- Treasury and IRS proposed regulations provide the first comprehensive framework for employer Trump Account Contribution Programs (TACPs) under IRC Section 128.
- Employers may contribute up to $2,500 annually through a TACP, with contributions excluded from federal income tax but subject to FICA and FUTA payroll taxes.
- TACPs must address written plan documents, account verification, employee notices, Form W-2 reporting, nondiscrimination testing, and permitted Trump account investments.
Treasury and the IRS recently released two sets of proposed regulations addressing Trump accounts, tax-deferred savings accounts for children created under Internal Revenue Code (IRC) Section 530A by the One Big Beautiful Bill Act (OBBBA) (for prior coverage, see the tax alert, IRS Issues Initial Guidance on OBBBA’s Trump Accounts for U.S. Children, published December 16, 2025). The proposed regulations cover both individual account rules and employer Trump Account Contribution Programs (TACPs), giving employers an initial framework for evaluating whether — and how — to offer Trump account benefits. Eligible accounts may begin accepting contributions starting July 4, 2026.
The proposed rules provide the first comprehensive framework for employers that want to offer Trump Account Contribution Programs (TACPs) under IRC Section 128, including rules for employee and employer contributions, nondiscrimination testing, account verification, reporting, and investments. Although the proposed rules — published in the Federal Register on August 21, 2026 — answer many questions about how employers may operate a TACP, several operational details remain open, so employers may want to take a cautious approach, while service providers build the necessary infrastructure. Comments on the proposed rules must be received by October 20, 2026.
Trump accounts may be established for children who have not attained age 18 before the close of the calendar year in which the account is created. These accounts are intended to supplement, rather than replace, existing education savings accounts, such as 529 plans and custodial savings vehicles. The maximum annual contribution limit for a Trump account is $5,000 (aggregate of family and employer contributions) per child per year, subject to exceptions for the $1,000 one-time federal deposit for eligible children born between 2025 and 2028 and contributions from qualifying charities or nonprofits. Amounts in a Trump account may be withdrawn for any reason beginning January 1 of the year in which the child turns age 18.
For employers, the proposed rules make TACPs a possible new workforce benefit, but one that may require significant payroll, vendor, and compliance coordination.
Key takeaways for employers:
- Employers may contribute up to $2,500 annually per individual employee (not per eligible child) through a TACP maintained under Section 128, which counts toward the overall $5,000 annual Trump account contribution limit.
BDO Insight
The $2,500 employer limit applies to individuals, even across multiple employers. For example, if Employer A makes a $1,000 contribution to Employee X during a calendar year, then Employee X starts working for Employer B during the same calendar year, the most Employer B could contribute to a TACP for Employee X is $1,500. However, employers do not have the obligation (nor the ability) to track contributions made for the same employee by other, unrelated employers. The $2,500 annual limit is a personal limit per individual, who must track their own compliance, similar to the IRC Section 402(g) salary deferral limit if an individual works for unrelated employers that each has a 401(k) plan and the individual contributes to both plans.
- Contributions for employees’ eligible dependents may be funded through employee pre-tax salary reduction arrangements under an IRC Section 125 cafeteria plan or by employer contributions.
- Employer contributions are excluded from federal income tax but remain subject to FICA and FUTA taxes.
- Tax-free “employer” contributions are not permitted for self-employed individuals, partners, more than 2% S corporation owners, and sole proprietors.
- Employers must meet new nondiscrimination testing requirements similar to those applicable to dependent care assistance programs under IRC Section 129.
- Employers may not restrict employees to a particular Trump account provider or custodian.
- Trump accounts generally may invest only in low-cost U.S. equity index mutual funds and exchange-traded funds with annual fees of 0.10% or less. ESG (environmental, social, and governance) funds, sector funds, and most actively managed investment strategies generally will not qualify.
Employer Contribution Rules
Employers may establish a TACP and contribute up to $2,500 annually (adjusted for inflation beginning in 2028) for an employee, an employee's dependent, or a combination of both, subject to the statutory limits. An employee with multiple eligible dependents may allocate contributions among their Trump accounts, but the aggregate TACP contribution is capped at $2,500. Related employers under the controlled group and affiliated service group rules are treated as a single employer for TACP contributions, so contributions made by all related employers would be taken into account when applying the contribution limits and for nondiscrimination testing.
BDO Insight
An employer is responsible only for ensuring that contributions made through its own TACP do not exceed the $2,500 limit. In other words, employers are not required to track or monitor whether total contributions from all sources, including after-tax contributions, exceed the aggregate $5,000 annual limit for a Trump account.
If an employer makes excess TACP contributions on behalf of an employee, that amount must be treated as taxable wages and included in the employee's gross income.
The proposed rules also permit contributions through a cafeteria plan salary reduction arrangement, but only if the cafeteria plan document specifically describes the TACP. Employee pretax salary deferrals under a cafeteria plan to fund TACPs may only be made for the employee’s dependents; they may not be used to fund the employee’s own Trump account, even if the employee is otherwise eligible for a Trump account because cafeteria plans generally may not provide “deferred compensation.”
BDO Insight
Unlike many traditional cafeteria plan elections, employees generally may change or revoke Trump account salary reduction elections monthly, but only on a prospective basis. Automatic enrollment is currently not allowed and may require a statutory change to implement.
While contributions are excluded from federal income tax, they remain subject to payroll taxes, including FICA and FUTA.
Employers will need to:
- Maintain a written TACP plan document, which must include the classes of employees eligible to make or receive TACP contributions, rules governing employer and employee contributions, procedures for employees to designate the trustee of the Trump account who will receive the contribution, certification, notice and reporting rules, and correction procedures for administrative failures.
- Obtain employee certifications regarding dependent status and eligibility, which the employer can rely upon.
