December 23, 2014 If you have questions, please contact your regular Groom attorney or one of the attorneys listed below: Juan Luis Alonso [email protected] (202) 861-6632 Elizabeth T. Dold [email protected] (202) 861-5406 David N. Levine [email protected] (202) 861-5436 Louis T. Mazawey [email protected] (202) 861-6608 David W. Powell [email protected] (202) 861-6600 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).
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