On December 23, 2020, the IRS issued Notice 2021-03, which extends relief from the “physical presence” requirement applicable to signatures that must be witnessed by a plan representative or notary public. By way of background, Treasury Regulations Section 1.401(a)-21(d)(6)(i) provides that, in the case of a participant election that is required to be witnessed by a plan representative or a notary public (such as a spousal consent to a waiver of a QJSA), the signature of the individual making the election must be witnessed in the physical presence of a plan representative or a notary public.
In response to the COVID-19 pandemic, the IRS issued Notice 2020-42, which provided temporary relief from the physical presence requirement if the requirements of the notice are satisfied (discussed below). The temporary relief is intended to facilitate coronavirus-related distributions and plan loan relief enacted by the Coronavirus Aid, Relief, and Economic Security Act, but it also applies to any signature that would otherwise have to be witnessed in the physical presence of a plan representative or notary. Notice 2021-03 extends the temporary relief period under Notice 2020-42, originally from January 1, 2020 to December 31, 2020, through June 30, 2021. The extension provides welcome relief to plan sponsors still dealing with the fallout of the COVID-19 pandemic and plan administration difficulties related to remote participants and beneficiaries.
Requirements to Qualify for Relief
Notice 2020-42, as modified by Notice 2021-03, provides two types of temporary relief from the physical presence requirement: (1) relief for participant elections witnessed by a notary public of a state that permits remote electronic notarization; and (2) relief for participant elections witnessed by plan representatives.
A. Elections Witnessed by a Notary Public
To qualify for temporary relief from the requirement of a notary public’s physical presence, the electronic system for remote notarization must use live audio-video technology and satisfy state-law requirements applicable to the notary public.
B. Elections Witnessed by Plan Representatives
To qualify for temporary relief from the requirement of a plan representative’s physical presence, the electronic system must use live audio-video technology that allows direct interaction between the signer and the plan representative and: (1) the signer must present photo ID to the representative during the live audio-video conference; (2) the signer must transmit a legible copy of the signed document by electronic means to the representative on the day it is signed; and (3) the representative must acknowledge that the signature has been witnessed in accordance with the requirements of Notice 2021-03 and transmit the signed document and the acknowledgment back to the signer using a system that the signer is effectively able to access.
Plan sponsors should ensure that any remote notarizations comply with both state and federal law. Because many states have authorized some form of remote electronic notarization, and navigation of these laws in conjunction with federal requirements can be tricky, plan sponsors should consider working with counsel to review remote notarization practices. The use of remote notarization pursuant to this relief is optional, and participants may still have elections witnessed in the physical presence of a notary public and accepted by the plan under Treasury Regulations Section 1.401(a)-21(d)(6)(i).