Puerto Rico Department Of The Treasury Announces 2023 Limits On Qualified Retirement Plans

• Law Firm: Littler Mendelson
• Subject Matter: Employment and HR, Retirement, Superannuation & Pensions, Employee Benefits & Compensation
• Author: Ms Lourdes Hern'ndez-Venegas and Alberto Tabales-Maldonado
• Published date: 14 February 2023

The Puerto Rico Department of the Treasury recently issued Internal Revenue Circular Letter No. 23-01 (CL IR 23-01) announcing the applicable 2023 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 to publish 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 IRS publishes its retirement plan limits under the US Code. Thus, the following are the applicable 2023 limits for qualified retirement plans in Puerto Rico:

• Annual Benefit Limit applicable to defined benefit plans - $265,000 (increased from $245,000 for 2022).

• Annual Contribution Limit applicable to participant accounts in defined contribution plans - $66,000 (increased from $61,000 for 2022).

• Annual Compensation Limit - $330,000 (increased from $305,000 for 2022).

• Compensation Limit for highly compensated employees (HCE) - $150,000 (increased from $135,000 for 2022). This is the limit for the base year (2023) for 2024 testing in the case of calendar year plans.

• Catch-up Contributions Limit applicable only to federal government employees ages 50 or over -$7,500 (increased from $6,500 from 2022).

• Elective Cash or Deferral Contributions Limit applicable to participants in a plan sponsored by the federal government or a plan qualified under both Section 1081.01(a) of the PR Code and Section 401(k) of the US Code- $20,000 (unchanged from 2022).¹

• Elective Cash or Deferral Contributions Limit applicable to participants in a plan qualified only under Section 1081.01(a) of the PR Code - $15,000 (unchanged from prior years).

• Catch-up Contributions Limit applicable to participants in a plan not sponsored by the...