Compliance Corner

State Updates

Maternity Leave Extended to Women Who Adopt Older Children

September 29, 2020

On August 8, 2020, Gov. Vazquez Garced signed HB 2424, extending maternity leave benefits to women who adopt children six years old and older. As a result, women who adopt older children will enjoy maternity leave with full salary for up to six weeks. This benefit previously applied to adoptions of children five years and younger.

Employers who employ workers in Puerto Rico should be aware of this extension in the maternity benefit.

HB 2424 »

New Leave Law for Victims of Domestic and Sexual Violence

November 26, 2019

On August 1, 2019, then-Governor Rossello signed Act No. 83 of 2019 into law. This law allows employees up to 15 days of unpaid leave per year because the employee or a member of the employee’s family was a victim of gender or domestic violence, child abuse, sexual assault, sexual harassment at work, lewd acts, or aggravated stalking. The law also allows employees to request reasonable work accommodations for the same reasons.

Employers cannot discriminate against employees who take leave under Act 83, nor can they use such leave as a basis for terminating employment or taking other adverse employment actions. Employers who fail to comply with the law can face penalties of up to $5,000 as well as damages.

Employers with employees in Puerto Rico should review their leave policies. If necessary, employers should consult with outside counsel to update those policies to comport with Act 83’s extensive requirements.

Act No. 83-2019 »

DOL and IRS Announce Extension of Time Frames for Benefit Plans in Puerto Rico Affected by Hurricane Maria

December 12, 2017

On Nov. 22, 2017, the DOL and the IRS announced an extension of time frames for group health plans, disability plans, pension plans, participants and beneficiaries of these plans, and group health insurance issuers directly affected by Hurricane Maria.

Group health plans, disability and other welfare plans, pension plans and health insurance issuers offering coverage under a group health plan must disregard the period from Sept. 17, 2017, through March 16, 2018, for such plan participants, beneficiaries, qualified beneficiaries, or claimants located in Puerto Rico when determining any of the following time frames:

  • The 30-day period (or 60-day period, if applicable) to request special enrollment
  • The 60-day election period for COBRA continuation coverage
  • The date for paying COBRA premiums
  • The date for individuals to notify the plan of a qualifying event or determination of disability
  • The date by which individuals may file a benefit claim under the plan's claims
  • The date by which claimants may file an appeal of an adverse benefit determination under the plan's claims procedure
  • The date by which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination
  • The date by which a claimant may file information to perfect a request for external review upon a finding that the request was not complete

With regard to group health plans that are directly affected by Hurricane Maria, the period from Sept. 17, 2017, through March 16, 2018, for those located in Puerto Rico must also be disregarded when determining the date for providing a COBRA election notice.

Several examples of time frames as they relate to group health plans are provided in the rules. As such, employers with plans and beneficiaries directly impacted by Hurricane Maria should ensure that these time periods are adjusted.

82 FR 55507 »

Puerto Rico Guidance on Retirement Plan Qualification Letters

February 07, 2017

On Dec. 23, 2016, the Puerto Rico Department of the Treasury issued Tax Policy Circular Letter No. 16-08 (“Circular Letter”) establishing new rules regarding the validity of retirement plan qualification letters. Additionally, the Circular Letter establishes procedures that employers and service providers must follow to request such qualification letters.

As background, plan documents of retirement plans qualified only in Puerto Rico, and for plans qualified both in Puerto Rico and the U.S., must include the qualification provisions required by the Puerto Rico Code. The Puerto Rico Code requires that all retirement plans intended to be qualified in Puerto Rico apply for and obtain a favorable determination letter from the Puerto Rico Treasury as to their tax qualified status. Tax Policy Circular Letter No. 16-08 serves as a singular source of information regarding the qualification of retirement plans under the Puerto Rico Code.

Specifically, the Circular Letter provides guidance relative to the validity of retirement plan qualification letters, clearly outlines what constitutes a qualification amendment, provides updated information about deadlines to request qualification letters, adds additional requirements to the documentation that must be submitted with any request for a qualification letter and provides information about the required filing fees for both retroactive and regular qualification requests.

The Circular Letter is effective as of Dec, 23, 2016. Employers that sponsor qualified retirement plans in Puerto Rico should familiarize themselves with the new guidance.

Tax Policy Circular Letter No. 16-08 (in Spanish) »

October 18, 2016

October 18, 2016

On Oct. 3, 2016, the Puerto Rico Office of the Commissioner of Insurance issued Ruling Letter No.: CN-2016-204-AS, which implements the necessary guidelines for Public Law No. 177-2016 (the “Law”) passed on Aug. 13, 2016.

As background, the Law requires that all insurers and health services organizations include as part of basic coverage in private health insurance a glucose monitor to be provided every three years and a minimum of 150 strips and 150 lancets a month for patients under 21 years old who have been diagnosed with Diabetes Mellitus Type I by a specialist in pediatric endocrinology or endocrinology. The ruling letter states that this coverage will also be available if the specialist in endocrinology orders it for patients under 21 years old whose condition shows a predisposition or a significant number of risk factors for developing Diabetes Mellitus Type I. Once diagnosed, patients must submit a prescription issued by a physician who is authorized to exercise the profession within the jurisdiction of the Commonwealth of Puerto Rico so that the pharmacist may dispense the monthly strips and lancets.

In addition, the Law mandates including as part of basic health insurance coverage, a portable insulin pump as therapy for patients under 21 years old who have been diagnosed with Diabetes Mellitus Type I, and who meet certain criteria. The ruling letter states that the qualification criteria established in Section 2 of the Law, will be deemed to have been amended so that they will be aligned with the guidelines of CMS, or any other law, federal regulation or administrative guideline that modifies or eliminates the current qualification criteria for the use of insulin pumps that are applicable to Puerto Rico.

Insurers and health services organizations that write private health insurance in Puerto Rico are required to take the necessary steps to bring policies into compliance with the Law and this ruling letter for policy years beginning on or after Jan. 1, 2017.

Ruling Letter No.: CN-2016-204-AS »

May 17, 2016

May 17, 2016

On April 28, 2016, the Puerto Rico Office of the Commissioner of Insurance issued Ruling Letter No.: CN-2016-199-AS, which sets aside Circular Letter Number CC-2015-1868-D, dated Nov. 24, 2015, and promulgates a transition period during which the PACE Act provisions will be adopted.

As background, the PACE Act repeals a PPACA requirement that changed the definition of “small employer” to an employer with between 1 and 100 employees. The PACE legislation granted the states and the insular jurisdictions the power to decide whether they wanted to keep the original definition of a small group or if they would adopt the definition established in the federal regulations. The Puerto Rico Insurance Code contains the definition established in the federal regulations and currently provides that as of Jan. 1, 2016, employers with 100 or more employees will be considered to be large groups.

This circular letter states that those employers who had up to 50 employees during at least 50 percent of all working days during the previous calendar year will be considered small groups. Employers who had more than 50 employees during at least 50 percent of the business days in the previous calendar year will continue to be considered large groups for regulatory purposes. This transition period will be in effect until Dec. 31, 2017. After that date, the definition of a small or medium sized employer will be applicable to companies that have up to 100 employees.

Ruling Letter No.: CN-2016-199-AS »

May 3, 2016

May 03, 2016

On April 26, 2016, the Puerto Rico Office of the Commissioner of Insurance issued Ruling Letter No.: CN-2016-198-AS, which states that insurers in the individual and small group major medical health insurance markets can choose to renew transitional policies through Sept. 30, 2017, although they must expire by Dec. 31, 2017. As discussed in the March 8, 2016, edition of Compliance Corner, CMS announced an extension for small group transitional policies. Such policies are not required to be in compliance with certain PPACA mandates including community rating, coverage of essential health benefits, prohibition on pre-existing condition exclusions and the annual out-of-pocket maximum limit. The policy must have been in place on Jan. 1, 2014.

Additionally, insurers that offer this short term extension of coverage are required to send each policyholder a renewal notice that explains the offer to continue the transition policy to the end of 2017. The compulsory notice is included with this Letter.

Ruling Letter No.: CN-2016-198-AS »

April 5, 2016

April 05, 2016

On March 11, 2016, the Puerto Rico Treasury Department issued Administrative Determination No. 16-05, which provides employers who sponsor a Puerto Rico retirement plan a new way to comply with the reporting requirement previously done on Treasury Form 480.70(OE) starting with taxable years after Dec. 31, 2014.

