You Gotta Keep ’Em Separated . . . IRS Permits Remote Signatures and Notarization

by Rebecca Hudson and Lyn Domenick

In response to the global novel coronavirus pandemic, the Internal Revenue Service released welcome guidance in Notice 2020-42 granting temporary relief from the physical presence requirement for participant elections (including spousal consent) that must be witnessed by a notary public or plan representative.  Social distancing recommendations and stay at home orders have resulted in a dire need for this relief, which is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals.  For the period January 1, 2020 through December 31, 2020, under certain conditions, qualified plans may permit remote electronic approval by a notary public or plan representative for participant elections and spousal consent.

Witness by a Notary

Notice 2020-42 provides that a plan may permit remote notary approval of a participant’s election or spousal consent using a live audio-video system that otherwise satisfies the notary requirements and is consistent with state notary law requirements that apply to the notary.  Many states have either permanently or temporarily authorized remote notarization, but in some states it is not currently permitted.

Witness by a Plan Representative

Current guidance remains applicable to the use of an electronic medium to make participant elections; however, this new IRS guidance offers temporary relief from the physical presence requirement.  For the period January 1, 2020 through December 31, 2020 the physical presence requirement is deemed to be satisfied by using an electronic system if the following requirements are met:

• the individual signing the participant election must present a valid photo ID to the plan representative during a live audio-video conference and may not merely transmit a copy prior to or after the conference;
• the live audio-video conference must allow for direct interaction between the individual and the plan representative (i.e. no pre-recorded video);
• the individual must transmit by fax or other electronic means a legible copy of the signed document directly to the plan representative on the same day it is signed; and
• after the plan representative receives the signed document, they must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements and transmit the signed document, including the acknowledgement, back to the individual within a reasonable time.

Plan sponsors who wish to take advantage of this relief should determine what electronic systems they will utilize and communicate the procedures to participants as needed.