Another topic to share with your client’s… as we now have a change in the “Physical Presence Rules”… for Retirement plan participant elections that we have worried about during the Pandemic.
IR 2020-110, 6/3/2020; Notice 2020-42, 2020-26 IRB
We have some new changes that the IRS just released that may affect some of your clients that are participants, beneficiaries, or administrators of qualified retirement plan.
It also covers tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election:
- Witnessed by a notary public in a state that permits remote notarization; or
- Witnessed by a plan representative using certain safeguards.
This is important due to the requirement of ‘social distancing’ and the limiting of direct contact to make participant elections with respect to a retirement plan, an employee benefit arrangement, or an individual retirement plan.
If you have a client that will need help this Notice 2020-42 will provide some temporary relief from the physical presence requirement in Reg §1.401(a)-21(d)(6) for any participant election.
Background. Section 2202(a) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) permits certain individuals to receive up to $100,000 for a coronavirus-related distribution from an eligible retirement plan.
A coronavirus-related distribution is defined as any distribution from an eligible retirement plan to a qualified individual made during calendar year 2020.
Such a distribution is not subject to the 10% additional tax under Code Sec. 72(t) to the extent it meets the requirements of a coronavirus-related distribution.
Section 2202(b)(1) of the CARES Act provides that for any loan from a qualified employer plan to a qualified individual made during the 180-day period beginning on March 27, 2020, the $50,000 aggregate loan limit in Code Sec. 72(p)(2)(A)(i) is increased to $100,000.
In addition, the rule in Code Sec. 72(p)(2)(A)(ii) limiting the aggregate amount of the loans to one-half of the present value of the vested accrued benefit of the employee is increased to 100% of the employee’s vested accrued benefit under the plan.
Reg §1.401(a)-21 sets forth standards for the use of an electronic medium to provide applicable notices to recipients or to make participant elections with respect to a retirement plan, an employee benefit arrangement, or an individual retirement plan.
Reg §1.401(a)-21(d)(6)(i) provides that, in the case of a participant election that is required to be witnessed by a plan representative or a notary public, the signature of the individual making the participant election must be witnessed in the physical presence of a plan representative or a notary public (“physical presence requirement”).
Reg §1.401(a)-21(e)(6) defines a participant election as any consent, election, request, agreement, or similar communication made by or from a participant, beneficiary, alternate payee, or an individual entitled to benefits under a retirement plan, employee benefit arrangement, or individual retirement plan.
Temporary relief. For calendar year 2020, the IRS has provided temporary relief from the physical presence requirement in Reg §1.401(a)-21(d)(6) for any participant election:
- Witnessed by a notary public in a state that permits remote notarization, or
- Witnessed by a plan representative using certain safeguards.
According to the Notice, this relief accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, permitted by the CARES Act.
Temporary relief from the physical presence requirement for participant election witnessed by a notary public.
In the case of a participant election witnessed by a notary public during calendar year 2020, the physical presence requirement is deemed satisfied for remote notarization executed via live audio-video technology that otherwise satisfies the requirements of participant elections under Reg §1.401(a)-21(d)(6) and is consistent with state law requirements that apply to the notary public.
Temporary relief from the physical presence requirement for participant election witnessed by a plan representative.
In the case of a participant election witnessed by a plan representative during calendar year 2020, the physical presence requirement is deemed satisfied if the live audio-video technology being used by the plan representative to witness the participant signing the election satisfies the following requirements:
- The individual signing the participant election must present a valid photo ID to the plan representative during the live audio-video conference and may not merely transmit a copy of the photo ID prior to or after the witnessing.
- The live audio-video conference must allow for direct interaction between the individual and the plan representative (for example, a prerecorded video of the person signing is insufficient).
- The individual must transmit by fax or electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed; 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 of this Notice and transmit the signed document, including the acknowledgement, back to the individual under a system that satisfies the applicable notice requirements under Reg §1.401(a)-21(c).
(That is, the participant must have the effective ability to access the electronic medium used to deliver the signed document back to him, and the participant must be advised that he may request and receive, at no charge, a copy of the document on paper.)
References. For the requirements for using an electronic medium to receive benefit plan participant elections, see FTC 2d/FIN ¶S-3419.4; United States Tax Reporter ¶4014.30.
An additional Resource for your clients in this crazy time…Check out the “SBA Paycheck Protection Program (PPP)” it is well worth your time.
The American Institute of CPA’s has provided to its members and the general public a wealth of resources to better help all Americans understand how to implement the federal programs that were initial this year to help small business.
I would invite you to visit the AICPA website to learn more about what programs are available. https://future.aicpa.org/resources/toolkit/paycheck-protection-program-resources-for-cpas
Additionally there is also a great deal of information and resources at the U.S. Small Business Administration (SBA) as to available loans and counseling through SCORE https://www.score.org/
Here is the link for the SBA “Coronavirus (COVID-19): Small Business Guidance & Loan Resources” https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
I would invite you to review these various websites for possible answers that will help keep your business in operation. The key program now available “Paycheck Protection Program (PPP)”, https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program which provide critical access to funding for small business.
The “PPP” is designed to be able to allow small business to keep paying their employees and other expenses such as health insurance premiums, rent or mortgage payments and utilities.
Good Luck and stay safe !
Finally, the Internal Revenue Service adds phone operators to answerer Economic Impact questions ….Let’s hope it is successful.
IR 2020-97, 5/18/2020
In an Information Release, IRS has announced that it is starting to add 3,500 telephone representatives to answer some of the most common questions about the economic impact payments provided by the CARES Act.
As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, PL 116-136, 3/27/2020), IRS is making economic impact payments to certain taxpayers.
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an EIP of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child under the age of 17 as of the end of 2020.
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment.
For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds.
IRS adds phone operators.
Beginning May 18, IRS is starting to add 3,500 telephone representatives to answer some of the most common questions about economic impact payments.
IRS also stated that telephone assistance and other services will remain limited, and answers for most of the common questions related to economic impact payments are available on IRS.gov. The IRS anticipates bringing back additional assistors as state and local advisories permit.
Answers for most economic impact payment questions are available on the automated message for people who call the phone number provided in the letter that accompanies the economic impact payment that they receive (Notice 1444). https://www.pennlive.com/coronavirus/2020/04/irs-notice-1444-why-are-millions-of-americans-receiving-this-government-notification-in-the-mail.html
Those who need additional assistance at the conclusion of the message will have the option of talking to a telephone representative.