As background, Section 1061.10(a) of the Puerto Rico Internal Revenue Code (the “Code”) requires that all retirement plans claiming exemption from the payment of income tax under Sections 1081.01(a) or 1101.01(a)(4)(D) of the Code, file an annual return. Pursuant to Section 1061.10(b) of the Code, the filing deadline is the last day of the seventh month following the end of the plan year.

The letter establishes new requirements for complying with the annual return filing. Employer sponsored retirement plans that are required to file Puerto Rico income tax returns must complete and file Form AS 6042.1, Deduction for Contributions to Qualified Retirement Plans and Tax on Certain Contributions, together with their Puerto Rico income tax returns. This would mean that the deadline to file is the fifteenth day of the fourth month following the end of the plan year. This deadline appears to be inconsistent with the deadline provided under Section 1061.10(b) of the Code mentioned above. Further guidance from the Puerto Rico Treasury Department may be needed for clarification and will be reported on in Compliance Corner if released.

In the case of retirement plans that are not required to file a Puerto Rico income tax return, those plans will only be required to complete and file Part V, General Information Regarding the Plan, of Form AS 6042.1. The filing deadline is the same as provided in Section 1061.10(b) of the Code.

Finally, the letter states that retirement plans that generated net income (or loss) not related to their exempt activity, must complete Treasury Form 480.20, Corporation Income Tax Return, to report net income (or loss) and pay the income tax, if any.

Sponsors of Puerto Rico retirement plans must be aware of these new filing requirements. Employers should contact their advisor for more information about compliance with the new filing requirements.

Administrative Determination No. 16-05 is available only in Spanish.

Administrative Determination No. 16-05 »

January 26, 2016

January 26, 2016

Governor Alejandro Garcia Padilla signed Law No. 251 (House Bill 695), amending Puerto Rico’s existing paid sick leave law under Act No. 180 by expanding the circumstances when employees can use accrued sick leave.

As background, under Act No. 180 eligible employees accrue one day of paid sick leave for each month in which the employee works at least 115 hours. Employees who meet this threshold can accrue 12 days of sick leave a year and may roll over unused sick leave time, subject to a cap.

The amendment is effective Dec. 31, 2015, and requires employers in Puerto Rico with at least 16 employees to allow eligible employees (e.g., nonexempt employees) to use up to five days of accrued sick leave annually to care for ill qualified family members. After using accrued sick leave days for this leave, the eligible employee’s accrued sick leave may not be reduced below five days (i.e., they must retain at least five accrued sick days after they take the leave). This leave is referred to as caregiver’s leave because qualified family members include the employee’s ill spouse, parent, or child. Qualified family members also include ill minors, individuals who are 60 years of age or older and disabled individuals for which the employee has custody or legal guardianship.

This new law also expands the existing documentation requirements of Act No. 180 by allowing employers to request medical certificates from employees if absences under the new circumstances mentioned above exceed two working days.

The implementation of this new law may require affected employers to review and revise their benefit policies to be compliant with these new requirements. Employers covered by this new law that already provide compliant sick leave policies do not need to provide additional sick leave.

Law No. 251 (House Bill 695) is available only in Spanish »

PR State Updates - 2015 Jan 15 No.01

December 15, 2015

On Nov. 24, 2015, Commissioner of Insurance Weyne-Roig issued Circular Letter CC-2015-1868-D, which addresses the impact of the PACE Act in Puerto Rico. As background, the PACE Act repeals a PPACA requirement that changed the definition of “small employer” to an employer with between 1 and 100 employees.

According to the Circular Letter, the Puerto Rico Insurance Code provides that as of Jan. 1, 2016, employers with more than 100 employees will be considered to be large groups. Furthermore, the rates for health insurance for small groups for 2016 have already been approved, taking into consideration the aforementioned definition and will enter into effect Oct. 1, 2015. Therefore, Puerto Rico will continue to use the definition of small group that is to enter into effect in 2016 and employers who have between two and 100 employees will be considered to be small groups.

The Circular Letter clarifies that groups of 50 to 100 employees will be considered small groups in the event of the renewal of the health insurance plan.

Circular Letter CC-2015-1868-D »

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