Many plan administrators and participants have struggled with how to satisfy certain qualified plan spousal consent rules while social distancing guidelines have been in effect. The Internal Revenue Service (IRS) provided much-needed relief on that topic in Notice 2020-42, published on June 3, 2020 (the Notice).
By way of background, IRS regulations require 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 spouse’s consent to the waiver of a qualified joint and survivor annuity), the individual making the election must sign in the physical presence of a plan representative or a notary public. While the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides tax breaks for certain coronavirus-related distributions from both defined benefit and defined contribution plans, it did not liberalize the distribution requirements for defined benefit plans. The combination of social distancing and the continued physical presence requirement has proved to be a hindrance for married participants seeking distribution of pension plan benefits in a form other than a qualified joint and survivor annuity.
Weighing the need for relief during the pandemic with the importance of protecting spouses’ interests in retirement plan benefits, the IRS has provided temporary relief from the physical presence requirement. The relief is effective only for elections made during calendar year 2020, and is available only if certain requirements are satisfied.
Under the Notice, for now, the physical presence requirement may be satisfied by an electronic presence, using live audio-video technology that otherwise satisfies the requirements for an electronic election. If a notary public will witness the election, applicable state law must allow the notary to perform his or her services remotely.
As an alternative (and regardless of whether or not state law allows notarization to be accomplished remotely), a plan representative may witness a spouse’s signature using live audio-video technology if the following requirements are met:
- The individual signing the election must present valid photo identification to the plan representative during a live audio-video conference;
- The live audio-video conference must allow for direct interaction between the individual and the plan representative;
- The individual who signed must send a legible copy of the signed document directly to the plan representative on the same date it was signed, by fax or other electronic means; and
- After receiving the signed document, the plan representative must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements of the Notice and transmit the signed document, including the acknowledgement, back to the individual using a system that satisfies the applicable notice requirements under the IRS regulations’ standards for the use of an electronic medium.