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CCH® PENSION AND BENEFITS — 11/29/05

Witness asks IRS to improve protections for electronic pension plan consents

Proposed regulations designed to allow retirement plans to use electronic technology to provide notices to participants and their spouses and to receive benefit elections and consents do not provide adequate protection for spousal beneficiaries, according to Deborah Chalfie of the National Women's Law Center who was the lone witness at a November 2, 2005, IRS hearing on the use of the Internet to communicate with pension plan beneficiaries. The proposed regulations (CCH Pension Plan Guide ¶20,261O) describe the requirements for electronic transmissions by retirement plans. For a detailed discussion of the proposed regulations, see CCH Pension Plan Guide Newsletter Report No. 1590, July 25, 2005.

Chalfie focused on the consent sought from a spouse who is otherwise entitled to a qualified joint and survivor annuity (QJSA) under the participant's retirement plan. She noted that the current scheme for written notice and consent requires informed consent, consent in writing and a notary or plan representative to witness the spouse's signing of the consent form. She observed that a handwritten signature on a consent form provides tangible evidence that can be authenticated independently.

"Substantially equivalent" requirement

The communications provided through electronic media must be "substantially equivalent" to the notice and consents provided in writing, Chalfie indicated. She told Associate Benefits Counsel Bill Bortz that the Electronic Signatures in Global and National Commerce Act (E-SIGN) contains this requirement. She noted that written consent by the spouse confirms the identity of the potential beneficiary and is a reliable indication that the signee understands what he or she is doing and that consent was not given under duress.

Chalfie said that she had heard of instances where the spouse's signature had been forged, or an impostor had appeared before a notary to give written consent. She said that she wanted the spouse to have "hard evidence," when electronic technology is used, that he or she had signed the consent form, so that the spouse's consent could be independently verified. A handwritten signature has served this purpose. Under the current rules, the spouse can make a claim that the consent is invalid, requiring the plan to cease future benefit payments. It is important to preserve this right in rules governing the use of electronic media, Chalfie said. She emphasized that she does not oppose the use of electronic technologies per se.

One commenter on the proposed regulations had claimed that the written record retention requirements were burdensome, Chalfie noted. She said that retirement plans are already required to preserve large amounts of paperwork, and that this is a necessary requirement, regardless of the burden created.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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