Signatures for participant elections on retirement plans can be done remotely online until the end of 2020 now that the IRS has temporarily removed the requirement that a notary public or plan representative be physically present.
Although the requirement suspension provided in Notice 2020-42, 2020-26 IRB 1, is intended to facilitate the payment of coronavirus-related distributions and plan loans, it applies to any participant election that requires a signature witnessed by a notary public or plan representative, including spousal consent.
Generally, remote electronic notarizations are conducted online using digital tools and live audio-video technologies, according to the IRS, and the June 3 notice says that the IRS and Treasury had received several public requests to allow remote electronic notarization of spousal consents for plan loans and distributions specifically during the pandemic.
“These stakeholders state that due to the social distancing measures with respect to the COVID-19 pandemic, the physical presence requirement . . . makes it difficult, if not impossible, for a participant to receive a plan distribution or plan loan (or for a qualified individual to receive a coronavirus-related distribution or plan loan) for which spousal consent is required,” the notice says.
On requirements for the audio-video conference, the IRS said the electronic system used must be reasonably designed to preclude anyone other than the appropriate person from making the participant election and provide that person with “a reasonable opportunity to review, confirm, modify or rescind the terms of the election before it becomes effective.”
Also, the individual making the election must receive confirmation of it through either a written paper document or an electronic medium, according to the notice.
Plan Representative Requirements
The IRS laid out more stringent requirements for plan representatives than for notaries public.
For conferences involving a plan representative, the individual signing the participant election must show a valid photo ID to the plan representative during the live audio-video conference and can’t just transmit a copy of the ID before or after, the notice says.
“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),” according to the notice, which adds that the signer must also send a copy of the document directly to the plan representative that same day electronically or by fax.
After receiving the document, the plan representative must acknowledge that they witnessed the signature in accordance with the new requirements and then send the document back to the signer.
Throughout the online process, a notary public must remain consistent with applicable state law requirements, the IRS said in a release announcing the temporary administrative relief.