- August 06, 2020
- Lisa Varela
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IRS Temporarily Allows Certain Retirement Plan Participants to Sign Elections Remotely
The IRS has released guidance that provides temporary administrative relief to help certain retirement plan participants or beneficiaries who need to make participant elections by allowing flexibility for remote signatures. Specifically, the guidance provides participants, beneficiaries, and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election (1) witnessed by a notary public in a state that permits remote notarization, or (2) witnessed by a plan representative using certain safeguards. The guidance accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) ( P.L. 116-136).
Conditions for Participant Elections
Reg.
§1.401(a)-21 sets forth standards for the use of an electronic medium to
provide applicable notices to recipients or to make participant
elections with respect to a retirement plan, an employee benefit
arrangement, or an individual retirement plan. Reg.
§1.401(a)-21(e)(6) defines a participant election as any consent,
election, request, agreement, or similar communication made by or from a
participant, beneficiary, alternate payee, or an individual entitled to
benefits under a retirement plan, employee benefit arrangement, or
individual retirement plan. Reg. §1.401(a)-21(d) sets forth the
following conditions for participant elections:
- The individual must be effectively able to access the electronic medium used to make the participant election;
- The electronic system must be reasonably designed to preclude any person other than the appropriate individual from making the participant election;
- The electronic system must provide the individual making the participant election with a reasonable opportunity to review, confirm, modify, or rescind the terms of the election before it becomes effective; and
- The individual making the participant election, within a reasonable time, must receive confirmation of the election through either a written paper document or an electronic medium under a system that satisfies the applicable notice requirements under Reg. §1.401(a)-21.
Applicability
While this temporary relief, which
covers the period from January 1, 2020, through December 31, 2020, is
intended to facilitate the payment of coronavirus-related distributions
and plan loans to qualified individuals, as permitted by section 2202 of
the CARES Act, the temporary relief applies to any participant election
that requires the signature of an individual to be witnessed in the
physical presence of a plan representative or notary.