A check was sent to a participant in 1997 and a 1099-R was issued for 1997. It now turns out the participant never cashed the check. What should the Plan Sponsor do with respect to the 1099-R which has, of course, already been submitted to the IRS?

I had a situation like this once, but the participant never rec'd the check because it had been lost in the mail. In that case, we amended the 1096 from the year the check was originally cut, and then had the check re-cut the next year and issued 1099 for the year the check was re-cut. This seemed fair to the participant.

In a case where the participant had the check, and simply didn't bother to cash it (is that your situation) I would not jump thru 1099-reissuing hoops. I don't have any regulatory authority for my postion, but I think the 1099 s/b based on the ultimate check cut date.

Income is considered taxable when it is constructively received by the participant. The participant could be interpreted to be in constructive receipt of this distribution as early as the day which the check was mailed.

The fact that the check was not cashed is not relevant. If there is a question about when the participant received the distribution, you might think more about what to do. If you are certain that the participant actually received this check though, I wouldn't even consider changing the tax reporting.