Yes, you have to include it in your 2020 income. It was reported to the IRS as a distribution. The tax that was withheld will be included in the total tax withheld on your tax return, and will be applied to your tax for the year.
As I said before, as far as taxes are concerned it doesn't matter that the check is lost and was never cashed. You have to report it the same as if you got the money. Your wife should contact the financial institution and ask how she can get a replacement check. (You're probably not the first people who ever lost a distribution check.) You have to report it as 2020 income even though you don't get the replacement check until 2021 or 2022.
