Uncashed Pension Checks

[poisnivey]

In a defined benefit plan, we located missing participants and validated current address.  They were non responsive to begin their benefit so we defaulted their election and began payment.  Two participants, who are 70.5, have not cashed their checks.  Do I stop payment and not reissue so that a 1099 is not generated or should we continue making payments knowing the checks aren't being cashed? 

[CuseFan]

The plan is obligated to make the payment. The unresponsive participant's failure to cash the checks (assuming you know they are being received) does not change that obligation nor the tax liability. Explaining this to the participant may help.

[Doc Ument]

I agree with CuseFan.  You might also want to mention to the participants the 50% tax penalty (imposed on the participant, not the employer) for refusing to take an RMD (Code §4974; Treas. Reg. §54.4974-2).   (If the participants are not opening that employer's mail, then have some other firm send the warning.)   That is why administrators should continue to report the RMDs as such to the IRS, so that the IRS computers can compare the employer's tax reports with the participant's tax filings.   I suspect the participants will start accepting the checks once the IRS starts "asking" the participants for the 50% tax deficiency (with accrued interest), though hopefully they will do so once they are informed by someone else of that tax consequence.   The employer should take reasonable steps to avoid being in the position of looking like it did not try to inform the participants of the tax consequences of failing to cash the checks.