Human Resources (HR) Publications

Retirement plan participants sign remotely

By: Michelle Higgins

Publication: Benefits & Compensation Regulatory Alert

Date Posted: Jul 15, 2020

Retirement plan participant elections allows for remote signatures

The Internal Revenue Service (IRS) made life easier for retirement plan administrators and participants by easing the requirements regarding signature witnesses.

The agency announced in June it would provide temporary administrative relief to help certain retirement plan participants or beneficiaries who need to make participant elections by allowing flexibility for remote signatures.

The change relates to signatures of the individual making the election, which in the past had to be witnessed in the physical presence of a plan representative or notary public, including a spousal consent (“the physical presence requirement”).

The IRS notice 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:

• witnessed by a notary public in a state that permits remote notarization, or
• witnessed by a plan representative using certain safeguards.

The guidance accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by the CARES Act.

Under this guidance, in the case of a participant election witnessed by a notary public, for the period from Jan. 1, 2020, through Dec. 31, 2020, the individual may use an electronic system facilitating remote notarization if done via live audio-video technology that otherwise satisfies the requirements of participant elections and that is consistent with state law requirements that apply to the notary public.

For the same period, in the case of a participant election witnessed by a plan representative, the individual may use an electronic system using live audio-video technology if the following requirements are satisfied:

1. The individual must be effectively able to access the electronic medium used to make the participant election;
2. The electronic system must be reasonably designed to preclude any person other than the appropriate individual from making the participant election;
3. The electronic system must provide the individual making the election with a reasonable opportunity to review, confirm, modify, or rescind the terms of the election before it becomes effective; and
4. The individual making the election, within a reasonable time, must receive confirmation of the election through either a written paper document or an electronic medium under a system that satisfies the applicable notice requirements.

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