Puerto Rico Governor Signs Pension Reform into Law

December 26, 2013 (PLANSPONSOR.com) – A set of proposed changes to Puerto Rico’s Teacher Pension System has now been signed into law.

Puerto Rico Governor Alejandro Garcia Padilla approved several reform measures designed to improve the long-term financial stability of the retirement system, which include:

  • Setting a minimum pension of $1,625 for all teachers who retire after the passing of the law;
  • Increasing the minimum pension for teachers already retired from $400 to $500 per month;
  • Replacing the current defined benefit plan with a defined contribution plan and balancing an increase in contributions of 1% by providing a 10-year, $300 annual salary increase;
  • Setting a retirement age of 55, along with 30 years of service, while guaranteeing benefits accrued up to July 31, 2014; and
  • Allowing any teacher with 28 years of service to apply for a 70% credit-based pension.

The new law also keeps in place previously accrued benefits, as well as guaranteeing a Christmas bonus of $200, a $100 prescription drug bonus and a medical plan contribution of $1,200 a year.

According to the Office of the Governor, the reforms are designed to stabilize Puerto Rico’s finances and safeguard its public school system by addressing a more than $500 million annual projected shortfall. The governor credits the success of the bill transitioning into law to cooperation between Puerto Rico’s teachers’ unions and legislators.