Limits that Apply to 2020 Retirement Plans Qualified by the 2011 Internal Revenue Code of Puerto Rico

 

The Treasury Department recently issued its Internal Revenue Circular Letter 19-17 (CC RI 19-17) to inform on the limits that apply to qualified retirement plans under the Code for the year 2020.  Following, we present a summary of such limits. 

 

Limits that Apply for Tax Year 2020

The limits for contributions and benefits of qualified retirement plans under the Federal Code that also apply to qualified retirement plans under the Puerto Rico Code are as follow: 

  • Annual Benefits Limit payable to participants in defined benefit retirement plans–$230,000
  • Annual Contributions Limit that applies to the accounts of participants in defined contribution plans–$57,000
  • Annual Compensation Limit that applies to the calculation of benefits of qualified retirement plans–$285,000
  • Compensation Limit of highly paid employees–$130,000: A highly paid employee means any employee that for the previous year received compensation in excess of the limit that applies for any given tax year under the USA Internal Revenue Code of 1986, as amended, or to any later ruling as adjusted by the Federal IRS.  Therefore, the compensation limit to determine if the employees qualify as highly paid employees is the compensation limit established for 2019. 
  • Cash or Deferred Contributions Limit that applies to participants in a retirement plan sponsored by the Federal government and to participants in a qualified retirement plan–$19,500
  • Additional Contributions Limit that applies to participants in a retirement plan sponsored by the Federal government that are 50 years old–$6,500

On the other hand, the following limits do not embrace the limits established by the Federal IRS Code; thus, as stated in the Code, beginning on January 1, 2020, these will be as follows: 

 

  • Cash or Deferred Contributions Limit that applies to participants in a qualified retirement plan–$15,000
  • Additional Contributions Limit that applies to participants in a retirement plan not sponsored by the Federal government that have turned 50–$1,500
  • Voluntary Employee After-tax Contributions Limit that applies to participants in qualified retirement plans—10% of the added compensation of the participant for all the years he has participated in the plan.
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