Retirement Services Provider Backs Remote Witnessing Procedures 

September 23, 2021

Internal Revenue Service
Attn: CC:PA:LPD:PR
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

RE: IRS Notice 2021-40

Dear Sir or Madam:

Thank you for the opportunity to provide comment on whether the temporary relief from the “physical presence” requirement for witnessing spousal consent granted in IRS Notice 2020-42 should be made permanent. Empower Retirement serves more than 67,000 plans with over 12 million participants and both our plan sponsor and participant customers have greatly appreciated the temporary relief granted due to COVID-19. For reasons described more fully below, we believe this relief should be made permanent.

In response to IRS Notice 2020-42 we changed our process for handling spousal consent to accept witnessing of signatures by a remote notary. We also educated our customers about this option. There was not a demand for using virtual witnessing by a plan representative, so we do not have experience with that option.

Relative costs and burdens of virtual versus in person witnessing

We received feedback from participants that they found the remote notarization process easy to use and appreciated being able to accomplish the task from home as opposed to driving to a bank or otherwise coordinating with a notary in person. Completing the task electronically, as opposed to circulating paper between the participant and the record keeper, also reduced the time it took to process a distribution. A trend we see with our participant customers is that, as they embrace technologies like Venmo or electronic check deposits, they are less and less tolerant of delays in processing the distribution of funds that they own in a retirement plan. Remote notaries do charge a fee, typically $25 or less, so that is a burden not typically experienced with in-person notarization.

Empower did not build an integrated solution for obtaining remote notarization onto its participant website due to the temporary nature of the relief. If, however, the relief were made permanent, we would pursue building an integrated solution that would reduce both the time and the cost involved in these transactions. Ultimately, we believe a virtual/electronic process is less burdensome than a physical presence/paper process for all parties involved (participants, spouses, plan sponsors, service providers).

1. Will or has removal of the physical presence requirement resulted in increased fraud, spousal coercion, or other abuse?

In the numerous spousal consents we processed with remote notarization we did not experience any evidence of fraud or coercion. We did not receive any phone calls or other communications from spouses suggesting that they were coerced or uncomfortable in providing their consent. We believe that using a remote notary offers much less opportunity for coercion because the notaries are typically randomly assigned through call center routing so there is no pre-existing relationship between the witness and the participant or his or her spouse. That is not the case when spousal consent is witnessed by a plan representative and is often not the case when an in-person notary is used as individuals will often choose to use notaries who are friends, co-workers, or relatives.

It is also important to consider the relative risks of fraud or error from using paper versus electronic processing. A paper process involves many more steps between execution of the document and delivery to the point where a transaction is initiated than an electronic process. Each step in that process creates an opportunity for tampering, misplacement, or other error. An electronic process does not involve these steps. Any electronic process will involve an increased risk of cyber security breach, but clearly the direction both the retirement industry and the world at large are moving in is not to avoid electronic processing to reduce that risk, but rather to focus on processes and procedures to mitigate it.

2. Has the method used to witness spousal consent changed with the abatement of COVID-19?

We did see an increase in the use of in person plan representatives as witnesses and a decrease in the use of remote notaries when the number of COVID 19 cases temporarily declined. We do not view this as a reason not to make the relief permanent. Both the prevalence of natural disasters and the real risk of future pandemics create the need for a virtual option that is readily available without waiting for the IRS to publish temporary relief for each such incident. We also believe that if the process for remote notarization were integrated into participant websites more participants and spouses would opt to use that process even during times when physical presence is not an obstacle.

3. Are additional safeguards needed to provide the same level of protections for spouses as provided through the physical presence requirement?

The protections contained in IRS Notice 2020-42 are based on the participant election rules in IRS Reg. 1.401(a)-21(d), which apply to all plans regardless of whether they are subject to the spousal consent rules. It seems reasonable to extend the same protections to spouses as are offered participants. Specifically, that the use of the technology is consistent with applicable state laws, that the spouse can effectively access the electronic medium being used, that the system is designed to preclude anyone other than the spouse from giving consent, that the spouse has a reasonable opportunity to review, confirm, modify, or rescind the consent before it becomes effective, and that the spouse receives confirmation of their consent within a reasonable period of time.

4. If the relief is made permanent, should the procedures for witnessing by a plan representative be different than those for witnessing by a notary?

As indicated previously, Empower does not have experience with virtual witnessing by a plan representative. It would appear to us, however, that plan representatives are not subject to any state oversight or mandated procedures for witnessing signatures in the way that notaries are, so having separate rules may be warranted.

We appreciate the IRS's efforts to continue seeking ways to improve how participants (and spouses) interact with their retirement plans and to take advantage of developments in technology to accomplish that objective. Thank you for this opportunity to comment and I welcome the opportunity to speak with your further on this topic if you would find that helpful.

Sincerely

Edmund F. Murphy III, President & CEO Empower Retirement | Great-West Life & Annuity
8515 E. Orchard Rd.
Greenwood Village, CO 80111
empower-retirement.com