Trump Accounts were created in 2025 by the One Big Beautiful Bill Act and they officially launched on July 4, 2026. A Trump Account is a type of traditional individual retirement account established for an eligible child and governed by special rules regarding contributions, investments, distributions and reporting. Once an authorized individual opens an account for an eligible child, the eligible child becomes the account owner and is also referred to as the account beneficiary. Contributions may come from various sources, including family, friends and employers.
On August 11, 2026, the Department of the Treasury and the IRS issued proposed regulations under Section 128 of the Internal Revenue Code outlining how employers may make tax-free contributions to Trump Accounts.
Trump Account Contribution Plans Are Generally Not Employee Retirement Income Security Act (ERISA) Pension Plans
The Department of Labor concluded in a Technical Release that a Section 128 Trump Account contribution plan for employees’ dependents generally is not an ERISA-covered pension plan because the retirement benefits belong to the children rather than the employees. Although the Department of Labor did not separately address whether such a plan is an employee welfare benefit plan, the plan does not appear to provide any benefit covered by ERISA’s welfare plan definition.
Written Plan Requirement
An employer must establish a Section 128 Trump Account contribution plan through a separate written plan document. The document must address eligibility, employer contribution amounts, how employees designate accounts and procedures for required certifications, notices, reporting and corrections.
Employer Contributions
Under a Section 128 Trump Account contribution plan, tax-free employer contributions cannot exceed $2,500 per employee per calendar year (subject to inflation adjustments after 2027). For example, an employer cannot contribute $7,500 under the plan for an employee with three children.
For purposes of the $2,500 limit, employer contributions include:
- Employee Salary Reduction Contributions:Employees may contribute salary-reduction elections through a Section 125 cafeteria plan.
- Direct Employer Contributions: Employers may also contribute directly to employees’ designated Trump Accounts.
Total contributions from all sources to a Trump Account are limited to $5,000 per calendar year (subject to the same inflation adjustments). Employers, however, are not responsible for monitoring this account-level limit or recovering excess contributions.
Employers cannot require employees to use a preferred Trump Account trustee or custodian. As a result, an employer may need to transmit contributions to multiple financial institutions.
Notice and Reporting Requirements
Employers must provide employees with reasonable notice of the availability and terms of the Section 128 Trump Account contribution plan. Employers must also provide an annual statement showing the contributions made on an employee’s behalf. This requirement may be satisfied by reporting Trump Account contributions in Box 12 of Form W-2 using code “TA.”
Nondiscrimination Testing
Section 128 Trump Account contribution plans must satisfy nondiscrimination testing requirements. The proposed regulations update and clarify the nondiscrimination testing rules that apply to both Section 128 Trump Account contribution plans and Section 129 dependent care assistance programs. Section 128 Trump Account contribution plans are subject to the first three tests described below, while dependent care assistance programs are subject to all four.
- Contributions and Benefits Test: A plan cannot provide more favorable terms to highly compensated employees. A plan will pass this test if it offers benefits on the same terms to all eligible employees, even if participating employees ultimately receive different amounts.
- Eligibility Test: The plan’s eligibility classification must be (1) reasonable and based on objective business criteria and (2) nondiscriminatory, as determined under either a facts-and-circumstances test or a safe harbor.
- Average Benefits Test: The average benefit provided to non-highly compensated employees must be at least 55% of the average benefit provided to highly compensated employees. Only employees who receive a benefit greater than zero are included in this calculation.
- Owner Concentration Test: No more than 25% of dependent care benefits may be provided to individuals who own more than 5% of the employer (or their spouses or dependents). This test does not apply to Trump Account contribution plans.
Pilot Program Matching Safe Harbor
Under the Trump Account pilot program, children born between 2025 and 2028 are eligible for a one-time federal contribution of $1,000 to their Trump Accounts. An employer may match this amount without performing the Contributions and Benefits Test or the Average Benefits Test. However, the employer’s Section 128 Trump Account contribution plan remains subject to the Eligibility Test.
What’s Next?
A public hearing on the proposed regulations is scheduled for October 15, 2026, but employers may rely on the proposed regulations immediately. Employers interested in implementing a Section 128 Trump Account contribution plan should begin preparing the required written plan document and begin coordinating with their payroll and benefits service providers regarding implementation.
Warner Norcross + Judd Has You Covered
If you have questions about Section 128 Trump Account contribution plans or need assistance with implementation, please contact Stephanie Grant, Cade Bunton, or another member of Warner’s Employee Benefits Practice Group.
