IRS Provides Roadmap for Employer Trump Accounts
The Trump account program is now live and accepting contributions. Still, as is true with any new type of savings vehicle or government-sponsored program, questions and complications have persisted—particularly with respect to the employment benefit aspect of the Trump account program. The IRS and Treasury have now released a notice of proposed rulemaking (NPRM) to offer guidance and clarity for employers who are interested in making contributions to Trump accounts on behalf of their employees and their employees' dependent children. The NPRM clarifies many issues that may have previously prevented employers from incorporating Trump accounts into their overarching employment benefit programs—and offers the detailed roadmap employers need to proceed with implementing their Trump account programs.
Trump Account Employment Benefit: The Basics
To implement the new Trump account program, Congress created a new IRC Section 128—a new tax section that provides tax-favored treatment, assuming the employer satisfies all relevant requirements, including not discriminating in favor of highly compensated employees. Employers can elect to allow employees to make after-tax contributions via payroll tax deductions. These personal contributions do not immediately reduce taxable income.
Employers can also establish a Section 128 program. This can allow employers to make contributions on a pre-tax basis. When the employer establishes a Section 128 program, the contributions are technically treated as employer contributions so that the amounts aren't currently taxable.
Employers can contribute to accounts of their employees and accounts established for the benefit of their employees' dependent children. Contributions can be made until December 31 of the year the account beneficiary turns 17.
The New NPRM
The IRS has clarified that employer-side contributions are limited to $2,500 in pre-tax dollars per employee, rather than $2,500 per beneficiary (meaning that an employee with multiple dependent children would be limited to a single $2,500 pre-tax benefit and contributions above the limit are taxable to the employee). Any employer-side contribution also counts toward the overall $5,000 per-beneficiary annual limit.
Employer contributions (within the applicable limits) are excluded from the employee's income, but remain subject to employment taxes (FICA and FUTA).
The NPRM also provides that self-employed individuals (i.e., sole proprietors or partners in partnerships) are not permitted to make employer-side contributions on behalf of themselves or their own dependent children. However, self-employed individuals who have employees are permitted to establish a program and make Trump account contributions on behalf of those employees and their employees' children.
These contributions are treated like any other employer-side Trump account contribution, so they are not taxable to the extent they do not exceed $2,500 per employee.
The distinction is important because when the self-employed person makes contributions on behalf of employees' dependent children, those contributions are tax deductible. When they contribute to Trump accounts established for their own children, those are personal, non-deductible contributions.
Administrative Details
Like most employment benefits, Trump accounts as employment benefits must be administered pursuant to a written plan document, titled Trump account contribution program (TACP). Employees must receive notice of the terms (and existence) of the program. The written document must specify the classes of employees who are eligible to participate, contribution formulas and whether the employee can elect to contribute via salary reduction under a Section 125 cafeteria plan.
That TACP plan document must inform employees about the procedures under which employees designate Trump accounts (of employees or their dependents) to receive contributions. The document must also outline procedures for correcting administrative failures (and informing employees when amounts previously designated as Trump contributions are recharacterized as not tax-free).
Employees must receive notification about any contributions made on behalf of them or their dependents. The IRS clarified that notice is sufficient if the amount is included on the employee's W-2, as instructed on the form for reporting Section 128 contributions.
Section 128 contributions can be offered via a cafeteria plan, but only if the employee is permitted to change or revoke their elections at least monthly. Employees can contribute via a cafeteria plan, but only on behalf of their dependent children, not for their own accounts.
Employers are permitted to rely upon employees' self-certification that their children satisfy the age and dependent-status requirements of a TACP. Employers are, however, required to verify that the destination account is, in fact, a Trump account (i.e., by establishing procedures to obtain the information from a service provider, trustee, etc.).
The NPRM also outlines nondiscrimination requirements that mirror those applicable to dependent care assistance programs (to prohibit discrimination in favor of highly compensated employees and their dependent children).
Conclusion
The NPRM also contains a number of examples designed to help employers understand their options and obligations under the Trump account program. As part of the comment period, the IRS has announced that there will be a public hearing on the NPRM on October 15, 2026—and, of course, comments could lead to additional changes and clarifications in the final rules. Your questions and comments are always welcome. Please post them at our blog, AdvisorFYI, or call the Panel of Experts.