Key Points:

• The newly issued Revenue Ruling 2025-15 clarifies  income tax withholding and reporting rules for uncashed retirement plan checks.
• Generally, adjustments or refunds of income tax withheld on a retirement plan distribution are not available when the retirement check goes uncashed.
• A reissued retirement plan distribution check is not subject to withholding unless it is for a greater amount than the original retirement check.
• Form 1099-R reporting for a subsequently reissued check is only required when the reissued check is greater than the original check amount and the difference is $10 or more. 

When an employer (or the proper withholding agent, like a plan administrator) issues a retirement benefit, there is generally an obligation to withhold income tax on the payment and to report the payment on Form 1099-R. Uncashed retirement benefit checks often create confusion regarding an employer's ongoing tax payment and reporting responsibilities with respect to the uncashed benefit distribution. For example, where there is a returned check, is the plan administrator required to make any income tax payment or reporting changes? Questions also arise regarding the tax obligations for the payor with respect to subsequently issued retirement benefit checks.

On July 16, 2025, the Internal Revenue Service released Revenue Ruling 2025-15 clarifying the income tax withholding and reporting obligations with respect to uncashed retirement plan distributions and subsequently issued retirement distribution checks. The ruling makes clear that when determining an employer's (or the proper withholding agents, such as a plan administrator's) withholding and reporting obligation the focus is on the facts at the time of the retirement plan distribution.

With respect to the original retirement distribution check, the IRS indicates that there is no adjustment or refund of withheld income tax allowed when a benefit check for the correct payment amount goes uncashed, because at the time the check was issued, it was a designated payment from the retirement plan. Further, the employer or plan administrator must report the distribution on Form 1099-R in the year the check was issued. No corrections to the original Form 1099-R are made if the check is reissued and cashed in subsequent years.

If a subsequent check is issued for the benefit distribution, the IRS clarifies that the employer or plan administrator does not have any tax withholding or reporting requirements provided the subsequent distribution check is for the same or lesser amount. If the subsequently issued check is for a larger amount (e.g., due to accrued earnings), the employer or plan administrator must perform income tax withholding on the difference between the original check amount and the subsequent check amount, because the difference is treated as a separate distribution. Further, if the subsequent check is for a greater amount, the employer or plan administrator must report the amount treated as a separate distribution on Form 1099-R provided it is at least $10. If the amount is less than $10, there is no Form 1099-R reporting requirement.

It is important to note that the ruling has some limitations on applicability. For example, it does not address situations such as: (1) a check was mailed to an address on file that the plan administrator has reason to believe is incorrect; (2) the subsequent check is issued to a different person (e.g., surviving spouse); or (3) the second check is issued by any person other than the issuer of the first check (e.g., PBGC Missing Participants Program).

If you have any questions regarding this guidance, please contact a member of the Hanson Bridgett Employee Benefits Group.