SUSAN QUINTANAR, November 10, 2022

In Notice 2022-27, the IRS extended (through December 31, 2022) the temporary relief from the requirement that participant elections under qualified plans be witnessed in the physical presence of a notary or plan representative, as set forth in Treas. Reg. 1.401(a)-21(d)(6)(i), including participant elections that require spousal consent. Unless the relief is further extended, the physical presence requirement for such elections will be in effect, once again, as of January 1, 2023.

Background 

The IRS first provided relief (through December 31, 2020) from the physical presence requirement in Notice 2020-42. That period was later extended (through June 30, 2021) in Notice 2021-03. Notice 2021-04 further extended the relief (through June 30, 2022). 

Under Notice 2020-42, the temporary relief was first implemented to alleviate the burden of trying to satisfy the physical presence requirement (under Treas. Reg. 1.401(a)-21(d)(6)(i)), while also attempting to adhere to the social distancing orders that came into effect to minimize the transmission of the Coronavirus Disease 2019 (COVID-19). At that time, the relief was intended to simplify the payment of certain distributions and plan loans that temporarily became available to plan sponsors for qualified participants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

In Notice 2022-27, the relief was extended through the remainder of this year because COVID-19 continues to pose a significant threat to the public’s health. 

Meeting the Standard for Relief from
the Physical Presence Requirement

Notice 2020-42 provided that witnesses could rely on electronic systems that met certain requirements to satisfy the standard for relief, as described in detail below.  

Plan Representatives

To avoid the need to be physically present, Notice 2020-42 provided that plan representatives could witness participant elections through the use of an electronic system that relied on live audio-video conferencing technology, as long as it satisfied the following conditions:

1. The individual signing the election presented the representative with a valid photo ID during the audio-video conference. Photocopies of the ID could not be used or delivered to the representative either before or after the conference;
2. The conferencing technology needed to allow for the individual and the representative to respond to each other directly and in real time. As an example, it would be unacceptable to rely on pre-recorded videos to satisfy this requirement;
3. The individual signing the election needed to send it to the representative on the same date that it was signed either by fax or by email (or through other electronic means); and 
4. Following receipt, the representative needed to acknowledge that he or she had witnessed the signature in compliance with the above requirements. The representative then needed to provide the individual with the signed election that included his or her acknowledgement of the individual’s signature. The method of providing the signed and acknowledged election to the individual had to comply with the notice requirements of Treas. Reg. 1.401(a)-21(c). 

Notaries Public

To avoid the need to be physically present, a notary could witness a participant election electronically, as long as the state laws that applied to the notary permitted remote electronic notarization. Any procedure for electronic notarization needed to be operated via live audio-video conferencing technology that otherwise conformed to the electronic medium requirements for notices and participant elections, as set forth in Treas. Reg. 1.401(a)-21(d)(6).

Apart from the date through which the temporary relief remained in effect, subsequent Notices did not change this standard for relief.

Going Forward into 2023

Unless further extended, the ability for witnesses to recognize participant elections through electronic transmissions will no longer be in effect as of January 1, 2023. A further extension on the relief into 2023 is not anticipated due to the reduction in the need for stringent COVID-19 health precautions. 

That said, we understand that the IRS is currently reviewing whether to modify the physical presence requirement to make the relief permanent. We will notify our readers of any further developments as they arise, including whether any additional procedural safeguards may be required to help reduce the risk of fraud or abuse in the absence of a physical presence requirement, should the IRS decide to make the relief permanent.