As required by Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”), the Puerto Rico Treasury Department (the “PR Treasury”) recently issued Circular Letter of Internal Revenue No. 26-03 with the applicable 2026 dollar limits for Puerto Rico qualified retirement plans, following the recent announcement by the Internal Revenue Service (“IRS”) in IRS Notice 2025-67 with respect to United States tax qualified retirement plans. The Puerto Rico limitations are generally applicable to tax-qualified plans under Section 1081.01 of the PR Code. Some of the key limits for tax years 2025 and 2026 are as follows with changes highlighted in yellow:
| 2025 | 2026 | |
| Annual Benefit Limitation for Defined Benefit Plans | $280,000 | $290,000 |
| Annual Contribution Limitation for Defined Contribution Plans | $70,000 | $72,000 |
| Annual Compensation Limit | $350,000 | $360,000 |
| Highly Compensated Employee Threshold | $160,000 * | $160,000 * |
| Elective Deferrals – Puerto Rico Only Qualified Plans | $15,000 | $15,000 |
| Catch-up Contribution – PR and Dual Qualified plans with cash or deferred arrangements | $1,500 | $1,500 |
| Elective Deferrals Limit – Dual Qualified Plans and Federal Government Thrift Savings Plan | $20,000/$22,000 ** | $22,500 ** |
| Catch‐up Contributions – Federal Government Thrift Savings Plan | $7,500 | $8,000 |
| Voluntary (i.e., after-tax) Contribution Limitation | 10% of Compensation since being plan participant | 10% of Compensation since being plan participant |
(*) This is the limit that must be used when determining whether an employee is a highly compensated (“HCE”) for the base year or the 12-month period preceding the plan year of testing in the case of calendar year plans. For example, an employee would be considered a HCE in both the 2026 and 2027 plan years (ADP test that are processed in 2027 and 2028, respectively) if earned more than $160,000 in the base years 2025 and 2026 respectively. For purposes of determining HCE status for the 2025 plan year (which is run in 2026), the applicable look-back year is 2024, for which the HCE threshold is $155,000 as per Circular Letter of Internal Revenue 25-01.
(**) Act No. 179-2025 primarily aligns Puerto Rico IRA contribution limits with the corresponding IRS framework. Before Act No. 179-2025, contributions to dual-qualified plans were generally capped at $20,000 (pre-tax plus IRA component) due to the elective deferral limit under Section 1081.01(d)(7)(A)(iii) of the PR Code, notwithstanding higher federal limits. Although the PR Treasury reiterated for 2025 the $20,000 cap in Circular Letter of Internal Revenue No. 25-01, Act No. 179-2025 subsequently amended the applicable rules beginning in tax year 2025, primarily by increasing the IRA contribution component from $5,000 to $7,000, resulting in a higher combined limit of $22,000 for 2025. Accordingly, for 2026 this cap increases to $22,500 (comprised of a $15,000 elective deferral and a $7,500 IRA component).
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.