Hurricane Aftermath: Available Government Assistance for Puerto Rico Residents

New Legislation Enacted

In the aftermath of Hurricane Maria, employers should become aware of sources of assistance to their business and employees. To help recover from the disaster, the government of Puerto Rico has enacted multiple sources of assistance, such as the local unemployment insurance and other local programs. Federal assistance is also available through the Disaster Unemployment Assistance Program, the federal Disaster Relief Application, and the U.S. Small Business Administration Aid. Employees may also be eligible to receive additional assistance from their commercial bank institutions in form of payment deferrals and/or moratoria.

New Guidelines Governing Payment of the Christmas Bonus

New Order or Decree

On October 18, 2017, the Puerto Rico Department of Labor enacted new regulations to administer Puerto Rico’s Christmas Bonus Law (“the regulation”), superseding all prior regulations on the subject. Among other things, the regulation establishes eligibility requirements, timing of payment and defines what counts as salary for purposes of the bonus calculation. It also establishes the requirements employers must follow to claim a credit for other additional voluntary compensation paid to the employees, and the procedure to request exemption from payment of the bonus. Finally, the regulation specifically addresses situations when a collective bargaining agreement is in place.

Hurricane Aftermath: Employee Compensation and Allowable Payroll Deductions

New Regulation or Official Guidance

The Puerto Rico Secretary of Labor and Human Resources (the Secretary) recently explained that employers are not required to pay the hours that non-exempt employees would have worked had the natural disaster caused by Hurricanes Irma and Maria not occurred. The Secretary also established the rules governing the payment for exempt employees. Further, many employers have been providing assistance to their employees by advancing them funds for emergency needs and have sought advice on whether payroll deductions are allowed so employees can repay such advances. The Secretary announced that repayment through payroll deductions is illegal for non-exempt employees, but legal for exempt employees. Accordingly, employers should be aware of the risks involved in such practices.

Hurricane Aftermath: Temporary Tax Exemptions for Benefits Provided to Employees

New Regulation or Official Guidance

On October 4, 2017, the Puerto Rico Department of the Treasury issued guidance granting temporary income tax exemption for payments provided by employers to their employees for relief due to Hurricane Maria, provided such payments are considered qualified payments made for disaster assistance and certain requirements are met. The Puerto Rico Treasury also provided tax relief on tax free loans given to employees, provided certain requirements are met.

Hurricane Aftermath: Distributions from Qualified Retirement Plans and IRAs

New Regulation or Official Guidance

Pursuant to an executive order signed by the Governor of Puerto Rico on November 8, 2017, the Puerto Rico Department of the Treasury must establish rules for distributions from qualified plans and IRAs following Hurricane Maria and other natural disasters. In doing so, the Treasury must create tax rules applicable to distributions for qualified plans and IRAS; rules and responsibilities for trustees, plans administrators and service providers related to their tax withholding obligation; and rules on plan loans.