Background

The Treasury rules require a notary or plan representative to “physically” witness spousal consents. In 2020, in response to the COVID-19 pandemic, Treasury issued a temporary rule (Notice 2020-42) allowing remote witnessing, if certain conditions were satisfied, effective through December 31, 2020. Subsequent guidance (Notices 2021-03, 2021-40, and 2022-27) extended remote witnessing through December 31, 2022. The last extension stated that Treasury would not extend the temporary period again and asked for comments on a permanent rule. (See our May 18, 2022 insight, “Relief from Physical Presence for Spousal Consent Extended.”)

New requirements

Practically, the proposed rule, which Treasury issued on December 30, 2022, means that plans can continue to do what they have doing under the temporary rules with the following adjustments:

• If a plan accepts remote notarization, it must also accept consents witnessed in the physical presence of a notary public.
• If the plan permits remote witnessing through a plan representative, the plan representative must record and retain the audio-video.

In addition, the proposed rule clarifies that the requirement of the electronic-witnessing regulations that apply with respect to the participant also apply with respect to the spouse. This means, among other things, that the spouse must, within a reasonable time, receive a confirmation of the effect of the consent and have an opportunity to review, confirm, modify or rescind the consent before it becomes effective.

Continuing requirements from the temporary relief

The requirements introduced by the temporary rules continue to apply. These include

• In the case of a signature witnessed by a notary, the election must be executed via live audio-video technology consistent with state laws that apply to the notary and are otherwise consistent with the consent rules.
• In the case of a signature witnessed by a plan representative, the election must be made using live audio-video technology, the signee must present valid photo ID during the audio-video session, the session must allow for live interaction and after receiving the signed document, the plan representative must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements and transmit the signed document back to the individual. In the case of a signature of the spouse witnessed by a plan representative, the spouse must electronically transmit a legible copy of the signed document to the plan representative on the date that the document was signed.

Implications for plan sponsors

Although temporary relief has expired, plan sponsors can, for the most part, continue doing what they have been doing with slight adjustments. Plan sponsors should make the necessary changes to operations immediately, so their procedures conform to the new requirements.

Permanent relief has been very controversial. Plan sponsor groups have said the temporary relief works and protects spouses, while participant groups say it is too early to conclude that spouses are protected.