With the IRS’ recent announcement of the 2025 limits on deductible contributions to health savings accounts (“HSAs”) and maximum deductible amounts and out-of-pocket expenses under high deductible health plans (“HDHPs”) (https://www.irs.gov/pub/irs-drop/rp-24-25.pdf), this is a good time to answer the recurrent question of whether HSAs and HDHPs can be operated in Puerto Rico.
Yes, pursuant to Section 1081.04 of the Puerto Rico Internal Revenue Code of 2011 (“PRIRC”, https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2-ingles/1-2011.pdf), HSAs and HDHPs may be operated in Puerto Rico and the relevant administrative and tax rules are modeled after and generally consistent with those of Code § 223. U.S. and international companies doing business in P.R. may, therefore, include their P.R. employees as participants in their existing U.S. HSA/HDHP arrangements or create a P.R. HSA/HDHP arrangement solely for their P.R. employees.
Up to the annual limits noted below, employer contributions to HSAs are not taxable to employees (PRIRC § 1031.02(a)(2)(D)), and employee contributions to HSAs are excluded from their taxable wages reported on box 7 of the local Form W-2 (PRIRC § 1081.04(b)(2)(C)) a copy of which is available online at https://hacienda.pr.gov/sites/default/files/documentos/comprobante_de_retencion_2023_rev._06.23_informativo_0.pdf. Provided they are used to pay qualified medical expenses incurred by participants or their dependents, distributions of HSA funds are not taxable to participants (PRIRC § 1081.04(f)(1)).
A couple of differences worth noting between establishment and operation of HSAs & HDHPs in P.R. vis-à-vis the U.S. are:
Hacienda’s Administrative Determination.
If the entity administering the HSA is not a local financial institution, then the governing documents for the HSA, but not those of the HDHP, would need to be filed with Hacienda to obtain an administrative determination confirming that, both in its terms and operation, the HSA meets the requirements of PRIRC § 1081.04. That would be the case if a U.S. recordkeeper is responsible for holding HSA assets and processing payments and reimbursements to participants. As part of its administrative review, Hacienda will evaluate whether the U.S. recordkeeper has proper administrative systems in place for complying with the local tax rules applicable to the P.R. participants in the HSA, such as reporting to Hacienda on local tax Form 480.7A (https://hacienda.pr.gov/sites/default/files/documentos/480.6a_2023_informativo.pdf) any taxable payments made to the P.R. participants or their beneficiaries.
Circular Letter of Tax Policy No. 16-09 (https://hacienda.pr.gov/publicaciones/circular-letter-tax-policy-no-16-09-cl-tp-16-09) establishes the documents to be prepared and the process to be followed for requesting an administrative determination from Hacienda, and Regulation No. 9115 establishes the relevant filing fees (https://hacienda.pr.gov/sites/default/files/publicaciones/2019/10/9115.pdf).
HSA Contribution Limits.
In the aggregate, employer and employee contributions to the HSA may not exceed: (1) $3,100/year if the participant has self-only coverage in the HDHP, or (2) $6,200/year if the participant has family coverage in the HDHP. For participants who are age 55 or older, both of these amounts are increased by $1,000. These local limits are comparable to the U.S. 2012 limits. Since the limits are established by PRIRC § 1081.04, rather than through Hacienda’s administrative guidance, and are not indexed for inflation, Hacienda cannot approve a higher limit. Such an increase would require a formal amendment to the PRIRC.
PRIRC § 1081.04 does not set a maximum amount for out-of-pocket expenses that HDHP participants may be required to pay. However, since ERISA and the Public Health Service Act apply in P.R. just as they do in the U.S. (see ERISA § 3(10) and PHSA § 2791(d)(14)), through ERISA § 715 the cost-sharing limitations of PHSA § 2707(b) also apply to HDHPs in operation in Puerto Rico (i.e., for 2025, $9,200 for self-only coverage and $18,900 for family coverage; https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf).