On January 20, 2021, the Puerto Rico Department of the Treasury
(Departamento de Hacienda, commonly known as
"Hacienda") issued Administrative Determination No. 21-01 (AD
21-01), which provides that lump-sum distributions from the
retirement plan for Puerto Rico government employees are eligible
for direct and indirect rollovers into Puerto Rico-qualified
retirement plans maintained by private-sector employers. In
practice, however, this determination is unlikely to have much of
an impact on the operation of private-sector employer plans.
Background
Since the 1940s, Puerto Rico government employees have been
covered by contributory-defined benefit and hybrid pension plans.
In 2017, the local government transferred all its employees to a
new defined contribution savings plan comparable to the 401(k)
plans sponsored by private-sector employers. Previously,
distributions from local government plans were ineligible for
tax-free rollovers into private-sector employer
