The Internal Revenue Service (“IRS”) recently issued Notice 2025-67 (the “Notice”) announcing the applicable cost-of-living adjustments for retirement plans for tax year 2026. Below is a comparison of key limits for tax years 2025 and 2026 of particular relevance to Puerto Rico tax-qualified plans (with increases highlighted):
| 2025 | 2026 | |
| Annual Benefit Limitation for Defined Benefit Plans | $280,000 | $290,000 |
| Annual Compensation Limit | $350,000 | $360,000 |
| Annual Contribution Limitation for Defined Contribution Plans | $70,000 | $72,000 |
| Highly Compensated Employee Threshold | $160,000 | $160,000 |
| Elective Deferrals Limit – (Applicable in Puerto Rico to Dual Qualified Plans and Federal Government Thrift Savings Plan) | $23,500 (*) | $24,500 (*) |
| Catch-up Contributions – (Applicable in Puerto Rico only to Federal Government Thrift Savings Plan) | $7,500 Enhanced for individuals aged 60 to 63: $11,250 | $8,000 Enhanced for individuals aged 60 to 63: remains $11,250 |
This Notice generally applies to qualified plans under the United States Internal Revenue Code of 1986, as amended. However, employers and administrators of tax qualified plans under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”), must be aware that Section 1081.01(h) of the PR Code requires that, before every taxable year, the Puerto Rico Treasury Department (the “PRTD”) notify the cost-of-living adjustments announced by the IRS that will, in turn, apply to plans qualified under the PR Code. Accordingly, we expect the PRTD to issue guidance announcing the applicable limits for tax year 2026 soon, as it did for 2025 through Circular Letter of Internal Revenue No. 25-01. We will provide an update as soon as the PRTD issues the corresponding confirmation.
* PR participants subject to a $20,000 cap per year.
This document has been prepared for information purposes only and is not intended as and should not be relied upon as legal advice. If you have any questions or comments about the matters discussed in this notice, wish to obtain more information related thereto, or about its possible effect(s) on policy or operational matters, please contact us.