On June 3, 2020, the IRS issued Notice 2020-42 providing temporary relief during 2020 from the requirement that spousal consent to retirement plan distributions, loans, and beneficiary designations occur in the physical presence of a notary public or plan representative.
Physical Presence Requirement: Background and Relief
Pension plans and other retirement plans with a default payment form of a qualified joint and survivor annuity require spousal consent for a married participant to receive a benefit in another form or to take out a loan. Other retirement plans require spousal consent for a married participant to designate a primary beneficiary other than the participant's spouse. The spouse's written consent must be witnessed by a notary or plan representative. IRS regulations require the spouse to be in the physical presence of the notary or plan representative when providing consent.
Under the IRS relief, the physical presence requirement is deemed satisfied under the following two scenarios.
1. Participant Election Witnessed by a Notary Public
Employers may accept a spousal consent signed during a remote notarization session using live audio-video technology that otherwise satisfies the spousal consent requirements and is consistent with the remote electronic notarization requirements of applicable state law.
Note: Many states have enacted permanent remote notarization requirements or implemented temporary remote notarization requirements during the COVID-19 national emergency.
2. Participant Election Witnessed by a Plan Representative
Employers may accept a spousal consent signed during a remote conference using live audio-video technology if:
- The spouse presents a valid photo ID to the plan representative during the live audio-video conference;
- The live audio-video conference allows for direct interaction between the spouse and the plan representative;
- The spouse transmits by fax or electronic means a legible copy of the signed document directly to the plan representative on the day it was signed; and
- After receiving the signed document, the plan representative acknowledges that he or she witnessed the signature in accordance with the requirements of the IRS relief and transmits the signed document, including the acknowledgment, back to the spouse.
Employers that have outsourced spousal consent administration to a third-party administrator should verify whether the third-party administrator will allow remote notarization and, if so, should confirm that it is being done in accordance with the IRS relief and applicable state law. Employers that handle spousal consent administration in-house should also consider whether to allow spousal consent witnessed by a plan representative, even if this is not the employer's normal procedure.
If you have any questions regarding this client alert, or if you would like assistance with your organization's response to the COVID-19 national health emergency, please contact a member of Venable's Employee Benefits and Executive Compensation Practice Group.