Puerto Rican plans

[Guest silverbell]

Does anyone have any knowledge about qualification of a Puerto Rican plan sponsored by a US Company - ie. IRS determination letter?

Do you have to be a 401(a) qualified plan to take the US deduction for contributions to a PR plan?

[Tom Poje]

Amy Cavanaugh included a short section on Puerto Rican plans in the Coverage and Nondicrimination Anser Book (2nd edition)

(Heck she 'suckered' me into editing much of the book, I should know!)

According to her comments, filing for a determination letter is required under the Puerto Rico Code in order for the plan to receive favorable tax treatment. Form letters for requests are available on the Hacienda Web site http://www.hacienda.prstar.net.

(web site is in Spanish only)

Hacienda is the Puerto Rico Treasury

good luck, amigo!

[Guest silverbell]

Thanks for the response, but I was inquiring about US determination letter for the Puerto Rican plan. We are planning to get a letter from the Hacienda but have been told that we need an IRS determination letter to take a deduction on our US tax form.

[mbozek]

PR has a separate tax code for PR residents who do not pay US taxes. There are separate provisions under the PR tax code (sect 165) which a qualified plan must meet and some provisions are inconsistent with requirement for US qualified plans, e.g., 401k(k) contributions are less. A US corp that is subject to US IRC must establish a plan subject to IRC 401(a) to claim a deduction under IRC 404(a). IRS reg 1.401(a)-50 permits trust established under PR tax law to be qualified under IRC 401(a) if the plan meets the requirements under IRC 401(a) and an election is made by the plan sponsor.

[IRC401]

There is no requirement to get a determination letter to establish that a plan is qualified under IRC 401(a).