Puerto Rico Treasury Department Issues Guidance on Retirement

December 23, 2014
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Puerto Rico Treasury Department Issues Guidance on
Retirement Plan Limits for 2015
Puerto Rico Retirement Plan Limits
As we anticipated in our Brief of November 3, 2015 (available here), the Puerto Rico
Secretary of the Treasury recently issued Circular Letter of Tax Policy No. 14-05 (available
here) announcing the key pension limits for 2015 under the Puerto Rico Internal Revenue
1
Code of 2011, as amended (PR Code). For plans qualified only in Puerto Rico (PR-Only
Plans), the limits on annual contributions, plan compensation and the highly compensated
employee threshold all will increase, but the limits on elective deferrals, after-tax and catchup contributions, and annual benefits all will remain unchanged for 2015. For plans qualified
both in Puerto Rico and the U.S. (Dual-Qualified Plans), the limits on elective deferrals, plan
compensation, and annual contributions, and the highly compensated employee threshold
all will increase, but the limits on catch-up and after-tax contributions, and annual benefits
all remain unchanged. Finally, only for federal employees participating in the Thrift Plan, the
limit on catch-up contributions will increase. The chart below reflects the key limits.
1081.01(d) Elective Deferrals –
PR- Only Plans
1081.01(d) Elective Deferrals –
Dual- Qualified Plans and Federal
Government Thrift Plan2
Catch-up Contributions – PR-Only
Plans and Dual-Qualified Plans
Catch-up Contributions – Federal
Government Thrift Plan
After-Tax Contributions – All Plans
Annual Limitation on
Compensation – All Plans
Annual Benefit Limitation on DB
Benefits– All Plans
Annual Contribution Limitation on
DC Plan Contributions– All Plans
Highly Compensated Employee
Threshold– All Plans
2014
2015
$15,000
$15,000
17,500
18,000
1,500
1,500
5,500
6,000
10% of the employee’s aggregate
compensation during time
employee is a plan participant
10% of the employee’s aggregate
compensation during time
employee is a plan participant
260,000
265,000
210,000
210,000
52,000
53,000
115,000
120,000
1
The limits for 2015 are based on the current provisions of the PR Code. The Puerto Rico government is currently working on a tax reform that
would overhaul the current tax system. At this time, it is unclear whether the proposed tax reform would affect the current limits under the PR
Code. Consequently, these limits are subject to change.
2
Note that the sum of elective deferrals and contributions to a Puerto Rico deductible individual retirement account (PR-IRA) by a Puerto Rico
participant in a dual qualified plan cannot exceed the sum of the PR Code annual limit on elective deferrals for participants in PR-only plans and the
PR Code annual limit on deductible contributions to a PR-IRA (i.e., $15,000 + $5,000 = $20,000, in 2015). That is, a participant in a dual-qualified
plan who makes $18,000 in elective deferrals in 2015, would only be able to contribute $2,000 to his PR-IRA in 2015 (i.e., $18,000 + $2,000 =
$20,000).