Under the Internal Revenue Code, certain participant elections, including spousal consents, are required to be witnessed in the physical presence of a plan representative or notary public. Applicable Treasury regulations allow for electronic notarization, but the notary or plan representative must still physically witness the electronic signature.
The physical witnessing of participant elections has not been an issue until the COVID-19 pandemic. The social distancing procedures implemented by the states related to COVID-19 have presented a roadblock for notaries and plan representatives to physically witness participant elections, and thus have prevented some participants from receiving COVID-19-related plan loans or distributions.
To facilitate the payment of plan distributions and loans, the IRS has issued Notice 2020-42
(Notice), which provides much needed relief for any participant election that requires the signature of an individual to be witnessed in the physical presence of a notary or plan representative. This temporary relief covers the period January 1, 2020, through December 31, 2020.
The Notice does not eliminate witnessing entirely, rather it provides alternative electronic options, such as live audio-video technology (e.g., Zoom, WebEx, etc.), so that participants, spouses, notaries and plan representatives can continue to follow social distancing guidelines. Temporary relief from the physical presence requirement is provided for any participant election witnessed by a: (1) notary public of a state that permits remote electronic notarization, or (2) plan representative.
Elections Witnessed by Notary Public '
The physical presence requirement for a participant election witnessed by a notary public is deemed satisfied for an electronic system that uses remote notarization if executed by live audio‑video technology and the electronic notarization acknowledging the signature complies with the federal E-SIGN law and state law applicable to notary publics.
Elections Witnessed by Plan Representative
The physical presence requirement for participant election witnessed by a plan representative is deemed satisfied for an electronic system if the electronic system using live audio-video technology satisfies the following requirements:
- The individual signing the participant election must present a valid photo ID to the plan representative during the live audio-video conference, and may not merely transmit a copy of the photo ID before or after the witnessing;
- The live audio-video conference must allow for direct interaction between the individual and the plan representative (for example, a pre-recorded call is not sufficient);
- On the day the document is signed, the individual must transmit a legible copy of the signed document by fax or electronic means directly to the plan representative;
- After receiving the signed document, the plan representative must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements of the Notice; and
- The plan representative must transmit the signed document and acknowledgment back to the individual under a system that satisfies current regulatory requirements for electronic notice. (For specific examples of permitted distribution systems, please read more here and here.)
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Warner is here to help! If you need assistance with implementing the temporary relief provided by the Notice, or with implementing the Coronavirus Aid, Relief and Economic Security Act (CARES Act) retirement plan provisions, please contact Lisa Zimmer
, Brianna Richardson
or any member of Warner’s Employee Benefits and Executive Compensation Practice Group.