IRS Proposes Permanent Relief From Physical Presence Requirement for Certain Electronic Signatures

The IRS has released proposed regulations that would permanently allow remote witnessing of certain retirement plan and benefit elections, including those involving spousal consent, that are required under the Code to be witnessed by a plan representative or notary public. The spousal consent provisions of these proposed regulations closely resemble prior temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a plan representative or notary public set forth in IRS notices (see our Checkpoint article). (The physical presence requirement is imposed under IRS regulations regarding electronic consents and elections for certain retirement plans, including 401(k) plans.) Originally granted in the early days of the COVID-19 pandemic in response to social distancing requirements and other measures put into place, the IRS relief initially applied for 2020 and has been extended three times, most recently through December 31, 2022 (see our Checkpoint article). Special rules for participant elections using electronic media in existing regulations continue to apply (e.g., participants must be effectively able to access an electronic medium used to make an election or consent) (see our Checkpoint article). The proposal clarifies that these rules also apply to spousal consents.

For spousal consents witnessed remotely by a plan representative, the proposed regulations provide that the physical presence requirement is deemed satisfied if the electronic system uses live audio-video technology and meets five additional requirements: live presentation of photo ID; direct interaction; same-day transmission; return with representative’s acknowledgment; and recording and retention of the audio-video conference in accordance with applicable plan document retention rules. The recording/retention requirement is the only difference from the conditions set forth in the relief previously granted in IRS notices regarding remote spousal consents. Spousal consent witnessed by a notary public remotely must use live audio-video technology and comply with applicable state-law requirements. Plans that accept spousal consents witnessed remotely by a notary public must also accept spousal consents witnessed in the physical presence of a notary public. Although the regulations are proposed to apply six months after final regulations are published, taxpayers may rely on them in the interim.

EBIA Comment: The preamble to the proposed regulations focuses on issues and concerns regarding remote notarization of spousal consent—a requirement generally applicable to retirement plans. However, the existing regulations also apply to notices or elections made under other employee benefit arrangements, such as accident and health, cafeteria, qualified fringe benefit plans, and HSAs; this would continue under the proposal. 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”). See also EBIA’s Cafeteria Plans manual at Section XVI.E.1 (“IRS Regulations Address Use of Electronic Media by Employee Benefit Plans”) and EBIA’s ERISA Compliance manual at Section XXIII.C.3 (“Applicability of Treasury Regulations Addressing Use of Electronic Media”).

Contributing Editors: EBIA Staff.