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Puerto Rico Treasury Department
Administrative Determination No. 17-29
Relief to Participants of 1081.01(d) Retirement Plans Affected by Hurricane Maria
Following is a brief outline of the Puerto Rico Treasury Department Administrative Determination No. 17-29 which is designed to provide relief to participants in a qualified “401(k)-type” defined contribution plan. The guiding rules of this official determination was issued by the Departamento de Hacienda on November 15, 2017. Legal implication questions should be referred to your attorney, although Retention Strategies lead Pension Consultant, Steven Goldberg, would be pleased to discuss.
It is important to note that Retention Strategies is not a law firm and the information below shall not be considered legal advice and shall not replace qualified legal advice. It is intended as a high-level summary of an official Puerto Rico Treasury Department Determination that could potentially have significant impact on qualified 1081.01(d) retirement plan participants if all or a portion of its optional provisions are adopted by the Plan Sponsor.
· Special Lump-sum distributions and/or Hardship withdrawals permitted up to $100,000
· Special loan provisions permitted
· To cover losses or expenses incurred by Participants and Beneficiaries
· Expenses and losses are those of Participant, spouse, descendants, ascendants
· Expenses and losses incurred as a consequence of Hurricane Maria
· Must be tax residents of Puerto Rico during 2017 and 2018
· Applicable to certain distributions made between Sept. 20, 2017 and June 30, 2018
· Hardship withdrawals will not be subject to 12-month suspension
· Detailed list of expenses or losses is not required
· The first $10,000 will be exempt from income taxes and tax withholdings
· Excess of $10,000 subject to a 10% flat income tax and a 10% tax withholding must be applied
· Multiple distributions may be made up until June 30, 2018, but may not exceed $100,000 in total. Tax exemption is limited to $10,000
· All distributions will be considered to have been made first from untaxed sources (employee before-tax contributions, company match and associated earnings)
Participant Requests for Distribution
· Formal request to the Plan Sponsor/Administrator by Participant will include name, mailing address and physical address of the eligible individual
· Participant will include a certification of Puerto Rico residency and that he/she will continue to be a resident in 2018, and that losses result from Hurricane Maria and extraordinary expense incurred for basic needs after Hurricane Maria or to compensate for resulting unearned income as a result of Hurricane Maria
· The Plan Sponsor, Administrator or Trustee is not required to verify or confirm information other than the residency claims
· Offering these provisions by the Plan Sponsor are optional and they may be less generous in nature
· Plan Amendments must be made retroactively before December 31, 2018, however they do not need to be filed with the Puerto Rico Treasury.