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IRS Proposes Alternative to In-Person Witnessing of Spousal Consents

Practice Management

The IRS has issued proposed regulations on the use of  electronic media to make participant elections and spousal consents. The proposed regulation generally affects sponsors and administrators of, and individuals entitled to benefits under, certain qualified retirement plans.

The proposed regulation provides an alternative to in-person witnessing of spousal consents required to be witnessed by a notary public or a plan representative, and clarifies that certain special rules for the use of an electronic medium for participant elections also apply to spousal consents.

Striking a Balance

In explaining the reasoning behind the proposal, the IRS says that, during the pandemic, it received requests from stakeholders to permit remote witnessing of spousal consents by a notary public or a plan representative over the internet using digital tools and live audio-video technologies (remote witnessing) for plan distributions and loans, and on March 13, 2020, the President determined that the pandemic was of sufficient severity and magnitude to warrant an emergency determination beginning March 1, 2020, under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. 

In response, the Treasury Department and the IRS issued a notice granting temporary relief from the physical presence requirement for spousal consents and, in response to the continuing COVID-19 pandemic and additional requests for relief from stakeholders, three additional notices granting extensions of the temporary relief were granted through Dec. 31, 2022.

The IRS says that it understands there are strongly held points of view both in support of and in opposition to remote witnessing, as discussed in the proposed guidance. This includes commenters opposing remote witnessing argued that spousal pension rights particularly affect retirement security for women and that any decision to waive those rights should be afforded maximum safeguards.

In drafting the proposed regulation, the agencies note that they have worked to strike a balance between the competing interests identified by commenters by offering remote witnessing as an option to those who elect to use it, but still requiring conditions on remote witnessing that are either similar to or more protective than the conditions in the temporary relief notices. 

Many of these conditions, including prohibiting a plan from requiring remote witnessing of spousal consents by a notary public and requiring that a plan representative record the audio-video conference during which a spousal consent is signed remotely (and retain the recording), were suggested both by commenters supporting and by commenters opposing remote witnessing, the IRS notes.  

Accordingly, the agencies believe that, by clarifying that the protections in Section 1.401(a)-21(d) apply both to participant elections and spousal consents, the proposed regulation emphasizes several essential protections for a spouse using an electronic medium to sign a spousal consent. Those protections include requiring a plan to send a spouse confirmation of a spousal consent separate from the documents sent to the participant making the election and giving the spouse the ability to review and rescind the spousal consent.

The Proposal

Section 1.401(a)-21(d)(6)(i) of the proposed regulation generally retains the physical presence requirement set forth in the existing regulation. The physical presence requirement provides that, in the case of a spousal consent that is required to be witnessed by a notary public or a plan representative (such as a spousal consent under section 417), the signature of the person signing the spousal consent must be witnessed in the physical presence of a notary public or plan representative.

The proposed regulation modifies the participant election rules in Treas. Reg. §1.401(a)-21(d) in two significant ways: 

1. The proposed regulation sets forth alternatives to the physical presence requirement in Section 1.401(a)-21(d)(6) for the witnessing of a spousal consent. These alternatives permit a spousal consent to be witnessed remotely by a notary public or plan representative, but only if certain conditions are satisfied.

2. The proposed regulation clarifies that the protections in Section 1.401(a)-21(d) that apply to participant elections made using an electronic medium also apply to spousal consents made using an electronic medium. As part of that clarification, the proposed regulation modifies existing Example 3 in Section 1.401(a)-21(f), which illustrates the electronic transmission of a participant election for a plan loan and related notarized spousal consent, to clarify that the protections in Section 1.401(a)-21(d) apply to the spousal consent. The proposed regulation also makes other minor conforming changes.

Alternatives to Physical Presence 

The proposed regulation provides two alternatives to the physical presence requirement for spousal consents. These two alternatives are similar to the alternatives in the temporary relief notices issued in response to the COVID-19 pandemic. 

Remote witnessing by notary public. Section 1.401(a)-21(d)(6)(ii)(A) sets forth remote witnessing rules for spousal consents witnessed by a notary public. The proposed regulation provides that, as an alternative to satisfying the physical presence requirement, a plan may accept a spousal consent witnessed remotely by a notary public, provided that: 

  • the signature of the person signing the spousal consent is witnessed by the notary public using live audio-video technology;
  • the requirements in Section 1.401(a)-21(d) for spousal consents are satisfied; and 
  • the remote witnessing is consistent with State law requirements that apply to the notary public. This alternative is substantially similar to the temporary relief from the physical presence requirement provided in the temporary relief notices for remote witnessing by a notary public.

Section 1.401(a)-21(d)(6)(ii)(A)(2) of the proposed regulation requires that a plan that accepts spousal consents witnessed remotely by a notary public, as described in proposed Section 1.401(a)-21(d)(6)(ii)(A)(1), must also accept spousal consents witnessed in the physical presence of a notary public.

Remote witnessing by plan representative. The proposed regulation also sets forth remote witnessing rules for spousal consents witnessed by a plan representative. 

Proposed Section 1.401(a)- 21(d)(6)(ii)(B) provides that, as an alternative to satisfying the physical presence requirement, a plan may accept a spousal consent witnessed remotely by a plan representative, provided that:

  • the signature of the person signing the spousal consent is witnessed by a plan representative using live audio-video technology;
  • the requirements in Section 1.401(a)-21(d) for spousal consents are satisfied; and 
  • the remote witnessing satisfies the five requirements described in proposed Section 1.401(a)-21(d)(6)(ii)(B)(1) through (5):

1. The person signing the spousal consent must present a valid photo ID to the plan representative during the live audio-video conference.

2. The live audio-video conference must allow for direct interaction between the person signing the spousal consent and the plan representative.

3. The person signing the spousal consent must transmit by electronic means a legible copy of the signed document directly to the plan representative on the same date that the spousal consent is signed.

4. After receiving the signed spousal consent, the plan representative must acknowledge that the signature has been witnessed by the plan representative and transmit the signed spousal consent, including the acknowledgement, back to the person signing the spousal consent under a system that satisfies the applicable notice requirements in Section 1.401(a)-21(c).

5. A recording of the audio-video conference during which the spousal consent was signed remotely must be made by the plan representative and, consistent with Section 1.401(a)-21(a)(3)(ii), must be retained by the plan in accordance with Internal Revenue Code Section 6001 (which provides rules relating to the maintenance of records, statements, and special returns).

Notarization

Section 1.401(a)-21(d)(6)(iii) of the proposed regulation continues to include rules that are in the existing regulation relating to electronic notarization. In particular, the proposed regulation provides that, if the physical presence requirements (or the alternative remote witnessing requirements) are satisfied, an electronic notarization acknowledging a signature (in accordance with Section 101(g) of E-SIGN and State law applicable to a notary public) will not be denied legal effect.

Public Comments

The IRS will accept written or electronic comments on the proposed regulation. They must be received by 90 days after the date it is published in the Federal Register, which is to take place on Dec. 30, 2022. 

Comments may be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-114666-22) by following the online instructions for submitting comments. 

Comments may be submitted on paper to: CC:PA:LPD:PR (REG114666-22), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044.

Public Hearing

A telephonic public hearing on this proposed regulation has been scheduled for April 11, 2023 at 10:00 a.m. eastern time.