IRS Notice 2021-40 (June 24, 2021)
Available at https://www.irs.gov/pub/irs-drop/n-21-40.pdf
The IRS has announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a plan representative or notary public. The original relief, which appeared in IRS Notice 2020-42 (see our Checkpoint article), was provided primarily to facilitate CARES Act distributions and loans (see our Checkpoint article) but could be used during 2020 for any signature that, under the regulations, had to be witnessed in the physical presence of a plan representative or notary, including spousal consents required under Code § 417. The relief was subsequently extended through June 30, 2021, by IRS Notice 2021-03 (see our Checkpoint article). Under those notices, signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state-law requirements for a notary public. Signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established by the original relief (live presentation of photo ID, direct interaction, same-day transmission, and return with representative’s acknowledgment).
IRS Notice 2021-40 further extends the relief—subject to the same conditions—through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding the costs and other effects of the physical presence requirement and its temporary waiver; whether the relief has resulted in fraud, coercion, or other abuses; how the witnessing requirements are expected to be fulfilled as the pandemic abates; what procedural safeguards should be instituted if the physical presence requirement is permanently modified; and whether permanent relief should use different procedures for witnessing by plan representatives and by notaries. Comments should be submitted by September 30, 2021.
EBIA Comment: Many 401(k) plans are designed to limit or eliminate the need for spousal consents. Plans that offer annuity forms of distribution, however, are subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a non-spouse as primary beneficiary. For more information, see EBIA’s 401(k) Plans manual at Sections XIII.G (“Spousal Consent to Distribution May Be Required”), XXVIII.H.3 (“Spousal Consents and Other Participant Elections That Must Be Witnessed”), and XXVIII.I (“Electronic Administration Chart”).
Contributing Editors: EBIA Staff.