- Provide advance notice of the TACP’s availability and terms to eligible employees (but the content of the notice is not specified in the proposed regulations).
- Report TACP contributions annually on Form W-2, Box 12 with new code “TA”.
- Identify Section 128 contributions when transmitting funds to trustees of Trump accounts.
- Verify that contributions are made to a valid Trump account. Note that employers cannot rely solely on an employee’s certification that the destination account is a valid Trump account and generally would need to seek separate verification from the trustee or payroll processor.
- Issue corrective notices if contributions later lose tax-favored treatment.
BDO Insight
Importantly, employers may not limit contributions to a particular Trump account custodian, meaning payroll and administration systems may ultimately need to accommodate multiple providers.
Nondiscrimination Testing
TACPs must meet three nondiscrimination requirements:
- Contributions and Benefits Test - Benefits cannot favor highly compensated employees (HCEs).
- Eligibility Test - Eligibility classifications must be based on objective business criteria and cannot disproportionately favor HCEs. Employees who are not yet age 21, who have not completed one year of service, or who make less than $25,000 or who are union employees generally can be excluded. Note that the exclusion for employees making less than $25,000 only applies for nondiscrimination testing of salary reductions. Those employees must be included for testing employer contributions.
- 55% Average Benefits Test - The average benefit provided to non-highly compensated employees (NHCEs) must be at least 55% of the average benefit provided to HCEs.
Generally, compliance with these tests is determined as of the last day of the plan year, taking into account any individual employed on any day of the plan year who is not an excluded employee and who was provided benefits under the TCAP on any day during the plan year. If a plan fails testing, employers generally may correct the failure by treating a portion of HCE contributions as taxable compensation reported on Form W-2, rather than disqualifying benefits for all participants. Employers also must provide Trump account trustees with a corrective notice within 21 calendar days after the test failure becomes known.
The proposed regulations also include a favorable safe harbor for employers that match the federal government's $1,000 pilot contribution for children born between 2025 and 2028 (the match is excluded from the nondiscrimination rules).
BDO Insight
Payroll providers and benefits administrators that currently offer cafeteria plan documents and related administration services are likely to play an important role in TACP implementation. Employers may want to ask existing vendors whether they expect to support TACP plan documents, payroll feeds, account verification, reporting, and nondiscrimination testing.
Investment Restrictions
The investment rules significantly limit permissible investments during a child's growth period (i.e., before the child attains age 18). Eligible investments generally must be mutual funds or ETFs, track a broad-based U.S. equity index, avoid leverage and speculative strategies, and maintain annual fees of no more than 0.10%. Permitted investments may include S&P 500 and broad U.S. stock market index funds. The proposed regulations generally prohibit ESG-focused funds, industry and sector funds, leveraged investment products, and strategies designed to outperform or materially deviate from an index benchmark. Cash may be held only temporarily to facilitate contributions, distributions, reinvestments, fee payments, and other permitted transactions.
Trustees will be responsible for monitoring investment eligibility, maintaining written compliance procedures, conducting periodic reviews of investment options, correcting administrative errors and reinvesting assets if an investment ceases to qualify. Trustees generally must replace an ineligible investment within 30 days after discovering the issue.
BDO Insight
Employers cannot require employees to use a specific Trump account trustee, so an employer may have to send contributions to multiple providers, which could make a TACP cumbersome because the employer is responsible for verifying those accounts at various financial institutions. Treasury and BNY, the designated trustee for Trump accounts, are developing a system to facilitate employer contributions to Trump accounts, with an initial focus on employers seeking to match the federal government’s $1,000 pilot contribution. The initial phase is not expected to accommodate employer cafeteria plan contributions in 2026.
On September 1, 2026, Treasury and BNY provided an update on the “Hub” system, a centralized verification and remittance system that could allow employers to send information and contributions through a single channel and alleviate a major administrative concern. It appears that employees would obtain a unique identifier for a child’s Trump account through the Trump account app and provide it to their employer. Employers would then use the Hub to verify accounts and facilitate contributions. Such operational guidance would help employers determine the cost and difficulty of adopting a TACP.
TACPs Exempt From ERISA
The Employee Benefits Security Administration recently concluded in Technical Release 2026-02, that employer contributions to Trump accounts during the growth period generally are not ERISA plans established or maintained by the employer (for prior coverage, see the tax alert, DOL Clarifies That Trump Accounts Generally Are Not ERISA Plans: Key Tax Considerations for Employers, dated June 25, 2026).
Employer Action Items
Because significant operational details remain under development, employers may wish to treat 2026 as a planning period rather than an immediate implementation year, particularly if cafeteria plan salary reductions, multiple account providers, or automated enrollment are important to the design. Employers considering a TACP should begin evaluating these design and implementation issues:
- Whether to provide employer contributions, employee pre-tax salary reduction contributions, or both.
- Payroll and administrative systems needed to support contributions.
- Nondiscrimination testing compliance.
- Employee communication and enrollment processes.
- Potential opportunities to match the federal $1,000 one-time pilot contribution for children born between 2025 and 2028.
The proposed regulations provide the first practical roadmap for employer-sponsored TACPs, giving employers enough information to begin evaluating whether the benefit fits within their overall benefits strategy. Employers interested in offering Trump account benefits should begin planning for payroll administration, account verification, nondiscrimination compliance, employee communications, and vendor coordination, while continuing to monitor additional guidance. The investment rules also provide much-needed clarity regarding the limited range of investments that will be permitted during the account growth period. Human resource and payroll vendors are likely to play a central role in developing TACP products and infrastructure designed to comply with the new rules.
Individuals interested in establishing an IRC Section 530A child savings account should visit TrumpAccounts.gov for more information.