As your business grows, so does the complexity of managing employee benefits—including retirement plans. One common problem for retirement plan administrators is uncashed distribution checks, which can arise, for example, when required minimum distributions (RMDs) begin, when mandatory cash-outs of small account balances are made, or when participants receiving periodic payments fail to update their contact information in a timely manner. Uncashed checks can raise a number of compliance questions.
The Internal Revenue Service (IRS) recently addressed one such question in Revenue Ruling 2025-15. The Ruling clarifies a plan administrator’s withholding and reporting obligations when a distribution check remains uncashed, including when the participant later requests a replacement check.
Why Revenue Ruling 2025-15 is Important
In Revenue Ruling 2025-15, the plan administrator of a qualified 401(a) retirement plan issued a distribution check to a participant reflecting a distribution of the participant’s accrued benefit, less federal income tax, which was properly withheld and remitted to the Internal Revenue Service. The plan administrator canceled the check when the participant did not cash it within six months, then issued a second check which reflected the amount of the participant’s accrued benefit at the time the second check was issued.
The IRS determined that the plan administrator had the following obligations:
- The amount of the distribution and federal income tax withheld with respect to the first check should be reported on Form 1099-R for the year the first check was issued—even though the check was never cashed;
- No adjustment or refund of the federal income tax withheld from the first check is allowed, assuming the correct amount was withheld and remitted; and
- If the second check is for a higher amount(due to a higher accrued benefit at that time), the excess is treated as a separate distribution and is subject to its own withholding and reporting obligations at the time it is made. Otherwise, no additional federal income tax is required to be withheld or reported when the second check is issued.
Why This Matters to Your Business
Revenue Ruling 2025-15 reinforces a principle from past IRS rulings: withholding and reporting obligations are triggered when the distribution check is issued. 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).
If your business sponsors a retirement plan, now is a good time to review your procedures for:
- Locating missing participants;
- Handling uncashed checks; and
- Ensuring timely and accurate tax reporting.
Revenue Ruling 2025-15 dealt with a relatively straightforward scenario, and questions remain regarding plan administrators’ obligations when plan participants go missing or fail to receive their distribution check. For tailored advice on how to protect your business and stay compliant, reach out to a member of Ice Miller’s Workplace Solutions Practice Group.
This publication is intended for general informational 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 circumstance.