Generally, when a qualified retirement plan sponsor issues a retirement benefit to a plan participant or beneficiary, there is an obligation to withhold income tax on the payment and report the payment using Internal Revenue Service (IRS) Form 1099‑R. However, uncashed retirement checks may cause confusion regarding a plan sponsor's tax reporting obligations, including the remittance of withheld income taxes on the benefit distribution, the impact of a returned, uncashed check on tax reporting obligations or the payor's obligations on a reissued check.
On July 16, 2025, the IRS released Revenue Ruling 2025‑15 (the "Ruling"), which clarifies the tax withholding and reporting obligations of retirement plan sponsors when a benefit payment is uncashed and a replacement check is subsequently issued. As discussed below, the Ruling is consistent with general receipt principles and is particularly relevant for plan sponsors dealing with the administrative challenges of uncashed retirement checks or missing participants.
First Check Distributed to Plan Participant or Beneficiary
If a retirement plan distributes a retirement check and federal income tax is properly withheld and remitted to the IRS, the Ruling confirms that a plan is not entitled to adjustment of or refund for those amounts — regardless of whether the check remains uncashed or if the check is subsequently canceled. Instead, the participant or beneficiary has the responsibility to claim a refund of any over‑withheld tax and may do so with their individual tax return. Additionally, the plan sponsor must report the distribution on the Form 1099‑R in the year the check was issued.
Replacement Check
If a retirement plan subsequently reissues a check (for example, if the first check is canceled due to being uncashed), the withholding requirements depend on the amount of the replacement check.
- Reissued check is for the same or lesser amount: If the reissued check is for the same or lesser amount as the first check, the plan sponsor will not have any reporting requirements or tax withholding obligations because withholding was already applied to the original distribution.
- Reissued check is for a larger amount: If the reissued check is for a larger amount (for example, to include accumulated earnings or interest), income tax withholding is only required on the excess amount between the first check and the replacement check because the difference is considered a separate distribution. Additionally, the plan sponsor must report the amount treated as a separate distribution on Form 1099‑R if the amount is at least $10. If the amount is less than $10, there is no Form 1099‑R reporting obligation.
Unanswered Questions and Final Thoughts
It is important to note that the Ruling has some limitations on applicability and leaves certain questions unanswered. The Ruling does not address how plan sponsors should handle situations such as if:
- The first check is mailed to an address the plan sponsor may have reason to believe is not current;
- The reissued check is issued to a different person than the first check (e.g., a surviving spouse);
- The plan sponsor does not have sufficient records regarding the initial payment; or
- The reissued check is distributed by an entity other than the issuer of the first check (e.g., the Pension Benefit Guaranty Corporation's Missing Participants Program).
The Ruling is consistent with prior IRS guidance for withholding and reporting obligations when retirement checks remain uncashed. However, plan sponsors should still confirm that internal administrative procedures for managing uncashed retirement checks align with the Ruling. These practices include:
- Withholding only additional amounts if a reissued check is distributed;
- Understanding that plans are not relieved of tax withholding or reporting obligations even if a retirement check remains uncashed; and
- Timely reporting of all tax distributions even if the retirement checks are uncashed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
