The only way to have the distributions from the pension plan exempt from US taxation woud be to have the funds rolled over treated as non-deductible traditional IRA contributions or have the funds deposited into a ROTH IRA. If you chose the ROTH IRA, the roller over would be considered a ROTH IRA conversion and the amount rolled over would be taxable. However, you would get a credit for the taxes paid in Puerto Rico so they would offset to some extent. The problem with this is that you would only be able to deduct the foreign taxes to the extent of your US tax on foreign income, so the deduction may be limited. It is possible you could treat the contributions as not-deductible, since you never deducted them on your US tax return. You would need to ask your broker about that.
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