2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1005 - Computation of Taxable Income (§§ 30101 — 30157) › Subchapter B - Treatment of Certain Income Items (§§ 30111 — 30119) › § 30118 - Amounts received under accident or health plans

(a) Amounts attributable to employer contributions.— Except as otherwise provided in this section, amounts directly paid by the employer to an employee for personal injuries or sickness shall be included in gross income of the employee.
(b) Amounts expended for medical care in health reimbursement arrangements.— Except in the case of amounts attributable to and not in excess of deductions allowed under § 30135(a)(4) of this title (relating to medical expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) of this section if such amounts are paid, directly or indirectly, by the employer to the taxpayer to reimburse the taxpayer through health reimbursement arrangements for expenses incurred by him/her for the medical care (as described in subsection (c)).
(c) For purposes of this section, a health reimbursement arrangement shall be those which comply with the following conditions:
(1) Shall cover the reimbursement for expenses in medical care of employees incurred by employees. In the discretion of the employer, the health reimbursement arrangements may include reimbursement for expenses incurred for:
(A) Dependents of the employee;
(B) Retired employees; or
(C) If it includes retired employees, the dependents of the retired employees.
(D) For purposes of this subsection, the term dependent shall include the spouse and any person described in § 30138(d) of this title.
(2) Reimbursement shall be paid, directly or indirectly, by the employer, who shall have the sole control over the health reimbursement arrangements.
(3) The employee shall not make contributions to the same.
(4) The reimbursement limit, if any, shall be in the discretion of the employer.
(5) The health reimbursement arrangements shall not be established through accounts, shall not accrue interest or dividends, and shall not be transferrable.
(6) Reimbursements shall not be used to defray expenses incurred in medical care (as defined in § 30394(d)(2)(A) of this title) and shall not be deductible under subsection (a) of this section, but rather, under this subsection for the year in which the employer makes the reimbursement.
(7) The employee shall not be required to have a high annual deductible health plan as established under § 30394 of this title, but at the option of the employer, he/she may require the employee to acquire said kind of plan to receive the reimbursement benefits under the health reimbursement arrangement.
(8) A health reimbursement arrangement may include the reimbursement through direct payment of the premiums of a person eligible to receive said reimbursements under this subsection.
(9) At the discretion of the employer, the amount of the reimbursement not used in a year may be rolled over to any other year; or shall determine that the funds allotted or encumbered may not be rolled over to subsequent years.
(10) In addition to using the same to defray medical expenses, prescription and over-the-counter medications, as well as the premiums of an individual health insurance, employees may apply for the reimbursement of the premiums paid for Medicare and long term care, and premiums for a preventive health care or health maintenance insurance such as weight control and tobacco use control programs and others.
(11) The employer shall establish in a document of health insurance plan and a summary plan description, the benefits to which employees are entitled under the health insurance plan and the format of which shall be approved by the Secretary within a term not to exceed sixty (60) days as of its submittal by the interested person, whether the employer or an insurance company or health services organization authorized under the Insurance Code of Puerto Rico.
(12) The employer may provide that the arrangements for retired employees that, at the time of their retirement, have an available balance, may be used to defray medical expenses after the retirement of said employees. At the time of retirement, the employer may also add an amount equal to the balance accumulated and not paid on account of sick or vacation leaves to the balance of an employee’s account. Provided, That the added sum shall be used pursuant to the provisions of this subsection.
(d) Compensation for illness.— Any amounts paid in lieu of wages during a period in which the employee is absent from work due to injuries or illness shall be excluded from the gross income.
(e) Payments not related to absence from work.— Gross income shall not include the amounts referred to in subsection (a) of this section, provided that said amounts:
(1) Are the payment for the permanent loss or function of a limb or bodily functions, or permanent disfigurement of the taxpayer, his/her spouse or dependent (as defined in § 30138(d) of this title), and
(2) are computed according to the nature of the injury without taking into account the period during which the employee was absent from work.
(f) Accident and health plans.— For purposes of this subsection:
(1) Amounts received under a savings plan as expense reimbursement related to an accident or health plan for employees, and
(2) Amounts received from the fund for employees to cover injuries and illness shall be treated as amounts received through an accident or health insurance.
(g) Rule for the application of § 30135(a)(4) of this title.— For purposes of § 30135(a)(4) of this title, the amounts excluded from gross income shall not be considered as a compensation (for insurance or otherwise) for expenses defrayed for medical care.
(h) Self-employed persons shall be considered employees.— For purposes of this section, the term “employee” includes an individual who is self-employed or who works independently, as defined in § 30391(f)(1)(B) of this title.
History —Jan. 31, 2011, No. 1, § 1032.08, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 24.