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The Pension Rights Center urges the IRS to protect retirement spousal rights

For Immediate ReleaseContact: Karen Friedman, 202-320-6518
October 04, 2021www.pensionrights.org

The Pension Rights Center (PRC) sent a comment letter to the IRS in opposition to efforts to weaken spousal rights to retirement benefits. The Pension Rights Center has been a leading consumer voice working to protect the retirement security of workers, retirees and their families since 1976.

The federal private pension law, ERISA, requires that when a pension-earning spouse dies, the surviving spouse must automatically receive a survivors’ pension from a traditional defined benefit pension plan, or be the named beneficiary of a 401(k)-type retirement account, unless the spouse had already provided written consent to give up those critical benefits. This consent must be witnessed in the physical presence of a notary or a plan administrator. While spousal pension rights apply equally to both women and men, in reality women are more dependent on spousal benefits for their retirement security than men.

The requirement that there must be in-person, properly-witnessed consent before spouses can surrender their right to retirement benefits has been a linchpin of protecting women’s pension rights for nearly four decades. The requirement that the signing process be in the physical presence of the notary or plan administrator has helped prevent and deter employees from engaging in fraud or coercion to get the signature of the spouse (for instance, if the pension-earning spouse wants to get a single life annuity, which would give him more money while he is alive; or he wants to secretly be able to change the beneficiary on his 401(k) plan).

During the worst months of the pandemic – when businesses were shuttered and social distancing was mandatory – it was understandable that the IRS temporarily waived this “physical presence” requirement and allowed retirement plans to accept spousal consents that had been remotely notarized or witnessed online. However, in response to ongoing pressure by business groups, the IRS recently issued a notice (2021-40) indicating it may consider permanently eliminating the important physical presence requirement.

In its comments responding to the IRS notice, PRC asserted that “Permitting remote notarization and witnessing without physical presence was an understandable accommodation during the worst phases of the pandemic... However, it must be recognized that the lockdowns and social distancing that temporarily necessitated this dramatic move are no longer a necessity – notaries are again freely available for in-person notarizations. There is simply no justification for weakening spousal protections and endangering women’s retirement security by permanently eliminating the physical presence requirement.”

In addition, PRC noted that “Spousal consents are the only circumstance under ERISA where notarization is required. The decision of a spouse to sign away spousal benefits is a life-changing event that requires maximum safeguards. The act of having to seek out and appear in the physical presence of a notary reinforces to the spouse the seriousness of the interests at stake…. Knowing one must appear before a third party, in person, is a significant deterrent to fraud and coercion.”  The Center provided evidence of the multiple ways in which remote online notarization is less effective than signing in front of a notary or a plan administrator.

The Pension Rights Center wasn’t the only advocate for workers and retirees to oppose the change. A large group of women’s and retiree organizations, unions and groups representing survivors of domestic abuse also filed a comment letter. Those who signed include:  the  National Women’s Law Center; the Alliance for Retired Americans; APWU Retirees Department, AFL-CIO; National Caucus and Center on Black Aging; National Committee to Preserve Social Security and Medicare; National Domestic Violence Hotline; National Coalition Against Domestic Violence; National Network to End Domestic Violence; National Organization for Women; Social Security Works; Tahirih Justice Center; UFCW International Union; Women's Institute for a Secure Retirement (WISER).

In their comment letter, the groups urged the IRS to end the temporary waiver and restore the physical presence requirement for spousal consent. They concluded, “If the IRS is considering any changes to this long-standing protection, the agency should publish a well-supported proposed regulation in a more formal notice-and-comment rulemaking proceeding, and it should strengthen protections for spouses and not weaken them.”

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