IRS Again Extends Remote Witnessing for Retirement Plan Changes

Relief affects loan applications and pension distributions

Stephen Miller, CEBS By Stephen Miller, CEBS July 2, 2021
LIKE SAVE
IRS Again Extends Remote Witnessing for Retirement Plan Changes

The IRS has extended through June 30, 2022, remote notarization relief that gives retirement plans greater flexibility for participant elections that require a witness, such as 401(k) loan applications and spousal consent to changes in the distribution of survivor's pension benefits.

IRS Notice 2021-40, issued June 24, waives requirements for physical witnessing for another year so that participants electing a plan option, or a spouse giving consent, can be witnessed live via audiovisual technology by a notary public or a plan representative.

Previously, in Notice 2020-42, issued June 3, 2020, physical witnessing was waived through 2020, retroactive to Jan. 1, 2020. Notice 2021-03, issued near the end of last year, extended the waiver period through June 30, 2021.

"Although COVID-19 pandemic restrictions are being relaxed across the country, this most recent extension of the temporary relief … provides the IRS with more time to consider permanent changes to the physical presence requirement," according to an alert from law firm Morgan Lewis.

[Related SHRM article: IRS Allows Remote Witnessing of Retirement Plan Changes Through 2020]

Notaries and Plan Representatives

Instead of the physical presence, Notice 2021-40 allows:

  • Participant elections to be witnessed by a notary public if conducted via live audio-video technology that meets the requirements for electronic participant elections and is consistent with state law requirements that apply to the notary public.
  • Participant elections to be witnessed by a plan representative if the person signing the participant election presents a valid photo ID 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.

[Want to learn more about retirement plans? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]

Permanent Relief Sought

The U.S. Chamber of Commerce had encouraged the IRS to make permanent the temporary relief from physical presence requirements.

"Going forward, we believe that remote witnessing should be allowed alongside the physical presence option to help plan administrators in streamlining plan operations and assist participants and beneficiaries who may have difficulty meeting the physical presence requirements, provided the safeguards in Notices 2020-42 and 2021-03 are in place to protect participants and their spouses," the Chamber wrote to the IRS in April.

Fraud Concerns Remain

Caution regarding remote witnessing was sounded last year by the Pension Rights Center (PRC), a nonprofit consumer organization.

In a letter commenting on allowing remote witnessing for federal employees' pension plans, the PRC noted that "default survivor annuities, and the requirement for written spousal consent to give them up and allow a different form of payment, are the linchpins of spousal retirement protections."

Physical witnessing "helps prevent consent from being coerced because the notary can witness the demeanor of the spouse and of the participant if present and refuse to notarize the document if duress is apparent," the PRC said.

Comments Requested

Notice 2021-40 includes a request for comments by Sept. 30, 2021, via the Federal eRulemaking Portal at www.regulations.gov.

Specifically, the IRS asked for feedback on whether the temporary relief should be made permanent or whether other changes may be appropriate, particularly with regard to cost burdens associated with the physical presence requirement, whether there is evidence that the temporary waiver has resulted in fraud, how participant elections are being witnessed, and what procedures and guidance should be implemented to provide safeguards in lieu of existing requirements.

"Stakeholders that care strongly about this administrative requirement should take advantage of the opportunity to provide comments," advised actuarial firm Cheiron.


LIKE SAVE

SHRM HR JOBS

Hire the best HR talent or advance your own career.

SPONSOR OFFERS

HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.