The IRS has again extended, through June 30, 2022, the temporary relief originally found in Notice 2020-42 and extended by Notice 2021-3 that removes the physical presence requirement for participant elections to be witnessed by a plan representative or a notary public.[1]

Original Relief and First Extension

The Notice describes the original grant of relief and the extension as follows:

On March 13, 2020, the President determined that the COVID-19 pandemic was of sufficient severity and magnitude to warrant an emergency determination under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121- 5207. In response to the public health emergency caused by the COVID-19 pandemic and related social distancing precautions, Notice 2020-42, 2020-26 IRB 986, provided temporary relief through December 31, 2020, from the physical presence requirement for any participant election witnessed by a notary public of a state that permits remote electronic notarization or by a plan representative, if certain requirements were satisfied. Notice 2021-3 (1) extended this temporary relief through June 30, 2021, (2) noted that, during this temporary relief period, a participant is still able to have a participant election witnessed in the physical presence of a notary public and have that participant election be accepted by a plan in accordance with § 1.401(a)-21(d)(6)(i), (3)  solicited comments on whether relief from the physical presence requirement should be made permanent and, if made permanent, what, if any, procedural safeguards are necessary in order to reduce the risk of fraud, spousal coercion, or other abuse in the absence of a physical presence requirement, and (4) stated that any permanent modification of the physical presence requirement would be made through the regulatory process, thus providing an additional opportunity for stakeholders to provide comments.[2]

Terms of Additional Extension

The Notice provides the following information on the extension:

This notice extends, for the 12-month period from July 1, 2021, through June 30, 2022, the temporary relief provided in Notice 2021-3, including extension of all the requirements to qualify for that relief. Accordingly, for that 12-month period, a plan may qualify for relief from the physical presence requirement for any participant election witnessed by a notary public or a plan representative using an electronic system that satisfies the applicable requirements specified in section III.A and B of Notice 2021-3.[3]

The referenced provisions provide specific instructions for both the use of a remote notary public and a remote plan representative.

Remote Notary Public

If the plan wishes to make use of a notary public who is not physically present, the following provisions apply (with the June 30, 2021 date now being extended to June 30, 2022):

In the case of a participant election witnessed by a notary public, for the period from January 1, 2021, through June 30, 2021, 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.[4]

Remote Plan Representative

Similarly, Notice 2021-3 provided the following rules to be followed if the plan representative will witness the signatures remotely (with the June 30, 2021 date now being extended to June 30, 2022):

In the case of a participant election witnessed by a plan representative, for the period from January 1, 2021, through June 30, 2021, the physical presence requirement in § 1.401(a)-21(d)(6) is deemed satisfied for an electronic system if the electronic system using live audio-video technology satisfies the following requirements:

(1) 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;

(2) 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);

(3) 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

(4) 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).[5]

Could This Be Made Permanent?

As the IRS did in Notice 2021-3, the IRS is asking for comments regarding whether these options should be made permanent rather than reverting to a physical presence requirement on July 1, 2022.  The agency is asking in particular for comments on the following items:

• How the temporary removal of the physical presence requirement for participant elections required to be witnessed by a plan representative or a notary public has affected costs and burdens for all parties (for example, participants, spouses, and plans) and whether there are costs and burdens associated with the physical presence requirement that support modifying the requirement on a permanent basis;

• Whether there is evidence that the temporary removal of the physical presence requirement has resulted in fraud, spousal coercion, or other abuse, and how, if the physical presence requirement is permanently modified, increased fraud, spousal coercion, or other abuse may be likely to result from that modification;

• How participant elections are being witnessed, or are expected to be witnessed, as the COVID-19 pandemic abates (for example, whether the availability of in-person notarization has returned, or is expected to return, to pre-COVID19 pandemic levels);

• If guidance permanently modifying the physical presence requirement is issued, what procedures should be established to provide the same safeguards for participant elections as are provided through the physical presence requirement; and

• If guidance permanently modifying the physical presence requirement is issued, whether the guidance should establish procedures for witnessing by plan representatives that are different from procedures for witnessing by notaries.[6]

The IRS is requesting that comments be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov by September 30, 2021.  Those submitting comments should type “IRS-2021-40” in the search field to find the location to submit these comments.[7]

[1] Notice 2021-40, June 24, 2021, https://www.irs.gov/pub/irs-drop/n-21-40.pdf (retrieved June 24, 2021)

[2] Notice 2021-40, June 24, 2021, Section II BACKGROUND

[3] Notice 2021-40, June 24, 2021, Section II EXTENSION OF RELIEF

[4] Notice 2021-3, December 22, 2020, Section III.A, https://www.taxnotes.com/research/federal/irs-guidance/notices/relief-extended-to-let-plan-participants-sign-elections-remotely/2dbsz?h=2021-3 (retrieved June 24, 2021)

[5] Notice 2021-3, December 22, 2020, Section III.B

[6] Notice 2021-40, June 24, 2021, Section IV. REQUEST FOR COMMENTS

[7] Notice 2021-40, June 24, 2021, Section IV. REQUEST FOR COMMENTS