Teachers Insurance & Annuity Association of America Issues Public Comment on IRS Notice

WASHINGTON, Oct. 11 -- Alice Hocking, executive vice president of the Teachers Insurance and Annuity Association of America, New York, has issued a public comment on the Internal Revenue Service notice entitled "Extension of Temporary Relief from the Physical Presence Requirement". The comment was written on Sept. 30, 2021, and posted on Oct. 4, 2021:

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Teachers Insurance and Annuity Association of America ("TIAA") welcomes the opportunity to submit this comment in response to Notice 2021-40 issued by the Internal Revenue Service ("IRS") and the Department of the Treasury ("Treasury")./1

Notice 2021-40 provides a 12-month extension, through June 30, 2022, of the temporary relief provided in Notice 2021-03 from the physical presence requirement for participant elections required to be witnessed by a plan representative or a notary public (referred to herein as the "physical presence requirement")./2

TIAA appreciates that Treasury and the IRS have granted this latest extension of temporary relief. Given the ongoing nature of the COVID-19 pandemic, we believe it is appropriate for health and safety reasons that retirement plan participants be able to rely on remote notarization to fulfill the physical presence requirement into the foreseeable future. We would also note that over the past year, the widespread use of remote notarization services by retirement plan participants has demonstrated that such services offer many benefits in terms of security, convenience, and public health, beyond simply being an acceptable temporary alternative to physical notarization. For these reasons, we would urge Treasury and the IRS to make the relief extended under Notice 2021-40 permanent. We discuss our recommendation in more detail below.

I. About TIAA.

Founded in 1918, TIAA is the leading provider of retirement services for those in academic, research, medical, and cultural fields. Over our century-long history, TIAA's mission has always been to aid and strengthen the institutions, retirement plan participants, and retail customers we serve and to provide financial products that meet their needs. With our strong not-for-profit heritage, we remain committed to the mission we embarked on in 1918 of serving the financial needs of those who serve the greater good.

Our investment model and long-term approach aim to benefit the approximately five million individual customers we serve across more than 15,000 institutions. To carry out this mission, we have evolved to include a range of financial services, including retail services and asset management services offered by our subsidiaries. But the core of our business has always been the provision of retirement services to our participants. For that reason, we have a deep-rooted interest in any regulatory initiative that could impact the ease with which our participants can access their retirement savings.

TIAA participants are able to access remote online notarization services through a web page or via a mobile application. Since temporary relief from the physical presence requirement was first granted last year, TIAA participants across all 50 states have completed over 11,000 remote notarizations. Of those completed notarizations, we have encountered no security issues or suspected incidences of fraud. Feedback from our participants has been overwhelmingly positive, with a focus on the ease and efficiency of the remote notarization process. For the sake of public health, as well as the interests of retirement plan participants, we urge Treasury and the IRS to make this relief permanent and allow participants to meet the physical presence requirement using remote notarization going forward.

II. Remote notarization has many benefits, and should be permitted on a permanent basis.

Treasury Regulation Sec. 1.401(a)-21(d)(6) provides that where a participant election is required to be witnessed by a plan representative or a notary public (e.g., spousal consent), the signature of the individual making the participant election must be witnessed in the physical presence of a plan representative or a notary public./3

Treasury and the IRS first provided temporary relief from the physical presence requirement through December 31, 2020 in Notice 2020-42 and extended that relief through June 30, 2021 in Notice 2021-3. Now, Notice 2021-40 extends the relief even further to June 30, 2022. Under this temporary relief order, participants have been able, and will continue to be able, to meet the physical presence requirement by using remote notarization services.

