Under IRS regulations regarding electronic consents and elections, if a signature must be witnessed by a retirement plan representative or notary public, it must be witnessed “in the physical presence” of the representative or notary — unless guidance has provided an alternative procedure.
Recently, in Notice 2022-27, the IRS extended, through the end of 2022, its temporary relief from the physical presence requirement. This is good news for businesses that sponsor a qualified retirement plan.
Requirements for relief
The physical presence requirement is imposed under IRS regulations regarding electronic consent and elections for certain retirement plans — including 401(k) plans. Originally granted in the early days of the COVID-19 pandemic, the relief initially applied for 2020 and has been extended twice since then, most recently through June 30, 2022.
As set forth in the IRS notice granting the original relief, the physical presence requirement is deemed satisfied for signatures witnessed by a notary public if the electronic system for remote notarization:
- Uses live audio-video technology, and
- Is consistent with state law requirements for a notary public.
For signatures witnessed remotely by a plan representative, the physical presence requirement is deemed satisfied if the electronic system uses live audio-video technology and meets four requirements:
- Live presentation of photo ID,
- Direct interaction,
- Same-day transmission, and
- A signed acknowledgement by the representative.
The relief has now been extended through December 31, 2022, subject to the same conditions. According to the IRS, a further extension of the relief beyond the end of 2022 isn’t expected to be necessary. The tax agency is currently reviewing comments received in connection with the initial relief and subsequent extensions to determine whether to retain or permanently modify the physical presence requirement. Any modification would be proposed through the regulatory process, which would include the opportunity for further comment.
An appreciable move
Given that the return to in-person business interactions has happened in fits and starts, this extension is likely to be appreciated by employers that sponsor retirement plans and their participants. Although many 401(k) plans are designed to limit or eliminate the need for spousal consents, those that offer annuity forms of distribution are subject to the spousal consent rules. And some 401(k) plans must require spousal consent if a married participant wants to name a non-spouse as primary beneficiary.