What is the “self-certification” process?

In general terms, self-certification means that no documentation is necessary to confirm eligibility and a participant’s word is enough. The CARES Act didn’t prescribe a specific process for self-certification (i.e., whether the employee’s certification may be verbal or should be submitted in writing). For documentation purposes, it may be best to request that a plan participant to confirm it in writing, an email should be enough. It is possible that investment platforms may include some sort of formal attestation on their distribution requests, but until this process is rolled out, plan sponsors will benefit from some form of documentation.

In Q11 of Coronavirus-related relief for retirement plans and IRAs questions and answers issued on May 4, the IRS indicated that “[t]he administrator of an eligible retirement plan may rely on an individual's certification that the individual satisfies the conditions to be a qualified individual in determining whether a distribution is a coronavirus-related distribution, unless the administrator has actual knowledge to the contrary.” This follows the earlier guidance provided in Notice 2005-92. Implementation of this aspect would be hard for an administrator who may not be aware of all of the circumstances of an employee who may have other jobs/sources of income that were negatively impacted as a result of COVID-19. Note that the ‘actual knowledge’ caveat didn’t impose additional verification burden and/or proof outside of the self-certification by participant as required by the Act. This QA raised a lot of questions in the industry and among the plan sponsors; more detail is anticipated from the IRS in future guidance.

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Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.