Proposed Rules for Employer Contributions to Trump Accounts

Background on Trump Accounts

Trump Accounts, which could be established effective July 4, 2026, are a special form of individual retirement account (IRA) for dependents under age 18 (the “growth period”) that convert to regular IRAs automatically when the child reaches the first day of the calendar year in which they will be age 18. Unlike a regular IRA, the child need not have compensation for the contribution to be made.

There is a special pilot Trump Account program (the “pilot program”) under which the government will contribute $1,000 to a Trump Account established for a child born in 2025 through 2028. There is also a broader Trump Account program that allows parents, grandparents, employers and certain others to make contributions to Trump Accounts, including pilot program Trump Accounts.

Employer contributions, including pre-tax employee contributions to a cafeteria plan, are limited to $2,500 per year per employee (not per dependent). These plans are subject to a series of rules, including nondiscrimination rules that are similar to those for DCAPs.

The IRS earlier issued guidance for establishing Trump Accounts. See our January 7, 2026 insight, “Initial Guidance on Trump Accounts.” Also earlier, the DOL issued guidance providing that, in most instances, Trump Accounts are not pension plans subject to ERISA. See our July 6, 2026 insight, “DOL Says Trump Accounts Are Not Pension Plans.”

The earlier guidance did not address the rules that apply for employers that would like to provide Trump Account contributions, including through cafeteria plans. The proposed rules address those issues.

Types of employer contributions to Trump accounts

Under the proposed rules, for purposes of the Trump Account rules, “dependent” is defined with reference to an Internal Revenue Code (IRC) section that includes both a “qualifying child” and a “qualifying relative.” The practical consequence of the definition is that an employee’s dependent may include certain children, such as a sibling, niece or nephew whom the taxpayer can claim as a dependent under the IRC. For purposes of the pilot program (for children born in 2025, 2026, 2027 or 2028), a qualifying relative is not included in the definition of eligible dependent.

An employer may make a direct contribution to the Trump Account. Alternatively, the employer may allow an employee to elect pre-tax contributions to a Trump Account under a cafeteria plan. Direct contributions may go for employees as well as dependents who meet the age requirement. Cafeteria plan contributions may only go for dependents who meet the age requirement.

An owner-employee may establish a Trump Account program for its common-law employees but may not participate in the plan.

Requirements for an employer’s Trump Account program

An employer’s Trump Account program must satisfy specific requirements:

• Separate written plan document. The Trump Account program must be described in a separate written document that specifies the classes of employees eligible to participate, the rules governing employer contributions (including the amount of contributions and whether contributions may be made via a cafeteria plan), the certification, notice and reporting procedures, and correction procedures. The document must also describe the plan year. The employer must follow the terms of the separate written plan.
• Reasonable notice. All eligible employees must be given reasonable notice of the availability and terms of the Trump Account contribution program so that they have a meaningful opportunity to receive benefits under the program. There is no required content requirement or delivery method.
• Written statement showing contributions. Employers must give a written statement of the contributions made the previous calendar year to each employee who receives a contribution (on behalf of a dependent or themselves). This requirement may be satisfied by including the information on Form W-2 box 12 using code TA for the year for which the contribution was made.
• Certification. Employers may rely on employee certifications in writing (paper or electronic) that represent the beneficiary is the employee or dependent (who meets the age requirement during the year the contribution is made), the age of birth and that no facts are known that would make the beneficiary ineligible. No reliance is allowed if the employer has actual knowledge that the certification is incorrect. The employer must use a method reasonably designed to verify, through information provided by the trustee, payroll processor or other service provider that the contribution is made to a valid Trump Account (e.g., use of a unique identifying number).
• Employer communication. The employer must communicate to the Trump Account trustee (similar to an IRA trustee) that the amount being contributed is a Trump Account contribution. If the employer later determines that the contribution does not meet the requirements, the employee must notify the trustee with a reasonable amount of time. The rule deems 21 days as reasonable. The trustee may rely on the employer’s notice until the trustee receives a corrective notice or has contrary knowledge.
• No selecting only certain trustees. An employer may not limit the trustees to whom they will send Trump Account contributions.
• Salary reduction election. In the case of a cafeteria plan, the employee must make the salary reduction election before the salary becomes currently available to the employee. The election does have to made before the plan year, which is the case for most cafeteria plan elections. The employee must be able to revoke the election at least monthly with respect to future salary.
• Employer contribution limit. The annual limit per employee for 2026 and 2027 is $2,500. The limit is indexed for inflation starting in 2028. If the employee has more than one dependent, the $2,500 limit is not increased. (The employer may allow the contribution to be divided.) If an employee has more than one employer, the $2,500 limit is applied by combining the amounts from the two employers. An employer’s Trump Account contribution will not be in excess of the limit solely because another employer also contributes to the same Trump Account. A husband and wife are separate employees and can receive $2,500 contributions each whether they work for the same or different employers (and whether it is for the same or different dependents). If a child receives the government’s $1,000 pilot program contribution, any employer match to that government contribution would count against the $2,500 employer limit.

Tax consequences

Employer contributions to Trump Accounts are excludible from income whether direct or through a cafeteria plan. Excess contributions (e.g., as a result of corrections) are taxable. Income tax withholding applies only to amounts subject to income tax. All employer contributions are subject to Social Security and Medicare (FICA) taxes. The guidance is not clear on whether FICA taxes apply to cafeteria plan contributions to Trump Accounts. (Normally, FICA taxes do not apply to pre-tax cafeteria plan contributions.)

Nondiscrimination rules

The proposed guidance sets forth the nondiscrimination rules that apply to Trump Accounts. These are generally similar to those for DCAPs. This guidance also proposes specific nondiscrimination rules for DCAPs. Significantly, as discussed below, the DCAP proposal specifies a new “utilization test” for the average benefits test that applies to both DCAPs and Trump Accounts.

Nondiscrimination tests require contributions and benefits on the same terms for highly compensated employees (HCEs) and non-highly compensated employees (NHCEs) even though they allow employees to receive different amounts of contributions and benefits as a result of differing elections or different utilization.

Several points of these nondiscrimination rules are worth noting:

• There is a special safe harbor for employer contributions to the pilot program. Any employer matching contributions to the $1,000 government contribution pilot program are disregarded from the contribution and benefits and average benefits nondiscrimination tests, but not from the eligibility nondiscrimination test.
• Eligibility classifications must be both reasonable and nondiscriminatory in operation.
• In conducting the “average benefits” nondiscrimination test that requires the ratio of average benefits provided to NHCEs be at least 55 percent of that provided to HCEs, employers may ignore employees who have zero contributions. Excluded employees are similar to those for pension plan testing, including exclusions for those who are not yet age 21 with one year of service and those in collectively bargained plans where inclusion was a subject of good-faith bargaining.
• The owner concentration test applicable to DCAPs (not more than 25 percent of amounts provided go to 5 percent or greater owners) does not apply to Trump Account testing.

Implications for employers

Since employers may rely on the proposed rule, they can comfortably implement Trump Account programs for 2027 based on the proposed rule.

Employers may wish to revisit their DCAPs now that the utilization test has been revised and specific regulations proposed.