Fact-check - rollover from Puerto Rico 401(k) to U.S. IRA = not allowed, correct?

Submitted by Robert Vashko on Wed, 2020-12-02 01:15

Client is P.R. resident and has participated in P.R. qualified retirement plan (401k). Client has separated from service, is relocating to Florida, and wants to roll the plan funds into a U.S. IRA. That is not possible, correct?

My understanding is that a P.R. QRP account can only be rolled over to another P.R. QRP or a P.R. IRA. *IF* the employer had dual-registered QRPs, then it might be possible to roll from the P.R. plan to the U.S. plan, but that’s not germane here since the client has separated.

And since there is no such thing as dual registration between a U.S. IRA and a P.R. QRP, the plan admin in P.R. should refuse to process a rollover, and even if they did try it, a U.S.-based IRA custodian should refuse to accept the transfer as a rollover.

Am I right on all that?

If so, a corollary question: if client hadn’t separated and was eligible to participate in the U.S. plan, could they roll from the P.R. plan to the U.S. plan and then immediately roll into a U.S. IRA (assuming they were eligible for a CARES CRD or other non-hardship in-service distribution option)?

Please and thank you.

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Permalink Submitted by Alan - IRA critic on Wed, 2020-12-02 03:03

Am citing an Ascensus article on various portability options between IRC plans and PR plans, including dual qualified QRPs. This article concurs with your first 3 paragraphs.
With respect to the corollary question, both the PR QRP and the US QRP would have to be dual qualified, AND the US QRP would have to contain provisions to accept such a rollover. The PR dual qualified QRP would also have to contain provisions allowing in service distributions. But even if client is able to meet these qualifications, according to the final paragraph of the Ascensus article, a rollover to the IRA from a dual qualified QRP is not allowed.