Plan 106: how much you contribute and what you get at retirement

How much comes out of your paycheck: 8.5%

Article 3.4 of Act 106-2017 states it plainly: every participant must contribute a mandatory minimum of eight point five percent (8.5%) of monthly pay to their Defined Contribution Account. That is the number almost nobody finds when they look for it, and it is the one that decides your retirement.

There is one exception written into the law itself: members of the Police rank system contribute two point three percent (2.3%). And for officers with fewer than ten years left before mandatory retirement under Act 447 of 1951, that reduction is optional; they have to state that they want it.

The 8.5% is a floor, not a ceiling. The law lets you contribute additional amounts voluntarily, up to what the Puerto Rico Internal Revenue Code allows. Since the government does not match a single cent, that voluntary contribution is the only lever you have to make your account grow faster.

Why your retirement is an account, not a pension

For decades the Puerto Rico government offered defined-benefit pensions under systems like Act 447 and Act 1: you worked the years, and a formula told you what you would collect for life. Those systems ran out of money. Act 106-2017 restructured everything: already-accrued benefits keep being paid from the General Fund (the PayGo scheme), and new accrual moved into individual accounts.

The practical translation is harsh but clear: if you join the Puerto Rico government today, nobody promises you a monthly amount. You have an account that grows with your 8.5% and with investment returns, and what comes out of it is what there will be. That is why the right question is not «when can I retire?» but «how much have I accumulated and how much more can I put in?».

How to check your balance

Plan 106 accounts are administered by Alight Solutions, not by the Retirement Board directly. Your account exists from the moment you started contributing, but it stays inactive until you activate it yourself at digital.alight.com/plan106 with the temporary password mailed to you. If you never saw it or lost it, that same page has the option to recover your user ID and password. You can also call 1-844-PLAN106 (1-844-752-6106).

That portal is where you see the balance, choose your investment funds and name beneficiaries. If you never picked a fund, the law provides that the money stays automatically in an alternative that guarantees the full amount of your individual contributions, preserving the principal; it is the conservative default, and many employees have been sitting there for years without knowing it.

One detail that works in your favor: basic and reasonable management fees are paid by the Government of Puerto Rico, not by your account. And the law requires that you be given reports of your account activity at least once a year, on paper or through the portal. If you have gone years without seeing one, ask for it.

Loans against your account

Yes, you can borrow against your own balance, and the terms are published by the Retirement Board. It is not a loan from the Retirement System: the money comes out of your account and goes back into your account. These are the terms:

• How much: up to 30% of your account balance on the application date, capped at $10,000. The minimum is $500.
• Interest: the prime rate published in The Wall Street Journal on the 15th of the prior month, plus 1%. It is set on the first day of the month and fixed when you apply.
• Where the interest goes: into your own account. You are the only one who benefits from the interest you pay.
• Term: minimum 6 months, maximum 60 months.
• How many: only one active loan at a time. It does not renew annually.
• How you repay: monthly direct debit from your checking or savings account. There is no payroll deduction through your employer.
• Who qualifies: active participants with sufficient balance and an already-activated account on the portal.
• There are no mortgage loans for buying a primary residence under this plan.

If you resign or leave government

Article 3.8 gives you three paths when you separate from public service, and none of them means losing what you contributed: you can leave the account where it is inside the Plan, transfer it to a defined-contribution plan qualified under Section 1081.01(a) of the Code, or request a disbursement of the balance. The disbursement is subject to whatever taxes apply when you take it out, so the fast option is almost always the most expensive one.

The balances are yours with the full weight of the law. Article 3.6 says participants have erga omnes ownership rights over their account, and Article 3.3 adds that contributions are not subject to any tax or garnishment, and are exempt from creditors' claims, with one important exception: debts you owe to the Retirement Systems, to your employer and to the Government.

If you stop paying a Plan loan, the outstanding amount is imputed to you as income and taxed on your next return, and you cannot take another loan until you settle it. And if you die, the available balance is disbursed to the beneficiaries you designated in writing; if you never named anyone, it goes to your heirs with a declaration of heirs or a will. Naming a beneficiary takes five minutes on the portal and saves your family months of paperwork.

If you worked in government before 2017

What you accrued under the previous systems until the freeze was not erased: it is paid at retirement under the PayGo scheme that Act 106 itself guarantees. What changed is that since the restructuring, your new accrual happens in the defined-contribution account, not in the old formula.

If you are in that mixed group, your retirement will have two sources with different rules, and it is worth asking the Retirement Board for an estimate of both parts early, not the year you plan to leave. Teachers and the judiciary have their own histories and litigation that have moved pieces. For your individual case, Retiro is the only source that can give you your real number: servicioretiro@retiro.pr.gov or 787-777-1414.