IRS Proposes Regulations to Permanently Permit Remote Witnessing of Participant Elections and Spousal Consents

On December 30, 2022, the IRS proposed regulations to permanently change retirement plan rules that require certain participant elections and spousal consents to be witnessed in the physical presence of a notary or plan representative. If specified conditions are met, the proposed regulations will allow affected qualified retirement plans to also accept remote notarization or witnessing by a plan representative.

IRS regulations have historically required that certain participant elections and spousal consents (e.g., a defined benefit plan lump sum distribution) be physically witnessed by a notary public or plan representative. However, in Notice 2020-42, the IRS provided temporary COVID-19 relief from the physical presence requirement and allowed the use of an electronic medium for participant elections and spousal consents. This relief was extended several times but was set to expire at the end of 2022. (For further details on IRS Notices 2020-42 and the subsequent relief extensions, please see our January 7, 2021 and July 8, 2021 Compliance Corner editions.) The proposed regulations make this relief permanent, with modifications.

Under the proposed regulations, a participant election or spousal consent witnessed remotely by a notary public or plan representative must satisfy the general requirements for participant electronic elections. Under these requirements, the electronic system must be one that the individual making the election can effectively access and that is reasonably designed to prevent anyone else from making the election. The system must also give the individual a reasonable opportunity to review, confirm, modify or rescind the election before it becomes effective and provide a compliant paper or electronic election confirmation within a reasonable time.

Additionally, for a plan to accept remote witnessing by a notary public, the notary public must witness the signature of the individual (e.g., spouse) signing the consent using live audio-video technology and adhere to applicable state laws.

If a plan representative performs the remote witnessing, the process must also meet the following requirements:

• The individual signing must present a valid photo ID during the live audio-video conference.
• The live audio-video conference must allow for direct interaction between the individual and plan representative.
• The individual must transmit (via fax or electronic means) a copy of the signed document directly to the plan representative on the same date it was executed.
• The plan representative must acknowledge the signature has been witnessed by the plan representative in accordance with these requirements and must send the executed document (and acknowledgment) back to the individual using a compliant notice system.
• The plan representative must record the live audio-video conference and retain the recording in accordance with plan document retention requirements. (This is an additional requirement that was not reflected in the temporary relief.)

Retirement plan sponsors should be aware of the proposed regulations and may welcome the flexibility to allow remote witnessing on a permanent basis. However, sponsors are not required to permit remote witnessing. If the sponsor chooses to do so, remote witnessing cannot be the sole option. (Sponsors must still accept notarizations witnessed in the physical presence of a notary.)

Comments on the proposed regulations are being accepted through March 30, 2023, and a telephonic public hearing has been scheduled for April 11, 2023, at 10:00 a.m. Final regulations, once issued, are proposed to apply six months after publication in the Federal Register. Sponsors are permitted to rely upon the proposed regulations in the interim.

IRS Proposed Rule – December 30, 2022 »