Federal Tax

International Pension Planning — Puerto Rico (Portfolio 324)

  • This Portfolio examines the legal rules, practices, and principles governing the establishment, qualification, operation, and termination of retirement plans in Puerto Rico.


Bloomberg Tax Portfolio, International Pension Planning — Puerto Rico, No. 324, provides a detailed discussion of the legal rules, practices, and principles governing the establishment, qualification, operation, and termination of retirement plans in Puerto Rico (“P.R.”) and the taxation of retirement benefits from qualified and nonqualified plans and equity-based compensation arrangements. Topics addressed include whether, when, and how to qualify a retirement plan in Puerto Rico, the operational requirements that a plan needs to satisfy to retain its local qualified status, a comparison of the various alternatives an employer may use for offering retirement benefits to its P.R. employees, the application of U.S. laws in the operation of retirement plans in Puerto Rico, the deduction of employer and employee contributions to qualified and nonqualified plans, and the P.R. and U.S. taxation of benefits from retirement plans in Puerto Rico.

The Worksheets to this Portfolio contain, among other things, sample plan and trust documents for the establishment of a profit-sharing plan with a cash or deferred arrangement qualified only in Puerto Rico, and samples of the requests to be filed with the P.R. Department of the Treasury for such plan’s initial qualification in Puerto Rico and for the administrative approval of subsequent plan amendments and the termination and liquidation of the plan.

This Portfolio, which is addressed primarily to employee benefits practitioners servicing U.S. and international companies with operations in Puerto Rico, assumes a basic knowledge of U.S. employee benefit rules. Readers of this Portfolio will note that, for the most part, retirement plans and compensation arrangements may be operated in P.R. in the same or similar fashion as they are operated in the United States. Areas where that is not the case are identified and discussed.

Table of Contents

I. Introduction
II. General Plan Qualification Requirements Under Puerto Rico Law
III. Additional Qualification Requirements for CODA Plans
IV. Additional Qualification Requirements for Self-Employed Plans
V. Additional Qualification Requirements for ESOPs
VI. Process for Qualification of Retirement Plans with Hacienda
VII. Correcting Plan Qualification Failures and Obtaining Private Letter Rulings from Hacienda
VIII. Deduction of Employer Contributions to Puerto Rico Qualified Plans
IX. Tax Exemption on Investment Income Earned by Trust
X. Investment Options Available to Participants in Puerto Rico Qualified Plans
XI. Taxation of Plan Benefits
XII. Application of Title IV of ERISA to Pension Plans in Puerto Rico
XIII. Comparison of Puerto Rico-Only and Dual-Qualified Plans
XIV. Asset Transfer from Dual-Qualified Plan to Puerto Rico-Only Qualified Plan
XV. Nonqualified Retirement Plans and Equity-Based Compensation Arrangements

Carlos Gonzalez
BenefitsPuertoRico.com LLP
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