IRS Again Extends Physical Presence Requirement Relief

The IRS is providing a six-month extension, through December 31, of the temporary relief previously provided from the physical presence requirement for participant elections that are required to be witnessed by a plan representative or a notary public.

According to Notice 2022-27, the extension is being provided to respond to the continuing COVID-19 pandemic and to permit consideration of stakeholder comments.

In response to the national 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 that was witnessed by either a notary public of a state that permits electronic authorization or a plan representative, if certain requirements were satisfied. Last June, the IRS issued Notice 2021-40, extending the relief through June 30, 2022.

The Treasury Department and the IRS are currently reviewing the stakeholder comments to determine whether to retain the physical presence requirement without modification or to propose to modify it. If the Treasury Department and the IRS decide to propose to modify the requirement, they will do so only through the regulatory process, which will include the opportunity for further comment.

The agency previously 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 to reduce the risk of fraud, spousal coercion or other abuse in the absence of a physical presence requirement. 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.

Notice 2022-27 includes instructions for submitting comments about whether permanent guidance modifying the physical presence requirement should be issued.