November 2024
Author: ADP Admin/Wednesday, February 1, 2023/Categories: Compliance Corner , State Compliance Update
The Puerto Rico Department of Treasury (Departmento de Hacienda) issued a circular letter (CC RI 23-01) with the applicable Pension Plan Contribution and Catch-up Limits beginning on or after Jan. 1, 2023 as shown below.
Note: For Tax Year 2023, the pension plan contribution limits for Puerto Rico residents participating in both PR IRC 1081.01 and IRS 401(K) (dual-qualified plans) are different than the IRS limits.
The Details:
The Puerto Rico Code has limits for certain pension plans that are different from those set by Federal Code. A summary of the 2023 pension/retirement plan contribution limits as compared to 2022 is below:
Puerto Rico Retirement Plan Limits
Category
2022 Limit
2023 Limit
Limit on Cash or Deferred Contributions applicable to participants in a qualified retirement plan only under Section 1081.01(a) of the Code (Section 1081.01(d)(7)(A)(i) of the Code).
$15,000.00
Limit on Additional Contributions applicable to participants in a retirement plan not sponsored by the federal government who have reached the age of 50 (Section 1081.01(d)(7)(C)(i) of the Code).
$1,500.00
Limit on Cash or Deferred Contributions applicable to participants in a retirement plan sponsored by the US federal government, and participants in a qualified retirement plan both under Section 1081.01(d) of the Code and under Section 401(k) of the Federal Code (Section 1081.01(d)(7)(A)(ii) of the Code).
**NOTE: The $22,500.00 limit is the 2023 federal contribution limit set annually by Section 402(g) of the Federal Code. However, Section 1081.01(d)(7)(A)(iii) of the Code provides that for an employee who participates in a qualified plan under Section 1081.01(d) of the Code and under Section 401(k) of the Federal Code, the maximum limit of contributions to the plan may not exceed $20,000.00. Any amount contributed in excess of the limit established by the Code will be taxable.
$20,500.00
**$20,000.00
$22,500.00
Limit on Additional Contributions applicable to participants in a retirement plan sponsored by the US federal government who have reached the age of 50 (Section 1081.01(d)(7)(C)(v) of the Code).
$6,500.00
$7,500.00
Limit on Annual Contributions applicable to the accounts of participants in defined contribution plans (Section 1081.01(a)(11)(B)(i) of the Code).
$61,000.00
$66,000.00
Limit on Annual Compensation applicable for the computation of benefits under qualified retirement plans (Section 1081.01(a)(12) of the Code).
$305,000.00
$330,000.00
Limit on Annual Benefits payable to participants in defined benefit pension plans (Section 1081.01(a)(11)(A)(i) of the Code).
$245,000.00
$265,000.00
Highly Compensated Employee Earnings Limit (Section 1081.01(d)(3)(E)(iii)(III) of the Code).
$135,000.00
$150,000.00
Limit on Voluntary Employee After-Tax Contributions applicable to participants in qualified retirement plans under Section 1081.01(a) of the Code. The limit applies to the participant’s aggregate compensation for all years of participation in the plan (Section 1081.01(a)(15) of the Code).
10%
NOTE: For purposes of the above elective deferral limits, dual-qualified plans are plans that meet the requirements of both section 1081.01(d) of the Code and 401(k) of the Federal Code. In addition, the dual-qualified limits will apply to an individual who is a participant in multiple plans of an employer, for example, a US qualified plan and a Puerto Rico qualified plan. Plans sponsored by the US government (such as the federal Thrift Savings Plan) are also considered dual-qualified.
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