In the coming days, a payroll related filing is due that is obligatory for every business.  I am referring to the annual payroll declaration that must be filed with the State Insurance Fund Corporation (the “SIF”). The renewal process commenced on July 1^st, 2025 and extends through August 15, 2025. A 15-day extension is available if additional time is needed to gather the necessary information to prepare and file the annual payroll statement. This extension can be requested through the SIF portal (www.cfse.pr.com)

Herein below, we provide various comments and tips with respect to various aspects of the workmen’s compensation insurance.

It is important to comply with this requirement if the company has employees or has contractors working for the business. You should also ensure that other businesses from whom you obtain services, including construction services, are also compliant with these requirements.  Failure to do so may expose your business to the potential assessment of unpaid premiums, in case of an audit from the SIF, or to a costly litigation in the case of an injured employee, contractor or employee of your contractor.

Every employer is required by law to have an insurance policy with the SIF.  This insurance provides the employer with immunity in the event of a workplace accident involving an employee or contractor, eliminating the possibility of a civil lawsuit.  To be covered by the workmen’s compensation insurance, employers must consider and report all risks associated with its operations (based on the current Manual of Trade and Industries Classifications and Types of Insurance published every year by the SIF) on its payroll statement and timely pay the corresponding premium.  Once an entity is considered an insured employer, the SIF will take care of all medical and rehabilitation costs of the injured employee and will eliminate the exposure to lawsuit costs related to the accident.

There are two types of policies: permanent and temporary.  The permanent policy is designed for employers that have continuous operations all year-round. This policy must be renewed annually. The temporary policy applies to economic activities that have a limited time duration such as construction projects or special events.

For purposes of renewing a permanent policy, the employer must do the following:

1. Prepare and submit the annual payroll statement on or before August 15 (or later if an extension is obtained), including the gross salaries of all employees based on the risks associated with the operations and identifying the locations where the operations occur.  Please note that the salaries to be considered must include all types of compensation, whether they are in cash or in kind.  Also, in the case there are contractors working without a SIF insurance policy, the employer will need to include those contractor payments in the annual payroll statement and pay the corresponding premium based on the applicable risk.  An employer may have multiple risks associated with its operations and can report those risks separately; however, take into consideration that officers, members, administrators and executives whose compensation cannot be specifically classified in any particular risk, must be reported using the main risk of the business, generally the one with the higher insurance premium rate.  Also, if during the year there is a change in the operating location or there is a new location, a new endorsement must be requested to the SIF to include the new location in the policy and cover any accident occurring there.  In the case of a corporate reorganization, request the SIF to transfer the premium discounts based on the accumulated experience of previous years to the new or surviving entity.  If the business has employees working from home, take into consideration that there is a risk rate that covers those salaries and there is additional information that must be provided related to those employees.

2. Include copies of other payroll-related quarterly returns. It can be copy of Forms 941 filed with the U.S. Internal Revenue Service, Forms 499 R-1B filed with the Puerto Rico Treasury Department or the State Unemployment Insurance Returns filed with the Department of Labor for the 3^rd and 4^th quarters of prior year and the 1^st and 2^nd quarters of current year.

3. Pay the premium installments notified by the SIF within the time required in the official SIF notice.

In the case of temporary policies, the SIF will determine the premium depending on the type of activity or operation the employer or contractor is engaged in and the length of time to be covered.

During an audit, the SIF may request information and documents with the purpose of determining whether the employees’ risks are correctly classified and whether the contracted services were properly covered by their own SIF insurance policy, if not included in your business payroll declaration.  Among the information that may be requested are:

1. List and job descriptions of all employees
2. List of officers, members, administrators, executives and supervisors
3. Detailed profit and loss statement, identifying those expenses related to payments for services
4. Copy of the informative returns related to services
5. List of the service suppliers, including a description of the services received, the amount paid, its employer identification number and its SIF policy number
6. Copies of invoices and checks related to the services contracted during the year.

ATBA Comments:

When preparing this year’s annual payroll statement, be sure to:

• Include all remuneration
• Identify all applicable risks
• Report the compensation of officers, members, administrators and executives using the highest risk rate
• Report all locations
• File on or before August 15, 2025
• Pay premiums within the timelines provided in the SIF notice.

Most employers in Puerto Rico maintain a permanent policy and timely submit the renewal every year with the SIF.  However, not all businesses verify and confirm that their business partners are compliant with the SIF and mantain an active policy.  Failure to do so may expose your business to the potential assessment of unpaid premiums, or even worse, to liability for medical expenses and civil lawsuits in the event of an accident involving a contractor’s employee. To avoid this risk, include in your contracting procedures the request for a certificate of active policy. This is a certificate issued by the SIF, which confirms the insurance status of your business partner. Whether you need assistance with obtaining a quote for an insurance policy with the SIF, the preparation and filing of the annual payroll statement, the creation of an account in the SIF portal or you need support with a SIF audit, our professionals are ready to help.  Please let us know how we can serve you.