February 2021
02Feb

Puerto Rico Government Plan-to-Private Plan Rollovers Allowed

On January 20, 2021, the Puerto Rico Department of the Treasury (Departamento de Hacienda, commonly known as “Hacienda”) issued Administrative Determination No. 21-01 (AD 21-01), which provides that lump-sum distributions from the retirement plan for Puerto Rico government employees are eligible for direct and indirect rollovers into Puerto Rico–qualified retirement plans maintained by private-sector employers. In practice, however, this determination is unlikely to have much of an impact on the operation of private-sector employer plans. Background Since the 1940s,...

February 2, 2021
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July 2020

21Jul

Puerto Rico announces referendum to protect public pensions

Puerto Rico’s governor announced Monday that she plans to hold a referendum on whether public pension payments should be protected by the U.S. territory’s Constitution for the first time in the island’s history. If approved, the measure would prohibit using money from Puerto Rico’s crumbling public pension system to repay creditors — challenging efforts by the federal control board overseeing the island’s finances to make pensioners share the pain with investors in a restructuring of part of the island’s...

July 21, 2020
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June 2020
10Jun

Supreme Court Clears Bankruptcy Restructuring of Puerto Rico Government Pension Plans

On June 1, 2020, the Supreme Court of the United States issued a unanimous decision in Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC, No. 18–1334, holding that the selection of the members of the Financial and Oversight Management Board for Puerto Rico did not violate the Appointments Clause of the U.S. Constitution. Consequently, the Board’s actions regarding the management and control of the budget and other financial matters of the government of Puerto Rico,...

June 10, 2020
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February 2020

10Feb

Deal reached to cut bankrupt Puerto Rico’s debt by $24 bln

Puerto Rico would shed about $24 billion of debt and move closer to exiting bankruptcy under an agreement with bondholders announced on Sunday by the U.S. commonwealth's federally created financial oversight board. The deal would cut $35 billion of bonds and claims to about $11 billion as it increases the ranks of general obligation (GO) and Public Buildings Authority (PBA) bondholders that signed onto a plan to restructure core government debt and more than $50 billion in pension obligations...

February 10, 2020
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December 2019

12Dec

Puerto Rico government launches defined contribution program for 110,000 employees

The government of Puerto Rico announced Tuesday the launching this month of a new defined contribution savings plan for 110,000 public employees, who will be allowed to determine how their pretax contributions will be invested for their retirement. The new retirement plan, similar to a 401(k) program, will include government employees covered by Act 106 of 2017, the Act to Guarantee Payments to Our Pensioners and Establish a New Defined Benefit Plan for Public Servants. Starting Dec. 19, these...

December 12, 2019
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November 2019

28Nov

Puerto Rico Retirement Plans Will See Tax Provisions Reinstated

House Bill No. 2172 (HB 2172), which intends to incorporate technical amendments to the Puerto Rico Internal Revenue Code of 2011, as amended, was approved by the Puerto Rico Legislature and sent to the Governor for approval, according to a client alert from law firm McConnell Valdés LLC. For taxable years commencing in 2019 and thereafter, HB 2172 would amend the PR Code to provide that distributions made by plans qualified under the U.S. Internal Revenue Code of 1986,...

November 28, 2019
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June 2019

13Jun

Puerto Rico oversight board reaches deal over retiree pensions

Puerto Rico’s federally created financial oversight board said on Wednesday it reached a deal to restructure more than $50 billion in unfunded pension liabilities that includes cuts for some of the bankrupt U.S. commonwealth’s retired government workers. The tentative agreement with a federal court-appointed committee representing more than 167,000 retirees, which the government opposes, helps pave the way for a plan to restructure Puerto Rico’s core government debt. Puerto Rico has been in U.S. District Court since 2017 in...

June 13, 2019
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November 2017

14Nov

Puerto Rico Governor Signs Executive Order Authorizing Rules for Retirement Plan and IRA Distributions in the Wake of Recent Natural Disasters

On November 8, 2017, the Governor of Puerto Rico signed Executive Order No. 2017-067 (“EO 2017-067”) authorizing the Secretary of the Department of the Treasury (the “PR Treasury”) to establish tax rules for distributions from qualified retirement plans and individual retirement accounts following Hurricane María and other natural disasters. Under EO 2017-067, the PR Treasury must create: Tax rules applicable to distributions from qualified retirement plans and individual retirement accounts (“IRAs”) that are disbursed following Hurricane María or any...

November 14, 2017
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June 2017

01Jun

Puerto Rico governor protects pensions, promises tax breaks

Puerto Rico's governor unveiled a budget Wednesday that prioritizes pension payments for tens of thousands of retired government workers who depend on a public pension system that is crumbling amid a deep economic crisis. The proposed $9.56 billion budget is more than a half million dollars larger than last year's, and Gov. Ricardo Rossello said that for the first time in recent history the budget would be truly balanced. "In the past, money was taken from areas, increasing budgeted spending and...

June 1, 2017
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May 2017

23May

Roads & pensions swept up in Puerto Rico’s $123bn bankruptcy

Puerto Rico’s bankruptcy process has spread to the territory’s pension system and highway authority, bringing the amount involved to over $120 billion and far exceeding the previous municipal bankruptcy record. The Employees Retirement System (ERS) and the Highways and Transportation Authority (HTA) were added to the proceedings already involving the territory’s government and the island’s sales tax financing corporation (COFINA). Puerto Rico and its agencies are roughly $74 billion in debt. While there are conflicting estimates about the gap between the...

May 23, 2017
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