IRS Temporarily Allows Retirement Plans to Witness Signatures Remotely
January 04, 2021
By Peter Alwardt, CPA
Update: Under IRS Notice 2021-3, the provisions below have been extended until June 30, 2021
On June 3, IRS released Notice 2020-42 (“Notice”) providing retirement plan participants, beneficiaries, and plan administrators with temporary relief from the requirement to be physically present for any participant election that is to be witnessed by either:
- A notary public in a state that permits remote notarization (please note that the state must allow remote notarizations); or
- A plan representative using electronic means with certain safeguards.
As stated by the IRS, the Notice is intended to accommodate state and local shutdowns and social distancing practices and help facilitate retirement plans making payment of coronavirus-related distributions and plan loans to qualified individuals under the CARES Act in addition to other plan transactions that require physical presence to be completed.
Under the Notice, plans may, for the period from January 1, 2020 through December 31, 2020, complete plan transactions requiring notarization of a participant’s signature by utilizing an electronic system facilitating remote notarization if it is executed via live audio-video technology that otherwise satisfies the requirements for participant elections under Treasury Regulation 1.401-21(d)(6) and that meets the state law requirements that apply to the notary public witnessing the signature.
The Notice further provides that for plan transactions, during the period noted above, that require a participant election to be witnessed by a plan representative the participant and plan representative may use an electronic system that provides live audio-video technology if the following requirements are satisfied:
- The participant signing the election must present valid photo identification to the plan representative during the live audio-video conference and may not merely transmit a copy of the photo identification prior to or after the witnessing;
- The live audio-video conference must allow for direct interaction between the participant and the plan representative (for example, a pre-recorded video of the person signing is not sufficient);
- The participant must transmit by fax or electronic means a legible copy of the signed document directly to the plan representative on the same date that it was signed; and
- After receiving the signed document, the plan representative must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements of the Notice and transmit the signed document, including the acknowledgement, back to the individual under a system that satisfies the applicable notice requirements under Treasury Regulation 1.401(a)-21(c).