A number of states, including Georgia, have issued electronic notarization rules this year in light of the COVID-19 pandemic and government mandated or recommended social distancing policies. Consistent with this state-level guidance, the IRS published Notice 2020-42 on June 3, 2020 (the Notice), which provides temporary relief from the requirement that certain participant elections for tax-qualified retirement plans be executed in the physical presence of a witness. The relief is applicable from January 1, 2020, through December 31, 2020.
IRS Offers Two Methods to Comply
Section 417 of the Internal Revenue Code of 1986, as amended (the Code), together with certain U.S. Department of the Treasury regulations, provides that any retirement plan elections requiring signature before a witness must be executed by the individual in the physical presence of the witness. The Code, however, permits the IRS to provide for special circumstances under which the physical presence rules may be relaxed. The IRS has relaxed these rules with the Notice, allowing temporary relief from the physical presence requirement for participant elections remotely witnessed either by a notary public of a state that allows remote electronic notarization, or by a plan representative if certain requirements are met.
For an election witnessed by a notary public, the Notice provides relief if the document is executed over a live video teleconference, and if the remote electronic notarization process satisfies state law requirements that apply to the notary public. For information on Georgia’s remote electronic notarization process and requirements, see our prior summary here.
For elections witnessed by a plan representative, the required process under the Notice is as follows:
- The signer and plan representative must connect using a live video teleconference technology (e.g., Zoom, Skype, FaceTime, etc.).
- The signer must present a valid photo ID to the plan representative over the video teleconference, and apply his or her signature to the document. The signer cannot send a copy of the photo ID before or after the signing process.
- The signer, on the same date the document is signed, must send a legible copy of the signed document to the plan representative by fax or electronic means.
- The plan representative then must acknowledge that the signature was witnessed by him or her in accordance with the requirements of the Notice, and must transmit the signed document and acknowledgement back to the signer.
The Bottom Line
For 2020, plan sponsors can follow either the applicable state’s remote notarization requirements to have these documents notarized, or may have plan representatives follow the requirements set out in the Notice to remotely witness a participant’s signature.
For plan sponsors who have been using their state’s electronic notarization rules to have these participant elections notarized, the Notice provides peace of mind that this method will be deemed to satisfy the Code’s physical presence requirements for any documents executed during the 2020 calendar year. However, it is important to note that the electronic notarization requirements in some states, if followed by a plan representative instead of a notary, may not satisfy the requirements under the Notice. As a result, plan sponsors who permitted retirement plan consents to be electronically witnessed by plan representatives may want to confirm that their procedures meet the requirements under the Notice.
If you have any questions regarding these new rules, please contact the MMM Employee Benefits & Executive Compensation team.