SummaryThe U.S. Department of the Treasury issued temporary guidance that is effective through December, 2020, waiving the personal appearance requirement for the notarization of participant elections related to qualified joint survivor annuities.
AnalysisUnder federal law, Section 417 of the Internal Revenue Code requires spousal consent to a waiver of a qualified joint survivor annuity (QJSA), which includes the waiver of a QJSA as part of a request for a plan distribution or a plan loan. Section 417 further requires that the spousal consent be witnessed by a plan representative or a Notary Public. Section 1.401(a)-21(d)(6)(i) of the Department of Treasury Regulations provides that, in the case of a participant election that is required to be witnessed by a plan representative or a Notary, the signature of the individual making the participant election must be witnessed in the physical presence of a plan representative or a Notary. Section 1.401(a)-21(d)(6)(ii) provides that, if the signature is witnessed in the physical presence of a notary, an electronic signature acknowledging the signature will not be denied legal effect, but the issue is that an electronic notarization of the signature of a spouse must be witnessed in the physical presence of the Notary.
The Department of the Treasury and the Internal Revenue Service have received several requests from stakeholders to permit remote electronic notarization of spousal consents for plan loans and distributions during the COVID-19 pandemic. They state that due to the social distancing measures with respect to the COVID-19 pandemic, the physical presence requirement for notarizations makes it difficult, if not impossible, for a participant to receive a plan distribution or plan loan (or for a qualified individual to receive a coronavirus-related distribution or plan loan) for which spousal consent is required. Thus, the Treasury Department is temporarily waiving the rule requiring physical presence before a plan administrator or Notary. The signature may be witnessed remotely through an electronic system that uses live audio-video communication and meets the other requirements in the Treasury Regulations. Those regulations speak of an electronic notarization of the signature. For the waiver to be effective, the state where the Notary is commissioned must, through either a permanent law or temporary authorization (executive order, emergency rule, etc.) must permit electronic notarization.
To read the Treasury guidance, click Download PDF, below.