IRS Extends Temporary Relief from Physical Presence Requirement

On June 24, 2021, the IRS released Notice 2021-40, which extends the COVID-19 temporary relief from the physical presence requirement for certain retirement plan elections. The notice also requests comments regarding whether changes to the physical presence requirement should be adopted on a permanent basis.

Under IRS regulations, certain retirement plan participant elections (such as a spousal consent to a waiver of a qualified joint and survivor annuity) must be witnessed in the physical presence of a plan representative or a notary public. An electronic system can be used to satisfy the physical presence requirement, if the system provides the same safeguards for the elections.

Previously, the IRS issued Notice 2020-42, which provided relief in 2020 from the physical presence requirement for participant elections witnessed by a notary public of a state that permits remote electronic notarization or a plan representative, if certain conditions were satisfied. Subsequent Notice 2021-3 extended this relief through June 30, 2021. (For further details on IRS Notice 2020-42 and IRS Notice 2021-3, please see, respectively, our January 7, 2021, Compliance Corner edition.)

Notice 2021-40 provides an additional 12-month extension of this temporary assistance, through June 30, 2022. The relief is optional; i.e., a participant is still able to have an election witnessed in the physical presence of a notary accepted by a plan.

Additionally, the IRS is seeking comments on whether relief from the physical presence requirement should be made permanent. Specifically, feedback is sought regarding whether such a change would impact costs and burdens for all parties (e.g., participants, spouses and plans) or result in fraud, spousal coercion or other abuse. The agency is also inquiring as to how participant elections are being witnessed, or are expected to be witnessed, as the COVID-19 pandemic abates. Furthermore, in the event of a permanent change, comments are requested regarding necessary procedures to safeguard participant elections and whether the procedures for witnessing by plan representatives should be different from those applicable to notaries.

Sponsors of retirement plans should be aware of the further extension of temporary relief from the physical presence requirement for participant elections. Those wishing to provide comments regarding potential permanent changes to the requirement must do so in writing by September 30, 2021.

Notice 2021-40 »