Employer contributions to Trump Accounts: what employers and employees need to know about the proposed guidance

Trump Accounts, one of the One Big Beautiful Bill Act’s (OBBBA) major provisions, created a new investment vehicle for parents to fund their children’s future. But this new opportunity required further regulatory clarity. In response, proposed regulations issued by the Treasury Department and IRS in August 2026 provide a framework for employers that want to make contributions to Trump Accounts. Employers considering a Trump Account Contribution Program (TACP) should evaluate both the potential value to employees and the administrative requirements, including written plan terms, payroll procedures, account verification, reporting and nondiscrimination testing.

Employees may benefit from employer contributions of up to $2,500 that qualify for exclusion from gross income, subject to the proposed rules. Employees may also be able to make prospective salary-reduction elections for contributions to a dependent’s Trump Account through a Section 125 cafeteria plan.

Who is affected?

The proposed regulations are relevant to employers considering a TACP, employers offering Section 125 salary-reduction elections and organizations whose workforces include individuals who are not common-law employees. Employees who receive employer contributions or make salary-reduction elections may also be affected.

A TACP may contribute only to a Trump Account whose beneficiary is in the growth period and is either the employee or the employee’s dependent. The growth period begins when the account is established and ends on December 31 of the year before the beneficiary turns 18.

Eligibility also depends on whether the recipient is a common-law employee. Partners, sole proprietors, individuals serving solely as directors and 2% shareholders of S corporations generally cannot receive contributions through their own business’s TACP because they are not treated as common-law employees for this purpose.

How the proposed rules impact employers

A TACP must generally be maintained as a separate written employer plan for the exclusive benefit of employees and must follow its written terms and applicable notice, certification and nondiscrimination requirements. The written plan must address employee eligibility, employer contributions, any Section 125 salary-reduction election, procedures for designating an eligible Trump Account, certification and reporting procedures, the plan year, and procedures for correcting administrative failures.

Employers must provide reasonable notice of the program’s availability and terms. For participating employees, employers must provide a written statement showing Section 128 contributions made during the preceding calendar year; reporting the contributions on Form W-2 may satisfy this requirement. Employers should coordinate their benefits and payroll processes to meet both obligations.

Account verification and trustee coordination

An employee’s certification alone is not sufficient to establish that a receiving account is a valid Trump Account. The proposed framework contemplates additional verification, potentially through the account’s unique identifier and confirmation from the provider or trustee. It also requires the employer to communicate with the trustee when a qualifying Section 128 contribution is made.

If a contribution is later found not to qualify, the employer generally must identify the affected amount and contribution year within 21 days. Employers therefore should assess whether their payroll and benefits systems can validate accounts, transmit funds to multiple providers, retain supporting records and complete corrections within that period.

Nondiscrimination testing

A TACP must satisfy three principal nondiscrimination tests. The proposed regulations generally adapt the Section 129 nondiscrimination framework for Section 128 programs.

Before implementation, employers should evaluate:

• Contributions and benefits: The program may not provide more favorable contribution terms or benefits to highly compensated employees. Offering the same terms to similarly situated employees, regardless of actual utilization, generally supports compliance.
• Eligibility: Eligibility classifications must be based on reasonable business criteria, such as job category, salaried or hourly status, or geographic location, rather than individual names. The eligible group must also satisfy the applicable facts and circumstances standard or percentage safe harbor.
• Average benefits: The average benefits provided to non-highly compensated employees under the employer’s TACPs must be at least 55% of the average benefits provided to highly compensated employees. Only employees who receive a contribution greater than zero are included in the calculation, and certain employees with compensation below $25,000 may be disregarded. Testing is performed as of the last day of the plan year.

The Treasury Department also indicated that an employer’s decision to match the $1,000 federal pilot contribution for eligible children born from 2025 through2028 will not, by itself, cause a TACP to be discriminatory. The employer must use reasonable procedures to verify eligibility and make the match available on consistent terms to all similarly eligible employees.

If a program fails one or more nondiscrimination tests at year end, the adverse tax result generally applies to highly compensated employees, whose affected contributions become includable in income.

Contribution limits and payroll treatment

The maximum employer contribution excludable from an employee’s gross income under a TACP is $2,500 per employee, not $2,500 per Trump Account or per dependent. The limit is scheduled to be indexed for inflation beginning in 2028.

Because the employee-level limit applies across dependents and employers, employers and employees may need a process for monitoring aggregate contributions. A contribution above the limit does not necessarily disqualify the program, but the excess generally must be included in the employee’s gross income.

Qualifying contributions are excluded from federal income-tax withholding but remain subject to FICA, RRTA and FUTA taxes. Payroll systems must therefore distinguish between income-tax withholding and employment-tax treatment.

What employers should consider before implementation

The proposed requirements raise several implementation questions for employers. Before adopting a TACP, employers should determine whether the benefit fits their workforce strategy and whether their existing systems can support plan administration. That assessment should consider the written-plan requirements, nondiscrimination testing, payroll-tax treatment, account validation, coordination with multiple trustees and correction procedures.

Employers should also determine whether a Section 125 salary-reduction feature would improve participation. A TACP may coordinate with a Section 125 cafeteria plan to allow an employee to make a prospective salary-reduction election for contributions to a dependent’s Trump Account. This employee-funded contribution is separate from the employer’s Section 128 contribution and cannot be directed to the employee’s own Trump Account.

Because elections generally apply only to compensation that has not yet become available, employers should coordinate the TACP document, cafeteria plan terms, payroll administration and employee communications before offering this option.

What employees should consider

Employees should confirm which accounts may receive contributions and understand that the $2,500 exclusion applies at the employee level across employers and dependents. They should also consider the contribution limits, investment restrictions, access to funds and how the benefit fits their broader financial goals.

Next steps

Critically, employers and employees can act now because these regulations provide for permitted reliance upon publish date, which occurred in August 2026. Employers should evaluate the requirements before adopting a TACP and determine whether their plan, payroll, and benefits processes can support implementation.

These regulations remain proposed and can change. Questions also persist for foreign employers and internationally mobile employees. Sikich’s tax team is closely monitoring guidance as it evolves, including how it interacts with other laws that impact your tax planning. We’re here to help you stay compliant as you create more opportunities for your employees.

About our authors

Bailey Martenson, CPA, is a Tax Manager at Sikich, serving businesses and their shareholders in the professional services and construction and real estate sectors. Her tax and advisory experience focuses on supporting business growth and ongoing federal and state tax compliance. Bailey.Martenson@sikich.com

Joseph Chadbourne, CPA is a member of the Sikich tax department who specializes in tax research, and preparation of business and trust tax returns. He is also skilled at addressing and resolving tax notices. Joseph.Chadbourne@sikich.com

Larry Johnson, CPA, MST, is a Senior Tax Manager. He advises clients on complex tax matters with expertise in exempt organizations, charitable gift planning, fundraising strategy, and donor relations. His background includes significant work with nonprofit organizations, board development, and philanthropic planning. He serves in leadership roles supporting historical and community organizations, including the Illinois National Guard and Militia Historical Society, reflecting his strong commitment to legacy, service, and mission-driven work. Larry.Johnson@sikich.com