Retirement Savings Plans,For Plan Sponsors,For Individuals,Custom

IRS Allows for Remote Notarization for Spousal Consent

June 17, 2020

On June 3, 2020, the Internal Revenue Service (IRS) released Notice 2020-42 which provides 2020 relief for what is known as the "physical presence" requirement for spousal consent.

Background. In some cases, plans must obtain spousal consent for a distribution (other than in the form of a Qualified Joint and Survivor annuity) and for designating someone other than the spouse as the beneficiary. This is particularly true for defined benefit plans and money purchase plans. Governmental plans are exempt from the spousal consent rules, but often adopt them voluntarily.

Treasury rules allow this to be done electronically but provide that the signature (electronic or not) be witnessed in the physical presence of a notary or a plan representative.

Relief. The Notice waives the "physical presence" requirement for 2020. Under this relief a plan is treated as meeting the spousal consent requirements if:

  • The spousal consent is witnessed by a notary public of a state that permits remote electronic notarization through live audio-visual technology; or
  • The spousal consent is witnessed by a plan representative through a live direct interaction with the plan representative and spouse.

Some, but not all, states allow remote notarization either on a temporary or permanent basis. If the plan follows the state’s remote electronic notarization rules, that would be sufficient.

If the plan decides to use a plan representative as the witness, four requirements must be met:

  1. The spouse must present a valid photo ID to the plan representative during a live audio-video conference.
  2. The live audio-video conference must allow for direct interaction between the spouse and the plan representative. A pre-recorded video of the spouse's signing would not meet this requirement.
  3. After the live interaction, the spouse must transmit by fax or electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed.
  4. The plan representative must acknowledge that the signature has been witnessed and transmit the signed document, including the acknowledgement, back to the spouse.

For clients who require spousal consent who wish to utilize this remote spousal authorization, you may wish to:

  1. Determine whether your state allows for remote notarization.
  2. Establish and document remote processes and procedures consistent with the Notice requirements.

The Notice makes clear that while it is intended to facilitate CARES Act distributions and loans where spousal consent is required, the relief is available for any participant election that requires the signature of an individual to be witnessed in the physical presence of a plan representative or notary.

The link to the Notice is available here.

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