IRS Allows Remote Witnessing of Retirement Plan Changes Through 2020

Relief affects special withdrawals under the CARES Act and pension distributions

Stephen Miller, CEBS By Stephen Miller, CEBS June 10, 2020
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couple making plan change through remote witnessing

The IRS has provided temporary relief from regulations that require a plan administrator or notary public to be physically present to witness certain retirement plan changes made by plan participants, and consent to those changes given by the participant's spouse, if required.

In Notice 2020-42, issued June 3, physical witnessing is waived through 2020, retroactive to Jan. 1. Instead, a participant electing a plan option, or a spouse giving consent, can be witnessed live via audiovisual technology by a notary public or a plan representative. Plan elections that require a witness include coronavirus-related distributions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, retirement plan loan applications and spousal consent to changes in the distribution of survivor's benefits.

Although intended as an accommodation for social distancing and state government stay-at-home orders, the relief will apply for all of 2020, even after these orders are lifted.

A Useful Option

"Many states have passed legislation (or permit executive orders) to allow for remote online notarization, and Notice 2020-42 will allow many plan administrators to take advantage of such services for 2020," wrote attorneys at Groom Law Group in Washington, D.C. "Although it is unclear whether the IRS will move to make a more permanent change for future years, plan sponsors and record-keepers can rely on this important relief for this year."

As of March 2020, 23 states have laws that allow remote notarizations, according to law firm Ballard Spahr.

David Joffe, a partner in the Nashville, Tenn., office of law firm Bradley, called the IRS relief "helpful to retirement plan administrators and participants who are electing benefits." He added, however, that "plan administrators may be reluctant to follow the additional procedures for elections witnessed by a plan representative. They may be less reluctant to utilize remote notarization, which generally places the compliance obligation on the notary."

Still, when remote notarization is not available, "the use of a plan representative to witness spousal consent is a helpful alternative (assuming the plan permits it or is amended to do so)," wrote Robert Projansky, a partner at law firm Proskauer in Washington, D.C., and Elizabeth Down, an attorney at the firm's New York City office.

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Remote Spousal Consent

The normal retirement benefit for a married participant in a defined-benefit pension plan is a qualified joint and survivor annuity, which pays a monthly annuity to the surviving spouse following a participant's death. Both the participant and spouse must consent to waive the monthly annuity to select another form of distribution, such as a lump-sum payment, if it is allowed by the plan.

To satisfy Notice 2020-24, Projansky and Down noted, a plan representative who is witnessing spousal consent remotely must do so by a live audio-video conference that meets the following requirements:

  • The spouse must present a valid photo ID during the conference.
  • The conference must allow for direct interaction between the spouse and the plan representative (meaning that, for example, the representative cannot watch a prerecorded video of the signing).
  • On the day the document is signed, the spouse must send a legible copy of the signed document electronically or by fax 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 these requirements.
  • The plan representative must send the signed document and acknowledgment back to the spouse, either by e-mail or, if requested, by providing a paper copy at no charge.

"Plan sponsors and administrators should consider modifying their distribution, loan and beneficiary designation procedures to incorporate this new relief for the rest of 2020," the Groom Law Group advised. "After 2020, the IRS could decide to extend this relief, or Congress could pass legislation that would permit electronic notarizations."

[SHRM members-only toolkit: Designing and Administering Defined Benefit Retirement Plans]

Fraud Concerns Remain

Caution regarding remote witnessing was sounded 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 would like to see remote witnessing expire within six months or when the president announces that the national emergency due to the pandemic has ended.

Related SHRM Article:

Can I Get an E-Witness? Retirement Plan Consents in the Age of Social Distancing, SHRM Online, May 2020


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