Covid Distributions - J&S plans

[k man]

is spousal consent still required?  can't find it anywhere. 

[Bird]

Yes.  I see nothing in the legislation (or reason) it wouldn't be.

[CuseFan]

Agreed. The only thing I would expect might be allowance for more "virtual" witnessing or notarization of consent, which there was a discussion thread on that last week? Week before? Six Sundays from next Tuesday - anyone know what the heck day it is?!

[Peter Gulia]

Here’s last week’s discussion:

Even if a notarial act is proper under the State law that governs the notary, a plan’s administrator should evaluate (and might want its lawyer’s advice about) whether the notarial act meets the plan’s provision and ERISA § 205.

Under ERISA § 205 a spouse’s consent must be “witnessed by . . . a notary public[.]”

A regulation allows a notary’s certificate to be furnished by electronic means, but requires that the spouse’s consent was signed in the notary’s physical presence.  26 C.F.R. § 1.401(a)-21(d)(6)(i)-(ii).  Although the classification in title 26 of the Code of Federal Regulations suggests the rule is about tax-qualification conditions, Reorganization Plan No. 4 of 1978 § 101 makes the Treasury Secretary’s rule authority for ERISA § 205.

[Bird]

The regs say plan representative or notary public

[Peter Gulia]

The statute allows, and some plans allow, witnessing by a plan representative.  But which kind of person witnesses a spouse’s consent might not change a need to do it “in the physical presence”.

 

The statute’s text is “witnessed by a plan representative[.]”  One might interpret “witnessed” to include something without physical presence.  But a court must defer to an agency’s interpretation of a statute expressed in a rule or regulation made in compliance with the Administrative Procedure Act.  A court defers unless the agency’s rule is really not an interpretation.

 

A plan’s administrator might prefer not to risk exposure to, or even defending against, a later claim that a consent did not meet the requirements of ERISA § 205 and the plan.

[Bird]

I wasn't suggesting they didn't have to be in the physical presence...but we know that it happens.  I am very clear with my sponsors that if they have any concerns about the spouse challenging any of this, force them to get a notary.  A little common sense goes a long way.

[FPGuy]

Suggest following outdoor procedure: client drives up, is handed document to execute through window. Executes in front of requisite witnesses, including notary if required. Hands executed document back to witness signature/notarization as required. Yes, I've had clients do it.

 

[Peter Gulia]

What FPGuy describes is one of many ways to do what some lawyers and notaries call a window-separated signing.

 

Some notaries will officiate if the notary can see and hear the signer, handle documents safely, and use sensible ways to guard against a forgery or alteration.

 

Nat’l Notary Ass’n, Important Coronavirus Guidance For Signing Agents And Mobile Notaries,

https://www.nationalnotary.org/notary-bulletin/blog/2020/03/notaries-precautions-coronavirus

 

[Peter Gulia]

Our BenefitsLink hosts helpfully posted an IRS notice that relaxes some of the “physical presence” condition for witnessing a spouse’s consent.

 

https://benefitslink.com/news/index.cgi

 

https://www.irs.gov/pub/irs-drop/n-20-42.pdf

 

Under Reorganization Plan No. 4 of 1978, authority to issue regulations, rulings, opinions, variances, and waivers under part 2 of subtitle B of title I of ERISA is transferred to the Secretary of the Treasury.

 

A plan’s administrator might want its lawyer’s advice about whether it may rely on the IRS notice as an interpretation of ERISA § 205.

[Peter Gulia]

In the IRS Notice extending some relief through June 30, 2021, the Treasury department invites comments on whether to make a permanent change.

https://www.irs.gov/pub/irs-drop/n-21-03.pdf