Since Treasury and the IRS first provided relief from the physical presence requirement, the use of remote notarization services by retirement plan participants has proceeded smoothly, allowing retirement savers to meet their notarization requirements in a convenient way that does not expose them unduly to COVID-19. Of the many thousands of remote notarizations that have occurred, there has been little to no indication that any have raised a significant security issue, to our knowledge. Under the shelter of the temporary relief granted from the physical presence requirement, the many enduring benefits of remote notarization have become clear. Most notably, allowing retirement plan participants to meet the physical presence requirement through remote notarization serves to promote public health, safeguard the security of the notarization process, and maximize ease of use for retirement investors, many of whom are working remotely and are therefore less able to easily access notaries in person as they once were. We believe these benefits support our argument that Treasury and the IRS should make their relief from the physical presence requirement permanent. We discuss each benefit in more detail below.

Public health. Granting permanent relief from the physical presence requirement would advance public health goals by decreasing the risk that retirement plan participants will contract or spread COVID-19 as part of the in-person notarization process. While we expect that increasing rates of vaccination in the U.S. and abroad will help the pandemic abate to a significant degree, the world has seen in recent months that even fully vaccinated individuals can contract breakthrough cases of COVID-19 and spread the virus to others - meaning the pandemic is far from over. Allowing individuals to use remote notarization services on a permanent basis would be appropriate from a public health perspective, given the ongoing and ever-changing nature of the pandemic. As the public learns to live with the risks posed by COVID-19 for the foreseeable future, they should be permitted to avoid unnecessary in-person interactions by using remote notarization services on a permanent basis.

Ease of use. The overwhelming feedback we have received, which is consistent with the general industry feedback we have seen, is that participants appreciate the convenience and flexibility that comes with remote notarization of spousal consent forms. For participants who are comfortable communicating over video, remote notarization offers them an easy, on-demand way to notarize documents from the comfort of their own home. This process saves time and effort without sacrificing security, as discussed further below. This is particularly true for participants who are no longer working in a formal office environment, where they are more likely to have close access to a notary, on a daily basis. Notably, participants who are not comfortable with video communications still are and should remain free to notarize in person. We believe this approach gives participants an ideal level of flexibility in determining which type of notarization service best suits their needs, preferences, and risk profile.

Security. Treasury and the IRS have previously solicited feedback as to whether procedural safeguards are necessary in order to reduce the risk of fraud, spousal coercion, or other abuse in the absence of a physical presence requirement. We believe the conditions set forth under the current temporary relief order have made the remote notarization process more secure than in-person notarization, not less. As is the case with notarization requiring physical presence, remote notarization involves real-time ID verification by a third party to ensure that the individual appearing before the notary is in fact who they claim to be. Plan sponsors can also make use of additional authentication standards if they wish to incorporate an extra layer of security into the process. The remote notarization process can also be digitally recorded and stored in case an electronic audit trail is ever needed. All of these elements serve to make remote notarization even more secure than in-person notarization. And in our own experience, with over 10,000 remote notarizations carried out over the past year, we have not encountered any significant security issues or incidences of fraud. As such, we do not believe any additional safeguards are necessary to prevent fraud or spousal abuse in the remote notarization process.

For these reasons, we believe Treasury and the IRS should make the temporary relief from the physical presence requirement provided in Notice 2021-40 permanent. Doing so would offer enormous upside to participants with very little downside, based on our experiences to date.

III. Conclusion.

We appreciate the opportunity to comment on this important issue. In our view, making the temporary relief from the physical presence requirement permanent would provide a host of benefits to participants and the general public, with very few drawbacks. We hope the perspective we have provided is helpful to Treasury and the IRS as they consider further extension of this relief, and we would be happy to engage further on any aspect of this letter.

Sincerely,

Alice Hocking

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Footnotes:

1/ Notice 2021-40, Extension of Temporary Relief from the Physical Presence Requirement (June 24, 2021), available at: https://www.irs.gov/pub/irs-drop/n-21-40.pdf.

2/ Notice 2021-03, Extension of Temporary Relief from the Physical Presence Requirement for Spousal Consents Under Qualified Retirement Plans (Dec. 22, 2020), available at: https://www.irs.gov/pub/irs-drop/n-21-03.pdf.

3/ 26 CFR Sec. 1.401(a)-21(d)(6).

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The notice can be viewed at: https://www.regulations.gov/document/IRS-2021-0009-0001

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