Under IRS regulations regarding electronic consents and elections, if a signature must be witnessed by a retirement plan representative or notary public, it must be witnessed “in the physical presence” of the representative or notary — unless guidance has provided an alternative procedure.
Recently, in Notice 2022-27, the IRS extended, through the end of 2022, its temporary relief from the physical presence requirement. This is good news for businesses that sponsor a qualified retirement plan.
The physical presence requirement is imposed under IRS regulations regarding electronic consents and elections for certain retirement plans. This includes 401(k) plans. Originally granted in the early days of the COVID-19 pandemic, the relief initially applied for 2020 and has been extended twice since then, most recently through June 30, 2022.
As set forth in the IRS notice granting the original relief, the physical presence requirement is deemed satisfied for signatures witnessed by a notary public if the electronic system for remote notarization:
For signatures witnessed remotely by a plan representative, the physical presence requirement is deemed satisfied if the electronic system uses live audio-video technology and meets four requirements:
Extension for the relief is now through December 31, 2022, and is subject to the same conditions. According to the IRS, they are not expecting the need for a further extension of the relief beyond the end of 2022. The tax agency is currently reviewing comments received in connection with the initial relief and additional extensions to determine whether to retain or permanently modify the physical presence requirement. Proposal for any change would be through the regulatory process. This includes the opportunity for further comment.
Return to in-person business interactions is happening in fits and starts. As such, appreciation of this extension is likely by employers that sponsor retirement plans and their participants. Many 401(k) plans are to limit or eliminate the need for spousal approval. However, those that offer annuity forms of distribution are subject to the spousal consent rules. And some 401(k) plans must require spousal consent if a married participant wants to name a non-spouse as primary beneficiary. Contact our accounting firm for more information.