P.R. Laws tit. 3, § 786-9
(a) Retirement benefit.— Upon permanent separation from service, when the separation is not due to death or total and permanent disability, the balance in the savings account of the participant of the Program shall be distributed to the participant by the Administrator in the form and on the date provided hereinbelow.
(b) Form of payment.—
(1) Married participants of the program.— If the participant of the Program is married as of the date of his/her permanent separation from service, after the normal date of retirement, the Administrator shall use the balance in the savings account for the purchase of a fifty percent (50%) joint and survivorship annuity contract. The Administrator may give the participant of the Program the option of choosing from among several insurance companies authorized by the Insurance Commissioner to conduct business in Puerto Rico for the purchase of the fifty percent (50%) joint and survivorship annuity contract.
(2) Single participants of the program.— If the participant of the Program is not married as of the date of his permanent separation from service after the normal date of retirement, the Administrator shall use the balance in the savings account of the participant to purchase a life annuity contract. The Administrator may give the participant of the Program the option of choosing from among several insurance companies authorized by the Insurance Commissioner to do business in Puerto Rico for the purchase of the life annuity contract.
(3) Lump sum payment of the balance in the savings account.— Notwithstanding the provisions in clauses (1) and (2) of this subsection, and except for the cases mentioned in clause (4) of this subsection, any participant who permanently separates from service after the normal date for retirement may request from the Administrator the lump sum payment of the balance of his savings account. If the participant is married, the distribution shall be made in favor of both, the participant and the spouse, unless a written consent from the spouse of the participant for the payment of the distribution to be made only in the name of the participant is submitted to the Administrator.
The sum of this distribution in the amount that exceeds the sums contributed by the participant shall be subject to a tax rate of ten percent (10%) in lieu of any other tax imposed by the Code. This tax shall be withheld at the source by the Administrator and deposited with the Secretary of the Treasury pursuant and subject as pertinent to the provisions of paragraphs (3)--(8) of section 1165(b) of the Code.
The provisions in Section 1022(b)(24) of the Code shall not apply in the case of these distributions.
(4) Savings accounts of less than ten thousand dollars ($10,000).— If the balance of the savings account of the participant of the Program is less than ten thousand dollars ($10,000) at the time of his permanent separation from service, the Administrator shall distribute the balance to the participant in a single lump sum. The participant shall be bound to include said sum as income in his income tax return and shall pay the regular tax rates provided in the Code.
(5) Rollovers of savings account balances into individual retirement accounts and qualified plans.— At the time of permanent separation from service, the participant may request from the Administrator a rollover of the total balance in his savings account into a qualified retirement plan, an individual retirement account (IRA), or a non-deductible individual retirement account, which complies with the requirements in Sections 1165, 1169 or 1168B of the Code, respectively.
For purposes of this clause, the rollover into the qualified retirement plan, individual retirement account or the non-deductible individual retirement account shall be executed by the Administrator through the disbursement of the balance of the account of the participant directly to the trust that shall manage the account or plan. Any rollover made pursuant to this provision shall not be subject to taxation, except when the rollover is made into a non-deductible individual retirement account.
The rollover of the savings account balance of the participant into a non-deductible individual retirement account shall be considered as a qualified rollover for purposes of Section 1169B of the Code. The distributed amount shall be subject to a ten percent (10%)-tax in lieu of any other tax imposed by the Code, which shall be withheld at the source by the Administrator and deposited with the Secretary of the Treasury, pursuant and subject as pertinent to the provisions in paragraphs (3)--(8) of section 1165(b) of the Code.
(6) Contribution rollovers into another government retirement system.— In cases where the participant of the Program separates from service and afterwards occupies a position in public service and thus participates in another government retirement system, he may request from the Administrator, and the latter may authorize, rollovers of his contributions directly into the other government retirement system to be credited for years of service in the other government retirement system.
(7) Payment options.— The Board may establish payment options through regulations, orders or resolutions. The selection of any payment option by a participant of the Program who is married at the time of his permanent separation from service must be agreed to by the spouse of the participant of the Program in writing before a representative of the Administrator or a notary public.
(c) Purchase date of the annuity contract and commencement of distribution.— The purchase of any annuity contract provided in this section, or by the Board pursuant to subsection (b)(4) of this section, shall be made after the normal retirement date of the participant of the Program, but not later than sixty (60) days from that date. The monthly payments provided in this section or under any other option provided by the Board pursuant to subsection (b)(4) of this section, shall commence after the normal retirement date of the participant of the Program, but not later than ninety (90) days from that date. The distribution of the balance of the savings account of the participant of the Program, in one (1) lump sum, shall be made not later than sixty (60) days from the date the participant is permanently separated from service.
History —May 15, 1951, No. 447, p. 1298, added as § 3-109 on Sept. 24, 1999, No. 305, § 30; Sept. 15, 2004, No. 296, § 10; renumbered as § 3-107 on April 4, 2013, No. 3, § 13, eff. July 1, 2013.