Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On December 31, 2018, the Puerto Rico Department of the Treasury (PR Treasury) issued Internal Revenue Informative Bulletin No. 18-24 (IB 18-24) announcing the 2019 applicable limits for Puerto Rico qualified retirement plans. Pursuant to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011, as amended (PR Code), the Secretary of the Treasury is required, before the beginning of each taxable year, to provide notice of the applicable limits under Section 401(a) of the Internal Revenue Code of 1986, as amended (US Code), which are incorporated by reference into the PR Code limits (e.g., annual compensation, annual benefit/contribution limits), once the Internal Revenue Service (IRS) publishes the retirement plan limits under the US Code.
On November 1, 2018, the IRS published the retirement plan limits under the US Code for taxable year 2019. Consequently, the PR Treasury announced, through IB 18-24, the limits on qualified retirement plans under the PR Code, including those limits applicable under the US Code.
The following are the applicable 2019 limits:
- Annual Benefit Limit applicable to defined benefit plans – $225,000 (increased from $220,000 for 2018).
- Annual Contribution Limit applicable to defined contribution plans – $56,000 (increased from $55,000 for 2018).
- Annual Compensation Limit – $280,000 (increased from $275,000 for 2018).
- Compensation Limit for highly compensated employee (“HCE”) – $125,000 (effective immediately after its adoption, Act No. 257 of December 10, 2018 amended the definition of HCE under the PR Code to eliminate the $150,000 limit established pursuant to Act 9 of February 8, 2017 and reinstate the limit under the US Code, as included here).
- Elective Deferrals Limit applicable only to participants in a dual qualified plan or to federal government employees – $19,000 (increased from $18,500 for 2018).
- Catch-up Contributions Limit applicable only to federal government employees age 50 or over –$6,000 (remained unchanged).
- Elective Deferrals Limit applicable to participants in a plan qualified only under Section 1081.01(a) of the PR Code – $15,000 (remained unchanged).
- Catch-up Contributions Limit applicable to participants in a plan not sponsored by the federal government who at the end of the plan year are at least 50 years of age – $1,500 (remained unchanged).
- After-Tax Contributions – 10% of the aggregate compensation of the employees for all years in which they are participants in a retirement plan (remained unchanged).
Employers in Puerto Rico should be aware of these developments and should contact knowledgeable counsel with any questions.