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EB Flash: IRS Issues Revenue Ruling 2019-19 Providing Clarification on Treatment of Uncashed Distribution Checks

Employee Benefits Alert

The Internal Revenue Service (IRS) today issued Revenue Ruling 2019-19, which provides clarification on the tax treatment of uncashed distribution checks from qualified retirement plans. Generally, the ruling confirms that the participant or beneficiary recipient of the distribution ("recipient") is required to include the taxable portion of a qualified plan distribution in gross income in the year of distribution, even if the recipient fails to cash the check. Moreover, the plan is required to withhold and remit payment of federal income taxes and provide the Form 1099-R to the recipient. The recipient's failure to cash the distribution check does not change these obligations.

It's noteworthy that the ruling is based on the assumption that the participant received and could have cashed the check, stating that "whether [the individual] keeps the check, sends it back, destroys it, or cashes it in a subsequent year is irrelevant" for purposes of the ruling.

The ruling further points out that "[t]he Department of the Treasury and the Internal Revenue Service continue to analyze issues that arise in other situations involving uncashed checks from eligible retirement plans described in § 402(c)(8)(B), including situations involving missing individuals with benefits under those plans." This final point is important, particularly with respect to missing (or potentially missing) participants, as this represents the bulk of difficult uncashed check issues that plans face.

Revenue Ruling 2019-19 is set for publication in Internal Revenue Bulletin 2019-36, dated September 3, 2019. 

The five-page text of the ruling is posted here.


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