Kristi Gauthier, National Director of Compliance
A new way for employers to help employees save for their children’s futures is now available, but employers considering the benefit should understand the rules and administrative requirements before jumping in.
Trump Accounts, created under the One Big Beautiful Bill Act (“OBBA”), are a new type of individual retirement account (“IRA”) that may be established for eligible individuals before the calendar year in which they turn 18. During a special “growth period,” which ends December 31 of the calendar year in which the account beneficiary turns 17, the accounts are subject to special contribution, investment, and distribution rules. After the growth period, traditional IRA rules generally apply.
Parents and others can contribute to Trump Accounts, and employers can too. Beginning July 4, 2026, employers may make contributions under new Internal Revenue Code Section 128 to the Trump Account of an employee or an employee’s dependent. If the applicable requirements are satisfied, those contributions are excluded from the employee’s gross income for federal income tax purposes.
What are the limits to contribute?
During the growth period, contributions generally are capped at $5,000 per beneficiary per year, indexed for inflation after 2027. Certain government and charitable contributions, as well as qualified rollover contributions, do not count toward that limit.
Employers may contribute up to $2,500 per employee per year under Section 128, also indexed for inflation after 2027. And this is an important detail: the $2,500 limit applies per employee, not per child. An employee with three eligible children does not receive three separate $2,500 employer contribution limits. Instead, the employee has a single $2,500 annual Section 128 limit that may be allocated among eligible accounts.
Section 128 contributions that otherwise qualify for the federal income tax exclusion remain subject to FICA and FUTA taxes unless another exclusion applies.
Separately, eligible U.S. citizen children born in 2025 through 2028 may receive a one-time $1,000 federal pilot contribution if the required election is made. The federal pilot contribution does not count against the general $5,000 annual contribution limit.
What does it take for an employer to offer one?
An employer cannot simply begin making tax-favored contributions. Section 128 contributions must be made through a Trump Account Contribution Program, or TACP, governed by a separate written plan maintained for the exclusive benefit of employees.
Under proposed Treasury regulations issued August 11, 2026, the written plan must address items such as eligibility, contribution rules, employee designation procedures, required certifications and notices, reporting procedures, the plan year and correction procedures.
Employers may also permit employees to make salary reduction contributions through a Section 125 cafeteria plan to the Trump Account of an employee’s dependent. Salary reduction contributions may not be made through the cafeteria plan to an employee’s own Trump Account.
Nondiscrimination requirements also apply. Generally, eligibility, contributions, and benefits may not discriminate in favor of highly compensated employees or their dependents. The proposed regulations provide detailed rules for testing eligibility and average benefits, as well as a limited safe harbor for certain employer contributions tied to the federal $1,000 pilot contribution.
What about ERISA?
There is good news for employers on the ERISA front. In Technical Release 2026-02, the Department of Labor concluded that Trump Accounts and Trump Account Contribution Programs generally will not constitute employee pension benefit plans under Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”).
The conclusion is particularly straightforward when the account benefits an employee’s dependent rather than the employee. Even when an employee is the account beneficiary, which could occur, for example, with a 16- or 17-year-old employee, employer contributions during the growth period generally will not create an ERISA-covered plan if the conditions outlined by the U.S. Department of Labor (“DOL”) are satisfied.
That means employers generally should not face the same ERISA reporting, disclosure, and fiduciary framework that applies to traditional employer-sponsored retirement plans. Employers should nevertheless structure their involvement carefully and remain within the parameters described by the DOL.
Why might employers consider offering one?
For employers looking to expand family-focused benefits, a Trump Account contribution program presents another option. An employer contribution can provide employees with a federal income tax-advantaged benefit directed toward long-term savings for their children.
The benefit may be particularly relevant for employers evaluating ways to supplement existing retirement, dependent care, and family-support programs. Employers can also determine the contribution structure that makes sense for their workforce, subject to the applicable annual limits and nondiscrimination requirements.
Why might employers wait?
The regulatory picture is still developing. Treasury and the IRS issued proposed employer-contribution regulations on August 11, 2026. Those regulations are proposed to apply to plan years beginning on or after final regulations are published, although taxpayers may rely on the proposed regulations for earlier plan years.
Employers also should not underestimate the administrative component. A TACP requires a written plan and coordination among payroll, benefits administration, and Trump Account trustees or service providers. Employers must address employee certifications, account verification, required notices, contribution reporting, and communications with trustees.
There are workforce considerations, as well. A program focused primarily on employees with eligible dependents may be more valuable to some segments of the workforce than others. And, because Trump Accounts are new, employers have limited experience on which to gauge employee interest and utilization.
So, what’s the bottom line?
TACPs are entirely optional. For employers interested in adding another family-focused benefit, they offer a new opportunity to help employees build long-term savings for their children. But the program comes with specific tax, nondiscrimination, documentation, payroll, and administrative requirements that employers should understand before moving forward.
Employers considering a Trump Account Contribution Program should review current IRS, Treasury and Department of Labor guidance; determine whether the benefit aligns with their overall benefits strategy; establish the required written program; coordinate implementation with payroll and service providers; and consult benefits, tax and ERISA counsel before implementing the program.
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