Oh Won’t You Stay…A Little Bit Longer…Because There’s No Need to Sign Your Distribution Form in Person

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by Elizabeth Nedrow and Becky Achten

In June 2020, the IRS issued Notice 2020-42 providing temporary relief from the physical presence requirement for certain participant distribution and beneficiary designation elections required to be witnessed by a notary public or plan representative.  This temporary relief was scheduled to expire June 30, 2021, and now has again been extended by the IRS.

As the COVID-19 pandemic continues, the IRS issued Notice 2021-40, again extending the temporary relief through the 12-month period ending June 30, 2022, as long as the prior requirements are met.  See our January 25, 2021 blog posting for a summary of the requirements.

In response to comments received from its previous guidance, the IRS is again requesting comments on whether permanent guidance modifying the physical presence requirement should be issued.  Specifically, the IRS is requesting comments regarding:

  • how the temporary relief from the physical presence requirement has affected costs and burdens for plans, participants and spouses and whether there are costs and burdens associated with the physical presence requirement that support modifying the requirement on a permanent basis;
  • whether there is evidence that the temporary removal of the physical presence requirement has resulted in fraud or spousal coercion and if the permanent removal of the physical presence requirement would increase the incidents of fraud or coercion;
  • how participant elections are being, or are expected to be, witnessed as the COVID-19 pandemic subsides;
  • what procedures should be implemented to provide the same safeguards for participant elections if the physical presence requirement is permanently removed; and
  • if procedures for witnessing by plan representatives should be different than those for witnessing notary publics.

Many plan sponsors have been hoping this relief will be made permanent.  If you haven’t had a chance to weigh in, comments are due to the IRS by September 30, 2021.