Internal Revenue Service Extends Temporary Relief from the Physical Presence Requirement by One Year

The IRS recently issued Notice 2021-40, providing a one-year extension through June 30, 2022, of the temporary relief from the physical presence requirement for certain plan elections (including spousal consents) required to be witnessed by a plan representative or notary public. Issued in response to the COVID-19 pandemic, the IRS provided initial relief from the physical presence requirement for the period beginning January 1, 2020 and ending December 1, 2020, and then provided initial extended relief through June 30, 2021.

The temporary relief from the physical presence requirement applies to any participant election witnessed by a notary public of a state that permits remote electronic notarization or by a plan representative, if certain requirements are satisfied. We discussed those requirements in our prior blog post on this topic.

The Treasury Department and the IRS are considering a modification to the regulations that would make the relief permanent. As in the initial extended relief, comments were solicited on whether relief from the physical presence requirement should be made permanent and, if made permanent, what, if any, procedural safeguards are necessary in order to reduce the risk of fraud, spousal coercion, or other abuse in the absence of a physical presence requirement. Other comments were also solicited on the following: how the temporary relief has affected costs and burdens; evidence of fraud, coercion or other abuse resulting from the relief; how participant elections may be witnessed as the COVID-19 pandemic abates; and whether permanent relief should include procedures for witnessing by plan representatives that are different from procedures for witnessing by notaries.

Comments are due to the IRS by September 30, 2021.

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About Author: Karen Gelula

Karen Gelula counsels public and private companies across industry sectors on all types of employee benefits and executive compensation matters. She advises clients on the design, operation, governance and compliance of qualified retirement plans, and seeks to ensure that employers’ health and welfare benefits plans comply with all applicable federal and state laws, and associated regulations. View all posts by

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