Deadlines for Plan Sponsors in Puerto Rico

In a client alert titled “Required Puerto Rico Qualified Retirement Plan Amendments and Determination Letter Filing Deadline,” Juan Luis Alonso of the Groom Law Group summarizes when required Puerto Rico qualified retirement plan amendments must be adopted generally and provides an overview of the requirements for applying for a determination letter under the Puerto Rico Internal Revenue Code of 2011 (PR Code).

Plan sponsors of plans covering employees in Puerto Rico must take action to maintain their plans’ qualification status for Puerto Rico tax purposes, says Alonso. Specifically, they need to amend their plans on or before the due date of the employer’s Puerto Rico income tax return for 2013, including any extension. This would be April 15, 2014, for a calendar year taxpayer, and July 15, 2014, if a calendar year taxpayer is timely in requesting an automatic extension to file, he says. These plan sponsors also need to apply for a Puerto Rico determination letter by the same due date.

The alert notes that employees who are residents of Puerto Rico or who perform labor or services primarily within Puerto Rico, regardless of residence for other purposes, may be either allowed to participate in a plan qualified under the PR Code or participate in a separate plan qualified only in Puerto Rico. In addition, the code requires that a plan intended to be qualified in Puerto Rico obtain a favorable determination letter from the Puerto Rico Treasury Department.

The alert also makes note of the Windsor decision on same-sex couples. While same-sex marriages are not recognized in Puerto Rico, says Alonso, the post-Windsor definitions of “spouse” and “marriage” (including same-sex couples) are applicable to Puerto Rico-only plans for the requirements under Title I of the Employee Retirement Income Security Act (ERISA)—for example, the spousal consent requirements and beneficiary designations.

Alonso notes that, although the Puerto Rico Treasury has not issued any additional guidance, it appears that the current definitions of spouse and marriage under Puerto Rico law (no same-sex marriages and no domestic partnerships or civil unions) continue to apply to those provisions and requirements of the code that are not subject to ERISA—for example, hardship withdrawals.

The alert recommends that plan sponsors should review both dual-qualified and Puerto Rico-only plans, which may need to be amended to comply with the U.S. Department of Labor’s post-Windsor interpretations of the terms “spouse” and “marriage.”

The full text of the client alert can be downloaded here.