On July 16, 2025, the Internal Revenue Service (IRS) published Revenue Ruling 2025-15, providing guidance on federal income tax withholding and reporting obligations when a distribution check from an employer-sponsored qualified retirement plan remains uncashed and a subsequent replacement check is issued. This guidance applies to all qualified retirement plans, including defined benefit (DB) and defined contribution (DC) plans.

In this revenue ruling, the IRS kept its assumed set of facts simple:

• The distribution was a single lump sum payment made from a qualified retirement plan¹ to an individual who is a U.S. citizen or resident.
• The entire distribution is taxable, with no special tax considerations.²
• The individual has not made a withholding election with respect to distribution of their plan benefit (so default federal income tax withholding applies).
• The correct amount of required federal income tax was withheld and remitted to the U.S. Department of the Treasury.
• The initial distribution check, Check 1, for the amount of the individual’s vested plan benefit, net of required withholding, was mailed to the individual’s address on file.
• After the distribution was made, the individual’s plan benefit did not increase.
• The individual did not cash Check 1, so after six months Check 1 was cancelled.
• Subsequently, a second check, Check 2, was mailed to the individual for the amount of the individual’s vested benefit at that time (net of any required tax withholding).

Can the tax withheld on Check 1 be recovered?

No. Because the correct amount of federal taxes—not more than the correct amount—was withheld and remitted for Check 1, there are no adjustments or refunds available for those taxes from the IRS, even though the individual never cashed the check.

How is tax withholding handled on Check 2?

If Check 2 is equal to (or less than) Check 1, then no additional federal income tax withholding is required on Check 2 because the withholding on Check 1 met the requirement.

If Check 2 is larger than Check 1 (e.g., due to investment earnings), then the excess amount is considered a separate distribution, subject to federal income tax withholding on the excess amount at the time Check 2 is issued.

How are the two checks reported to the IRS?

A plan administrator must report a distribution from a DB or DC plan of $10 or more to the IRS using Form 1099-R.

Check 1 must be reported to the IRS on Form 1099-R for the tax year in which Check 1 was issued, reporting the amount of that distribution and the federal income tax withheld—even though the check was never cashed.

If Check 2 is equal to (or less than) Check 1, a Form 1099-R for Check 2 is not required.

But if Check 2 is larger than Check 1 by at least $10, the excess amount must be reported on Form 1099-R for the year of that distribution.

How this affects plans from a practical standpoint

Many plan administrators and plan payors may find they have already been handling the federal income tax withholding and reporting of uncashed distribution checks and reissued replacement checks in the same manner as the IRS guidance in this just-released revenue ruling. Plan administrators and payors who have been handling the process differently should review this new IRS guidance and adjust their procedures accordingly.

Please contact your Milliman consultant to discuss if or how this change may impact your plan(s).

¹ A qualified retirement plan under Internal Revenue Code (IRC) section 401(a).

² In the assumed set of facts presented in this revenue ruling, the qualified retirement plan does not include any designated Roth accounts under IRC section 402A (so no after-tax basis recovery applies), employer securities (so no net unrealized appreciation applies), or payments that are excludable from gross income under IRC sections 104 or 105 related to injuries or sickness, or accident or health plans.