The Revenue Ruling states that the guidance equally applies to situations in which the participant chooses to not cash the check, sends the check back to the payor, destroys the check, or cashes the check in a subsequent year. (Photo: Shutterstock)

Benefit plan administrators and plan service providers received IRS guidance on what to do when a participant in a tax-qualified retirement plan receives a plan distribution but does not cash the check or cashes the check in a later year. According to IRS Revenue Ruling 2019-19, the distribution is:

• Includible in the participant's gross income for the year in which the distribution occurs
• Subject to applicable tax withholding by the plan administrator (or payor) when the distribution is made
• Reportable on Form 1099-R for the year of distribution by the plan administrator (or employer)

The Revenue Ruling states that the guidance equally applies to situations in which the participant chooses to not cash the check, sends the check back to the payor, destroys the check, or cashes the check in a subsequent year.

Plan administrators and plan service providers should review their uncashed check processing procedures to confirm that such procedures align with this guidance.

Generally, when a plan distribution is processed, the plan administrator applies the applicable tax withholding to the gross amount of the distribution and the check is issued for the net amount. Assuming the check is not returned as undeliverable, the plan administrator will report (after the end of the tax year) on a Form 1099-R the distributions made from the plan during the tax year.