IRS extends remote electronic notarization relief for retirement plan elections through June 30, 2022

On June 24, 2021, the Internal Revenue Service (IRS) issued Notice 2021-40, which extends, through June 30, 2022, temporary relief from the “physical presence” requirement for certain participant elections required to be witnessed by a notary public or plan representative.

Background

In response to the public health emergency caused by the COVID-19 pandemic, on June 3, 2020 the IRS issued Notice 2020-42, providing temporary relief 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. The relief applied to participant elections of withdrawals, distributions and loans that require spousal consent. The Notice provided as follows:

• In the case of a participant election witnessed by a notary public, the physical presence of a notary was deemed satisfied for an electronic system that uses remote electronic notarization if executed through live audio-video technology that is consistent with state law requirements.
• In the case of a participant election witnessed by a retirement plan representative, the physical presence requirement was deemed satisfied for an electronic system if the system using live audio-video technology satisfies the following requirements:
  • The individual signing the participant election presents a valid photo ID to the plan representative during the live audio-video conference;
  • The live audio-video conference allows for direct interaction between the signing individual and the plan representative;
  • The signing individual transmits by fax or email 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 acknowledges that the signature has been witnessed by the plan representative in accordance with the requirements of the Notice and transmits the signed document, including the acknowledgement, back to the signing individual under a system that satisfies applicable IRS notice requirements.

In December 2020, the IRS issued Notice 2021-3, which extended the temporary relief through June 30, 2021. Now, the IRS has further extended the relief through June 30, 2022.

Retirement plan administration

This extension permits retirement plan administrators to continue to use remote authorizations for the next year. This additional flexibility is welcome.

Looking ahead

The IRS has requested comments as to whether it should issue permanent relief from the physical presence requirement. Specifically, the IRS has requested comments on how the temporary removal of the physical presence requirement has affected costs and burdens for affected parties and whether there are costs and burdens associated with the physical presence requirement that support modifying it on a permanent basis. If guidance permanently modifying the physical presence requirements is granted, the IRS also requests comments on what procedures should be established to provide safeguards for participant elections. The IRS has requested comments by September 30, 2021.

If you have any questions regarding the extension of this temporary relief, please contact a member of the DLA Piper Employee Benefits and Executive Compensation group or your DLA Piper relationship attorney, or email us at CoronavirusEmployment@dlapiper.com.

For additional information on remote notarization, see this article from our recent eSignature and ePayment News and Trends newsletter, “[UPDATED] Coronavirus: Federal and state governments work quickly to enable remote online notarization to meet global crisis."

Please continue to visit our Coronavirus Resource Center and subscribe to our mailing list to receive alerts, webinar invitations and other publications.

Sherry Klenk is a consultant with DLA Piper’s Employee Benefits and Executive Compensation group, based in Chicago. Reach her at sherry.klenk@usdlapiper.com.