Employer Contributions To Trump Accounts

The 2025 One Big Beautiful Bill Act added Internal Revenue Code Sections 530A and 128. Code Section 530A establishes so-called “Trump Accounts,” and Code Section 128 governs employer contributions to them. Contributions to Trump Accounts could first be made on July 4, 2026. Since then, several agencies have issued guidance relevant to employers. On June 17, 2026, the U.S. Department of Labor published Technical Release 2026-02, addressing whether employer contributions under Code Section 128 implicate ERISA. On August 11, 2026, the IRS published a notice of proposed rulemaking (the “NPRM”), addressing employer contributions and nondiscrimination rules. The IRS subsequently issued temporary regulations effective September 30, 2026, addressing general account requirements, account establishment and automatic enrollment, and qualified contributions.

What Is a Trump Account?

Trump Accounts are “starter” retirement accounts with the stated purpose of helping families save for their child’s future. A Trump Account may be established for any child who:

• Will not attain age 18 before the end of the calendar year in which the election to establish an Account is made; and
• Has been issued a Social Security number meeting the applicable statutory requirements before the election is made.

Almost anyone can make an election to establish or contribute to a child’s Trump Account, including parents, grandparents, other family members, friends, employers, and nonprofit organizations. Unlike many other tax-advantaged savings accounts, Trump Accounts do not require the child to have earned income.

In addition, a separate pilot program provides a one-time $1,000 government contribution for eligible U.S. citizen children born in 2025, 2026, 2027, or 2028 who have been issued a Social Security number. For more information, visit https://trumpaccounts.gov/.

Employer Contributions

Employers may contribute to Trump Accounts through a Trump Account Contribution Program (TACP) under Code Section 128, which requires a written plan document. A TACP may offer employer-funded contributions, employee salary-reduction contributions through a cafeteria plan, or both.

Employer-Funded Contributions

Employer contributions to an employee’s Trump Account or the Trump Account of an employee’s eligible dependent are excluded from the employee’s income up to an annual limit of $2,500. The limit is adjusted for inflation for taxable years after 2027.

For this purpose, under the proposed regulations, an employee’s “eligible dependent” is an individual whom the employee anticipates will be the employee’s dependent under Code Section 152 for the calendar year in which the contribution is made. Under 26 U.S.C. § 152, a dependent is (1) a qualifying child or (2) a qualifying relative.

Example: Mary-Kate earns $60,000 per year. Her employer contributes $2,500 to her eligible child’s Trump Account.

• Mary-Kate’s wages for federal income-tax purposes remain $60,000.
• The $2,500 contribution is not treated as additional income to Mary-Kate.
• Mary-Kate’s child receives the benefit of the contribution without Mary-Kate having paid income tax on it.

Employee Pre-Tax Contributions

A TACP may also—or alternatively—allow employees to contribute compensation to an eligible dependent’s Trump Account on a pre-tax basis through a Code Section 125 cafeteria plan. (For more information about cafeteria plans generally, see our article here.)

Employee contributions to a Trump Account under a cafeteria plan share the annual $2,500 limit with employer-funded TACP contributions; they do not qualify for a separate $2,500 limit. Pursuant to the IRS’s guidance in the NPRM, the employer’s cafeteria plan must be amended to specifically describe the TACP benefit and permit prospective election changes or revocations at least monthly.

Example: Ashley earns $60,000 per year and elects to contribute $2,500 to her child’s Trump Account through her employer’s cafeteria plan.

• $2,500 is deducted from Ashley’s pay and contributed to her child’s account through the cafeteria plan.
• Ashley’s wages for federal income-tax purposes are reduced to $57,500.
• Ashley funds the contribution herself but receives a tax benefit because the contribution is made on a pre-tax basis.

Important: Employees may use a cafeteria plan only for contributions to their eligible dependent’s Trump Account. Contributions to an employee’s own Trump Account are not permitted through a cafeteria plan.

Are TACP Contributions Subject to FICA and FUTA Taxes?

Generally, yes. In the NPRM, the IRS explains that contributions excluded from gross income under Code Section 128 have no corresponding exclusion for purposes of FICA or Federal Unemployment Tax Act (FUTA) taxes. The same distinction applies to employee contributions funded through cafeteria plan salary reductions: the federal income-tax benefit does not eliminate FICA and FUTA tax liability.

Can Employees Contribute to a Trump Account Outside a Cafeteria Plan?

Yes. Employees may contribute directly to an eligible dependent’s Trump Account using after-tax funds.

Additional Considerations

How Does the Contribution Limit Apply to a TACP?

Employer tax-free contributions to a TACP and employee pre-tax salary-reduction contributions share the same $2,500 annual exclusion for 2026 and 2027, with inflation adjustments after 2027. The annual limit applies on a per employee (not per dependent) basis, meaning an employee’s annual exclusion is aggregated across all employers and all dependent accounts.

What Are the TACP Document Requirements?

An employer must establish its TACP in a separate written plan maintained solely to provide Trump Account benefits to eligible employees and their eligible dependents. The employer must communicate the program’s availability and terms to all eligible participants.

Additionally, by January 31 of each year, employers must provide each participating employee in the TACP with a written statement identifying the amount of employer contributions made during the prior year. Under proposed Regulation Section 1.128-2(g), this requirement could be satisfied via the IRS’s Form W-2.

Do Nondiscrimination Rules Apply to TACPs?

Yes. TACPs are subject to nondiscrimination requirements and other rules modeled on those that apply to dependent care assistance programs under Code Section 129. As a result, employers generally may not operate a TACP in a manner that favors highly compensated employees.

What Questions Remain?

Does ERISA Apply to a TACP?

The U.S. Department of Labor (DOL) has stated that TACPs generally are not ERISA-covered plans, substantially reducing ERISA concerns. However, the guidance currently appears in DOL Technical Release 2026-02 rather than a final regulation, so additional guidance would be welcome.

How Will Employers Monitor Contributions from Other Sources?

Trump Accounts are subject to a $5,000 annual contribution limit from all sources. From an administrative standpoint, employers may face difficulties in tracking total contributions – including those made by an outside third party with after-tax dollars, such as a grandparent – to a particular Trump Account. Proposed Regulation Section 1.128-2(d)(5)(v) provides that employers have no obligation to ensure compliance with this account-wide limit. The NPRM also indicates that future guidance may require any excess contributions be attributed first to other-source contributions before the qualifying contributions under Code Section 128. Additional guidance on these ordering rules will be welcome.

Are the Employer-Contribution Rules Final?

No. The August NPRM addresses employer contributions and TACP documentation requirements, but it remains non-binding guidance from the IRS. That said, it permits taxpayers to reasonably rely on the NPRM before final regulations are published. We will continue to monitor the regulatory landscape, and employers should consider whether additional guidance has been published before designing or administering a TACP.

Conclusion

TACPs offer employers a new way to help employees save for their children’s futures through tax-favored contributions. Employers considering a program should address written-plan requirements, cafeteria-plan coordination, contribution limits, employment taxes, reporting, and nondiscrimination testing. It will also be important to monitor IRS and DOL guidance and confirm the status of any proposed rules, as this is an area that continues to evolve.

Morgan L. Kreiser
Negil McPherson III, Summer Associate