IRS Extends Again Relief From Physical Presence Requirement for Participant Elections

The agency is requesting comments about whether relief should be made permanent.

The IRS is providing a 12-month extension, through June 30, 2022, of the temporary relief previously provided from the physical presence requirement for participant elections required to be witnessed by a plan representative or a notary public.

According to Notice 2021-40, the extension is provided to respond to the continuing COVID-19 pandemic and to permit consideration of stakeholder comments.

In response to the public health emergency caused by the COVID-19 pandemic and related social distancing precautions, Notice 2020-42 provided temporary relief through December 31, 2020, from the physical presence requirement for any participant election witnessed by a notary public of a state that permits remote electronic notarization or by a plan representative, if certain requirements were satisfied. In December, the IRS issued Notice 2021-3, extending the relief through June 30 of this year.

In Notice 2021-3, the agency solicited comments 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. The IRS stated that any permanent modification of the physical presence requirement would be made through the regulatory process, thus providing an additional opportunity for stakeholders to provide comments.

Several comments from stakeholders requested permanent relief from the physical presence requirement. In addition, some stakeholders asked for additional time to submit comments about whether the physical presence requirement should be modified, considering concerns regarding potential fraud, spousal coercion or other abuse.

During the 12-month period from July 1, 2021 through June 30, 2022, all the requirements in Notice 2021-3 to qualify for relief of the physical presence requirement must be followed.

Notice 2021-40 includes instructions for submitting comments about whether permanent guidance modifying the physical presence requirement should be issued.