The Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) recently issued Technical Release 2026-02, providing important guidance on the treatment of newly created Trump accounts under the Employee Retirement Income Security Act of 1974 (ERISA). The guidance specifies that Trump accounts established under Internal Revenue Code Section 530A and related employer contribution programs under IRC Section 128 generally will not constitute ERISA-covered employee pension plans.
For employers considering whether to offer Trump account contributions as an employee benefit, the guidance provides welcome clarity and could create an opportunity to offer a tax-favored benefit without the administrative burden typically associated with ERISA-covered retirement plans.
Background
The One Big Beautiful Bill Act of 2025 established Trump accounts as a new type of tax-favored savings account for eligible individuals under age 18. In December 2025, the IRS issued initial guidance on the accounts. During the account's “growth period” (which generally ends on December 31 of the year before the beneficiary turns age 18), special contribution, investment, and distribution rules apply. After that period, Trump accounts generally operate under the same rules applicable to traditional IRAs.
Account funding can come from several sources, including:
- Government-funded pilot program contributions;
- Qualified general contributions from governmental and charitable entities;
- Employer contributions under IRC Section 128;
- Qualified rollover contributions; and
- Contributions from parents, beneficiaries, and other individuals.
DOL Clarification
The DOL’s analysis specifically focused on whether Trump accounts, and employer contribution arrangements supporting them, create ERISA-covered pension plans.
Under ERISA Section 3(2), a pension plan generally exists when an employer establishes or maintains a program that provides retirement income to employees or defers employee income until termination of employment or beyond.
The DOL determined that Trump accounts generally do not meet that definition because:
- Initial accounts are established by the U.S. Treasury rather than the employer;
- Employers generally have no authority over investments, distributions, or account administration;
- Many Trump accounts are established for employees' dependents rather than employees themselves; and
- Account control resides with the designated responsible party rather than the employer.
As a result, employer involvement through IRC Section 128 contributions generally will not cause a Trump account arrangement to become an ERISA-covered pension plan.
Important Tax Benefits for Employers
IRC Section 128 allows employers to contribute up to $2,500 annually per employee (subject to future inflation adjustments) to a Trump account maintained for an employee or the employee's dependent. Those contributions generally are excluded from the employee's taxable income.
That creates a potentially attractive recruitment and retention tool that can provide tax advantages to employees while expanding employer-sponsored financial wellness programs.
BDO Insight
- Although the DOL guidance does not address deductibility directly, employer contributions made under an authorized employee benefit program would, absent a statutory limitation, generally be expected to qualify as ordinary and necessary business expenses. Employers should monitor forthcoming IRS guidance for additional clarification regarding reporting and deduction requirements.
- Perhaps the most significant practical consequence of the DOL's guidance is what employers can avoid. Because Trump accounts generally are not treated as ERISA pension plans, employers ordinarily would not be subject to ERISA requirements, including:
- Form 5500 annual reporting requirements;
- Fiduciary duties;
- Claims procedures;
- Disclosure obligations; and
- Trust and plan administration requirements.
That distinction might make Trump account programs significantly easier to administer than many traditional employer-sponsored retirement arrangements.
Nondiscrimination Requirements Still Apply
While ERISA compliance might be limited, IRC Section 128 contribution programs are not entirely free from compliance obligations.
Technical Release 2026-02 notes that Trump account contribution programs are subject to rules similar to those applicable to dependent care assistance programs under IRC Section 129. That includes requirements relating to nondiscrimination, eligibility, average benefits testing, employee communications, and benefit reporting.
Employers should therefore expect that contribution programs will require some level of annual testing and compliance review to help ensure benefits are not disproportionately provided to highly compensated employees.
Cafeteria Plan Considerations
The guidance also notes that Treasury has said IRC Section 128 contributions can be offered through a cafeteria plan under IRC Section 125 when contributions are made to the Trump account of an employee's dependent. However, cafeteria plan treatment is generally not available when contributions are made to a Trump account established for the employee.
Employers contemplating implementation should work closely with benefits counsel and payroll providers to properly structure contribution programs.
Maintaining Employer Neutrality
The DOL has emphasized that employers should maintain a limited role in connection with Trump accounts. To preserve the account's non-ERISA status, employers generally should not:
- Influence investment decisions;
- Control distributions;
- Impose restrictions beyond those required by the IRC;
- Represent the arrangement as an employer-sponsored retirement plan; and
- Receive compensation related to the accounts.
At the same time, the DOL guidance confirms that employers can engage in various educational and administrative activities without creating ERISA concerns. That includes:
- Providing retirement savings education;
- Posting information on company intranets;
- Facilitating payroll deductions;
- Distributing neutral educational materials; and
- Linking employees to official Trump account resources.
ERISA Relief Does Not Eliminate Other Tax Rules
The DOL has also cautioned that Trump accounts remain IRAs for federal tax purposes. Accordingly, prohibited transaction rules under IRC Section 4975 remain applicable, and some prohibited transactions could result in the loss of favorable tax treatment under existing IRA rules.
Key Takeaways
- Technical Release 2026-02 provides employers with important clarity regarding the treatment of Trump accounts under ERISA. The DOL's conclusion that Trump accounts and related IRC Section 128 contribution programs generally are not ERISA-covered pension plans could allow employers to offer a tax-advantaged savings benefit while avoiding many of the compliance burdens associated with traditional retirement plans.
- As employers evaluate whether to incorporate Trump account contributions into their employee benefit programs, attention should still be paid to IRC Section 128 requirements, nondiscrimination testing, payroll administration, and maintaining the neutrality necessary to preserve the arrangement's non-ERISA status.
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