IRS allows remote signatures on retirement plan elections

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The Internal Revenue Service is giving retirement plan participants and beneficiaries some added flexibility during the COVID-19 pandemic to remotely sign or have their retirement plan elections notarized.

The IRS issued a notice Wednesday offering temporary administrative relief so retirement plan participants or beneficiaries who need to make participant elections can do so with the help of remote signatures.

The change involves signatures of someone making the election that would normally need to be witnessed in the physical presence of a plan representative or notary public, including a spousal consent. This is known as the “physical presence requirement,” but with the ongoing upheaval of the coronavirus making travel difficult in many parts of the country, the IRS is giving people the ability to sign such documents remotely with the help of tools such as videoconferencing technology.

Notice 2020-42 provides participants, beneficiaries and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election that is either witnessed by a notary public in a state that allows remote notarization, or witnessed by a plan representative using certain safeguards. The guidance accommodates local shutdowns and social distancing practices and aims to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as allowed under the CARES Act.

Under the guidance issued Wednesday, in the case of a participant election witnessed by a notary public, for the period from Jan. 1, 2020, through Dec. 31, 2020, an individual can use an electronic system to do remote notarization if it’s performed through live audio-video technology that otherwise satisfies the requirements of participant elections and abides with state law requirements that apply to the notary public. For the same time period, in the case of a participant election witnessed by a plan representative, an individual can use an electronic system using live audio-video technology if the following requirements are satisfied:

  • The individual must be effectively able to access the electronic medium used to make the participant election;
  • The electronic system has to be reasonably designed to preclude any person other than the appropriate individual from making the participant election;
  • The electronic system has to provide the person making the election with a reasonable opportunity to review, confirm, modify or rescind the terms of the election before it takes effect; and,
  • The person making the election, within a reasonable time, needs to receive confirmation of the election through either a written paper document or an electronic medium under a system that satisfies the relevant requirements in the IRS notice.

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