IRS Extends Temporary Relief from “Physical Presence” Requirement for Certain Retirement Plan Elections

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On December 22, 2020, the Internal Revenue Service (“IRS”) issued an advance version of Notice 2021-03 (the “Extension Notice”) to extend the temporary relief from the “physical presence” requirement for participant elections under retirement plans that was previously granted in Notice 2020-42 (the “Relief Notice”).

As a general rule, retirement plan elections that require the signature of the participant must be witnessed in the physical presence of a plan representative or notary public. Although the term “participant election” is used in the regulatory guidance and the Notices, the physical presence requirement – and the relief – applies for any consent, election, request, agreement or similar communication from a participant, beneficiary, alternate payee, or an individual entitled to benefits under a retirement plan, employee benefit arrangement, or individual retirement plans where a physical presence is required. For example, the election to waive a qualified joint and survivor annuity benefit from a retirement plan.

In response to the ongoing coronavirus pandemic, the Relief Notice temporarily waived the “physical presence” requirement for elections witnessed by either a notary public or a plan representative, when certain requirements are met. For example, for elections witnessed by either a notary public or a plan representative, live audio-video technology must be used to witness the election. The applicable requirements are discussed in detail in our June 4, 2020 blog post.

The temporary waiver of the physical presence requirement under the Relief Notice was set to expire on December 31, 2020. In the Extension Notice, the IRS provided that the temporary relief will remain available from January 1 through June 30, 2021, subject to the same terms and conditions as under the Relief Notice. For example, for relief from the physical presence requirement for elections witnessed by a notary, the election must be in a state that permits remote electronic notarization.

The Extension Notice also includes a request for comments on the temporary relief from the physical presence requirement. This included a specific request for comments on whether the relief from the physical presence requirement should be made permanent and, if so, what procedural safeguards should be in place.

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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