Retirement plan administrators regularly face the problem of uncashed distribution checks, which can arise, for example, when required minimum distributions (RMDs) begin, when small accounts are cashed out, or when participants receiving periodic payments fail to update their contact information in a timely manner. The Internal Revenue Service (IRS) recently issued Revenue Ruling 2025-15 to address a plan administrator’s withholding and reporting obligations when a distribution check remains uncashed, including when the participant later requests a replacement check.

In Revenue Ruling 2025-15, the plan administrator of a qualified 401(a) retirement plan issued a check to a participant reflecting a distribution of the participant’s accrued benefit, less federal income tax, which was properly remitted to the Treasury Department. The participant’s entire distribution was taxable. The plan administrator canceled the check when the participant did not cash it within six months. The plan administrator then issued a second check in the amount of the participant’s accrued benefit at the time of issuance of the second check.

Regarding the uncashed first check, the IRS concluded that the employer must report the designated distribution and federal income tax withheld on Form 1099-R for the year the check was issued. The employer is not entitled to any adjustment or refund of the federal income tax withheld from the first check (assuming that the employer withheld and remitted the correct amount). When the second check is issued, however, no additional federal income tax is required to be withheld or reported unless the amount of the accrued benefit at that time (and, therefore, the amount of the second check) exceeds the amount of the first check. If the second check reflects a higher accrued benefit than that reflected in the first check, then the excess amount is treated as a separate designated distribution subject to its own withholding and reporting obligations at the time it was made.

Revenue Ruling 2025-15 is consistent with past IRS rulings that have concluded that withholding and reporting obligations apply at the time a distribution check is distributed to the distributee. This is true even if the check is received but not cashed by the distributee (Revenue Ruling 2019-19) or includes an excess payment that the distributee may be obligated to repay later (Revenue Ruling 2002-84). The facts which the IRS analyzed in Revenue Ruling 2025-15 were very straightforward, however, and a number of questions remain regarding plan administrators’ obligations when plan participants go missing or fail to receive the check. Ice Miller will continue to update you on new guidance in this important area.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.