Further Extension of Relief from the Physical Presence Requirement for Participant Elections
On May 13, 2022, the IRS issued Notice 2022-27 to further extend the temporary relief from the physical presence requirement for participant elections through December 31, 2022, as a continued response to the ongoing COVID-19 pandemic. However, the notice states that, in light of recent easing of public health precautions relating to the COVID-19 pandemic, a further extension of temporary relief from the physical presence requirement beyond the end of 2022 is not expected to be necessary.
IRS regulations provide that in cases where a participant election is required to be witnessed by a plan representative or a notary public (such as spousal consent to a waiver of a qualified joint and survivor annuity, or requests for plan loans or distributions), the signature of the individual making an electronic participant election must be witnessed in the physical presence of a plan representative or a notary public. Per regulation section 1.401(a)-21(d) (6)(iii), the Commissioner can permit use of procedures under an electronic system deemed to satisfy the physical presence requirement so long as it provides the same safeguards for participant elections as are provided through the physical presence requirement.
The relief from the physical presence requirement originally was provided by Notice 2020-42 and subsequently extended by Notice 2021-3 and Notice 2021-40 through June 30, 2022. Notice 2021-40 also requested comments on whether permanent guidance modifying the physical presence requirement should be issued. Notice 2022-27 states that the Treasury Department and the IRS are currently reviewing stakeholder comments to determine whether to retain the physical presence requirement without modification or to propose to modify the requirement. It adds that should the Treasury Department and the IRS decide to propose to modify the physical presence requirement, they will do so only through the regulatory process, which will include the opportunity for additional comments.
Extension of Temporary Relief
Notice 2022-27 provides an additional 6-month extension through December 31, 2022, of the temporary relief from the physical presence requirement. Briefly, under this relief:
- Relief from the Physical Presence Requirement for any Participant Election Witnessed by a Notary Public
In the case of a participant election witnessed by a notary public, the physical presence requirement is deemed satisfied for an electronic system that uses remote notarization if executed via live audio-video technology that otherwise satisfies the requirements for electronic participant elections and is consistent with state law requirements that apply to the notary public.
CHEIRON OBSERVATION: This relief is useful only for participants in states that have implemented electronic notarization procedures.
- Relief from the Physical Presence Requirement for any Participant Election Witnessed by a Plan Representative
In the case of a participant election witnessed by a plan representative, the physical presence requirement is deemed satisfied if the individual signing the participant election presents a valid photo ID to the plan representative during a live audio-video conference that allows for direct real-time interaction between the individual and the plan representative, and the individual transmits a legible copy of the signed document directly to the plan representative on the same date it was signed.
(For more details about the temporary relief, please refer to our previous alerts: IRS Provides Temporary Relief From Physical Presence Requirement For Participant Elections and IRS Further Extends Temporary Relief from Physical Presence Requirement and Requests Comments.)
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.