IRS Again Extends Temporary Relief from ‘Physical Presence’ Requirement for Certain Retirement Plan Elections

Morgan Lewis - ML Benefits
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Morgan Lewis - ML Benefits

The IRS issued Notice 2021-40 (the Notice) on June 24 that provides a 12-month extension (until June 30, 2022) of the temporary relief from the requirement that certain retirement plan elections be witnessed – in person – by a plan representative or a notary public. The IRS originally issued this temporary relief in the early days of the COVID-19 pandemic lockdown with such relief extending through the end of 2020. The IRS then extended the temporary relief through June 30, 2021. The Notice again extends this temporary relief through June 30, 2022.

As described in more detail in our earlier blog post, the Internal Revenue Code and accompanying regulations provide that certain retirement plan elections (and, in particular, elections that require the consent of a participant’s spouse) must be witnessed in the physical presence of a plan representative or notary public. For obvious reasons, this physical presence requirement was extremely difficult to satisfy during the COVID-19 pandemic lockdown, and the relief issued by the IRS temporarily waived the physical presence requirement if certain requirements were met. For example, the temporary relief permitted live audiovisual notarizations undertaken in accordance with the requirements of applicable state remote notary laws.

Although COVID-19 pandemic restrictions are being relaxed across the country, this most recent extension of the temporary relief in the Notice allows plans and participants to continue to utilize remote notarizations in lieu of physically appearing before a plan representative or notary public. In addition, the Notice includes a request for comments from potential stakeholders (by September 30, 2021) on whether the temporary relief should be made permanent or whether other changes may be appropriate, so the Notice also provides the IRS with more time to consider permanent changes to the physical presence requirement.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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