Q: Hi Erick, one of our workers wants to designate his children, rather than his wife, as beneficiaries of his 401(k) plan accounts. He is required to sign the documents in front of a live witness, but because of COVID-19, he is concerned about doing so. What can we do?
A: The
Internal Revenue Service recently issued a Notice, #2020-42, addressing this concern. The Notice provides temporary relief from the “in-person” requirement for witnessing a participant signature on this kind of document. It applies to participant elections made between January 1 and December 31, 2020.
Under normal circumstances, the signature of the employee must be witnessed in person by a plan representative or a notary public. But temporarily, the requirement can be met, in the case of a notary, by using live audio-video technology. If the signature is to be witnessed by a plan representative, there are additional requirements, such as requiring that the participant present a valid photo ID during the live video conference.
More conditions apply, so it is important to understand the temporary rules. The Notice can be found at
https://www.irs.gov/pub/irs-drop/n-20-42.pdf. You may wish to discuss it with the plan’s attorney, too, because if the signing does not meet the requirements, it could be invalid. That could cause trouble for the plan and its fiduciaries, not to mention significant complications of the payout upon the participant’s death. Great question, thank you for asking.
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Disclosures:
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
©2020 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
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