Overview
Under the One Big Beautiful Bill Act (Pub. L. 119‑21), §530A of the Internal Revenue Code (IRC) has introduced Trump accounts—a new, narrowly tailored savings vehicle for children under age 18, generally structured as a modified traditional individual retirement account (IRA). While much of the early discussion and guidance, including the new proposed regulations issued by the IRS on March 6, 2026, has focused on Trump accounts themselves, as well as family and federal pilot contributions, new IRC §128 establishes a distinct and important new benefit that employers can incorporate in addition, or as an alternative, to dependent care or educational assistance programs.
Specifically, employers may provide tax‑favored contributions to the Trump accounts of employees or their dependents through a Trump Account Contribution Program (TACP), subject to rules that closely resemble those governing dependent care assistance programs. Employers can contribute up to $2,500 per employee per year, subject to cost-of-living adjustments after 2027. TACPs are optional for employers.
Employer Contributions to Trump Accounts
While IRC §530A governs Trump accounts themselves, including how they are established and invested, IRC §128 determines whether employer contributions may be excluded from income. Employer contributions may be made to:
- A Trump account owned by an employee who is under age 18, or
- A Trump account owned by a dependent child of the employee.
Of note, employers do not establish Trump accounts. The account must already exist, having been opened by a parent or guardian through Form 4547, Trump Account Election(s).
As for timing, contributions may not be made before July 4, 2026, the statutory start date for funding Trump accounts, despite the fact that Trump accounts are effective for taxable years beginning after December 31, 2025.
The maximum amount excludable from income is $2,500 per employee per calendar year, subject to cost-of-living adjustments after 2027. Since this limit applies per employee, not per beneficiary, an employee with multiple eligible children may receive only $2,500 in aggregate employer contributions in a given year (subject to cost-of-living adjustments after 2027).
Employer contributions to a Trump account of an employee or the employee’s dependent are excludable from the employee’s gross income and are not taxable to the child, provided the contributions are made pursuant to a qualified TACP. The amounts are taxable upon distribution, to the extent they exceed basis, under traditional IRA rules after the beneficiary turns 18.
Employer contributions and any employee pretax salary reduction contributions each count toward a Trump account’s overall $5,000 annual contribution limit under IRC §530A(c). However, account trustees, rather than employers, are responsible for monitoring aggregate contributions. Accordingly, when making a TACP contribution, employers must affirmatively indicate to the Trump account trustee that the contribution is an IRC §128 contribution excludible from the employee’s gross income. Per Notice 2025-68, Trustees may rely on employer representations unless they have knowledge to the contrary.
Notably, these employer contributions are likely wages subject to Federal Insurance Contributions Act (FICA) taxes, even if excludable from gross income and federal income tax withholding, because they are not specifically excluded from the definition of “wages” under IRC §3121(a)(18), in the way educational assistance programs or dependent care assistance programs are. Instead, employer contributions to Trump accounts will likely be treated like adoption assistance benefits, which are subject to FICA taxes but not federal income tax withholding, unless there is a legislative amendment to IRC §3121(a)(18) to cover Trump account contributions.
What Is a Trump Account Contribution Program (TACP)?
A TACP is defined in IRC §128(c) as a separate written plan of an employer established for the exclusive benefit of employees to provide contributions to Trump accounts of employees or their dependents. The written plan should address: (i) eligible employees; (ii) eligible beneficiaries (employee or dependent); (iii) type of contributions (nonelective employer contributions and/or elective salary reduction contributions for dependents); (iv) annual contribution limits; and (v) claims and administration procedures.
Employers may structure TACPs in two ways:
- Employer nonelective contributions (up to $2,500 per employee per year, subject to cost-of-living adjustments after 2027), or
- Pretax salary reduction contributions under an IRC §125 cafeteria plan only for Trump accounts for an employee’s dependents.
Both employer nonelective contributions and employee pretax salary reductions count toward the $2,500 annual amount that is excluded from income (subject to cost-of-living adjustments after 2027).
Notice 2025‑68 clarifies that pre-tax salary reduction contributions through a cafeteria plan may only be made if the contribution is made to the Trump account of the employee’s dependent but not if the contribution is made to the Trump account of the employee. This is because a contribution to the employee’s own account would provide deferred compensation under IRC §125(d)(2)(A) given the employee would have a vested right to compensation that may be payable to that individual in a later year. Treasury and the IRS have indicated they intend to address rules related to the coordination of Trump account contribution programs and IRC §125 cafeteria plans in proposed regulations.
The TACP must satisfy requirements similar to those applicable to IRC §129 dependent care assistance programs, including nondiscrimination rules, eligibility classifications, notice and disclosure requirements, annual reporting and employee statements, and benefits.
Nondiscrimination Requirements
Based on the IRC §129 rules, a compliant TACP should satisfy three core nondiscrimination requirements:
- Eligibility Test: The plan must not discriminate in favor of highly compensated employees (HCEs) as to eligibility.
- Benefits and Utilization Tests: The plan must not provide disproportionately greater benefits to HCEs (benefits test); the average benefits provided to employees who are not HCEs must be at least 55% of the average benefits provided to HCEs (utilization test).
- 5% Owner Concentration Test: No more than 25% of the total benefits may be provided to 5% owners, directly or indirectly (including through dependents).
Failure of any of these tests does not disqualify the TACP, but it causes taxable income inclusion for affected HCEs.
Open Issues and Anticipated Guidance
While dependent care assistance programs are familiar to most employers, there is arguably not a lot of guidance on the nondiscrimination rules, and most employers are not comfortable with the requirements for nondiscrimination testing. It would be helpful to receive additional guidance on the application of the nondiscrimination rules, including how the utilization test will operate in the TACP context, and whether employers may apply the test to a smaller subset of employees, such as those eligible to establish Trump accounts. Otherwise, employers may choose not to take advantage of the opportunity to contribute to TACPs of employee dependents if HCEs are taxed on the benefit as a result of failing the utilization test.
There are also questions around whether TACPs are subject to ERISA. Per Notice 2025-68, the Departments of Labor and Treasury anticipate issuing guidance on how to structure IRC §128 employer contributions to Trump accounts to ensure that they are not subject to the ERISA coverage framework.
Lastly, there are operational questions around establishing TACPs and their interplay with cafeteria plans. Notice 2025‑68 confirms that forthcoming proposed regulations will address coordination with IRC §125 cafeteria plans, provide additional operational guidance for TACPs, and provide guidance on reporting and trustee reliance rules.
Conclusion
TACPs offer a novel, tax‑favored family benefit with manageable compliance risk—provided nondiscrimination rules are planned around from the outset. While Notice 2025‑68 provides a workable initial framework, significant design and compliance questions remain. Employers and advisors who engage early with these issues will be better positioned to leverage Trump accounts as a meaningful employee benefit once the regime becomes fully operational.
