In Notice 2020-42[1] the IRS has provided relief from a physical presence requirement for spousal and other qualified retirement plan related consents in recognition of the COVID-19 emergency.  The purpose of the notice is described as follows:

In response to the unprecedented public health emergency caused by the Coronavirus Disease 2019 (COVID-19) pandemic, and the related social distancing that has been implemented, this notice provides temporary relief from the physical presence requirement in Treasury Regulations § 1.401(a)-21(d)(6) for participant elections required to be witnessed by a plan representative or a notary public, including a spousal consent required under § 417 of the Internal Revenue Code (Code).  While this temporary relief, which covers the period from January 1, 2020, through December 31, 2020, is intended to facilitate the payment   of coronavirus-related distributions and plan loans to qualified individuals, as permitted by section 2202 of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020) (CARES Act), the temporary relief applies to any participant election that requires the signature of an individual to be witnessed in the physical presence of a plan representative or notary.[2]

Physical Presence Rule

The physical presence issue arises under the rules found at Reg. §1.401(a)-21(d)(6).  That regulation contains the following physical presence standards that may present issues during the COVID-19 emergency:

Section 1.401(a)-21(d)(6)(i) provides that, in the case of a participant election that is required to be witnessed by a plan representative or a notary public (such as a spousal consent to a waiver of a QJSA under § 417), the signature of the individual making the participant election must be witnessed in the physical presence of a plan representative or a notary public.  Section 1.401(a)-21(d)(6)(ii) provides that, if the signature is witnessed in the physical presence of a notary public, an electronic signature acknowledging the signature (in accordance with section 101(g) of the Electronic Signatures in Global and National Commerce Act, Pub. L. 106-229, 114 Stat. 464 (2000) (E-SIGN), and applicable state law for notaries public) will not be denied legal effect.[3]

A footnote reference provides the following information on E-SIGN:

Section 101(g) of E-SIGN provides that “[i]f a statute, regulation, or other rule of law requires a signature or record relating to a transaction in or affecting interstate or foreign commerce to be notarized, acknowledged, verified, or made under oath, that requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable statute, regulation, or rule of law, is attached to or logically associated with the signature or record.”[4]

Relief Granted

The Notice grants temporary relief during 2020 from the physical presence requirement of Reg. §1.401(a)-21(d)(6) described in the prior section:

• Temporary relief from the physical presence requirement for any participant election witnessed by a notary public of a state that permits remote electronic notarization, and

• Temporary relief from the physical presence requirement for any participant election witnessed by a plan representative.[5]

Notary Public Physical Presence Relief

The temporary relief provided from the physical presence requirement for a notary public is:

In the case of a participant election witnessed by a notary public, for the period from January 1, 2020, through December 31, 2020, the physical presence requirement in § 1.401(a)-21(d)(6) is deemed satisfied for an electronic system that uses remote notarization if executed via live audio-video technology that otherwise satisfies the requirements of participant elections under § 1.401(a)-21(d)(6) and is consistent with state law requirements that apply to the notary public.[6]

In this case the IRS is leaning heavily on provisions found in state law, so the relief is only possible if the state law will allow the notary public to execute a remote notarization.

Plan Representative Physical Presence Relief

More detailed rules are provided by the IRS in the case of gaining an exception from the physical presence rule for a plan representative, since there is no underlying state law for the IRS to rely upon.  For 2020, the physical presence requirement of Reg. §1.401(a)-21(d)(6) will be deemed satisfied for an electronic system if the electronic system using 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 prior to 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 video of the person signing is not sufficient);

• The individual must transmit by fax or electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed; and

• 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 this notice and transmit the signed document, including the acknowledgement, back to the individual under a system that satisfies the applicable notice requirements under § 1.401(a)-21(c).[7]

Online meeting systems such as Zoom, Google Meet, Microsoft Teams, and Apple Facetime should be sufficient to allow the signing to meet the first two requirements.  The individual could then transmit their signed form to the plan representative using a scanner or even a picture of the signed form. 

The representative’s retransmission system must meet the requirements of Reg. §1.401(a)-21(c).  The two key requirements are:

• The electronic medium used to provide an applicable notice must be a medium that the recipient has the effective ability to access and

• At the time the applicable notice is provided, the recipient must be advised that he or she may request and receive the applicable notice in writing on paper at no charge, and, upon request, that applicable notice must be provided to the recipient at no charge.[8]

[1] Notice 2020-43, June 4, 2020, https://www.irs.gov/pub/irs-drop/n-20-42.pdf (retrieved June 5, 2020)

[2] Notice 2020-43, June 4, 2020, Section I

[3] Notice 2020-43, June 4, 2020, Section II

[4] Notice 2020-43, June 4, 2020, Section II

[5] Notice 2020-42, June 4, 2020, Section III

[6] Notice 2020-42, June 4, 2020, Section III.A.

[7] Notice 2020-42, June 4, 2020, Section III.B.

[8] Reg. §1.401(a)-21(c)