Proposed rules for employer contributions to Trump accounts

Tax Hot Topics

The IRS recently issued proposed regulations (REG-101355-26) on employer contributions to the newly created Trump accounts, including applicable nondiscrimination rules. The new type of tax-advantaged savings account for children introduced in last year’s major tax law could first be established this year, but no contributions were permitted until July 4.

These new accounts function like traditional individual retirement accounts (IRAs) for eligible minors and generally are subject to an aggregate annual contribution limit of $5,000 (subject to a cost-of-living adjustment after 2027). In addition, under a pilot program, each qualifying child born after Dec. 31, 2024, and before Jan. 1, 2029, is eligible for a one-time $1,000 federal contribution to a Trump account, which will not count against the aggregate annual limit.

In December 2025, the IRS published the first Trump account employer contribution guidance in the form of questions and answers in Notice 2025-68. 

The 2025 law known as the One Big Beautiful Bill Act also added new Section 128, which permits an employer to contribute to the Trump account of an employee or an employees dependent on a basis excludable from the employee's gross income, provided the contribution is made under a Trump account contribution program (TACP).

A TACP may be offered via salary reduction under a Section 125 cafeteria plan 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. All contributions from parents, employers and others (other than exempt government contributions) will count toward the annual $5,000 cap and will enjoy tax-deferred growth within the account.

The proposed regulations address the requirements for an employer to establish and maintain a TACP, which include, among others:

• A written plan. The program must be maintained under a separate written plan for the exclusive benefit of employees, and the employer must operate the program in accordance with its written terms. The proposed regulations clarify that a TACP can cover only service providers who are employees under the common-law standard and, therefore, cannot cover self-employed individuals such as partners, sole proprietors, non-employee directors or 2% shareholders of S corporations.
• Reasonable notification. All eligible employees must be given reasonable notification of the availability and terms of the TACP.
• A written statement. An employee must receive by Jan. 31 a written statement showing the amount of Section 128 contributions made on their behalf, or on that of their dependent, during the previous calendar year under the employer’s TACP. An employer can satisfy this requirement by including the amount of Trump account contributions on an employee’s Form W-2 in the manner specified in the form's instructions.
• Employer communications with Trump account trustees. The proposed regulations prescribe rules regarding employer communications with the trustee of a Trump account to which the employer is making contributions. Among these rules is a requirement that at the time it makes a contribution to a trustee, an employer is generally required to advise the trustee that the amount is a Section 128 contribution. In addition, if an employer subsequently determines such a contribution was not a Section 128 contribution, the employer must notify the trustee and provide the affected Trump account information, the calendar year in which the contribution was made, and the amount determined not to be a Section 128 contribution.
• Eligibility nondiscrimination. The employer's eligibility classification cannot favor highly compensated employees (HCEs). The proposed regulations add a 90%-based safe harbor (subject to reduction based on workforce composition) that employers may use to demonstrate a reasonable, nondiscriminatory eligibility classification without a full facts-and-circumstances review.
• Contributions and benefits nondiscrimination. Contributions or benefits provided under the program cannot favor HCEs.
• 55% average benefits test. The average benefits provided to non-HCEs under all TACPs of the employer for each year must be at least 55% of the average benefits provided to HCEs, and the proposed regulations provide specific failure and correction procedures if the test is not met.