The American Retirement Association (ARA) has signed on to a joint letter supporting the IRS’ new permanent rules to allow remote notarization of spousal consent forms.
During the pandemic, the IRS received requests from stakeholders to permit remote witnessing of spousal consents by a notary public or a plan representative over the internet using digital tools and live audio-video technologies (remote witnessing) for plan distributions and loans.
The Treasury Department and the IRS granted temporary relief from the physical presence requirement for spousal consents. In response to the continuing COVID-19 pandemic and additional requests for relief from stakeholders, they issued three additional notices granting extensions of the temporary relief through Dec. 31, 2022.
The Proposed Regulation
The IRS on Dec. 30, 2022 issued proposed regulations on the use of electronic media to make participant elections and spousal consents. The proposed regulations generally affect sponsors and administrators of, and individuals entitled to benefits under, certain qualified retirement plans. They provide an alternative to in-person witnessing of spousal consents required to be witnessed by a notary public or a plan representative, and clarify that certain special rules for the use of an electronic medium for participant elections also apply to spousal consents.
The proposed regulations generally retain the physical presence requirement set forth in existing regulation, which provides that, in the case of a spousal consent that is required to be witnessed by a notary public or a plan representative, the signature of the person signing the spousal consent must be witnessed in the physical presence of a notary public or plan representative.
But the proposed regulations modify the participant election rules in Treas. Reg. §1.401(a)-21(d) in two significant ways:
- The proposed regulation sets forth alternatives to the physical presence requirement in Section 1.401(a)-21(d)(6) for the witnessing of a spousal consent. These alternatives permit a spousal consent to be witnessed remotely by a notary public or plan representative, but only if certain conditions are satisfied.
- The proposed regulation clarifies that the protections in Section 1.401(a)-21(d) that apply to participant elections made using an electronic medium also apply to spousal consents made using an electronic medium. As part of that clarification, the proposed regulation modifies existing Example 3 in Section 1.401(a)-21(f), which illustrates the electronic transmission of a participant election for a plan loan and related notarized spousal consent, to clarify that the protections in Section 1.401(a)-21(d) apply to the spousal consent.
The March 10 Letter
The ARA and the other signatories note that plans have been using the relief from the physical presence requirements for nearly three years, and that systems are now in place to allow participants or spouses to use either in-person or remote witnessing.
They argue that this flexibility has allowed participants and beneficiaries to save time and money, and has been especially helpful to those with (1) mobility limitations, (2) non-traditional schedules, and (3) residences in remote areas.
The signatories also note that there has been “no indication from either plan sponsors or service providers of fraud, spousal coercion, or other abuse.” In fact, they write, the notices the IRS has issued on the matter contain security requirements and participant and beneficiary protections “that are stricter than the current in-person physical presence requirements.”
“We appreciate the IRS’ practical approach to this issue that protects plan participants and beneficiaries, but also allows flexibility to plan sponsors, participants, and spouses,” they write.
Finding Out More
The proposed regulation can be seen here.