Trump Accounts Are Live: What Employers Need to Know Now

Executive Summary

Effective July 4, 2026, employers may contribute up to $2,500 annually on a tax-free basis to “Trump Accounts,” a new tax-advantaged savings account for employees’ dependent children under age 18, which was established under the Working Families Tax Cuts Act (Pub. L. No. 119-21), also known as the One Big Beautiful Bill Act. While some employers have announced their intent to provide matching programs,¹ significant compliance questions remain, including how nondiscrimination rules apply and the mechanics of making employer contributions. At the same time, the U.S. Department of Labor (DOL) has confirmed that Trump Account programs generally fall outside ERISA. Employers interested in this benefit should monitor forthcoming IRS and Treasury guidance before finalizing program designs.

Background: What Are Trump Accounts?

A Trump Account is a new type of individual retirement account (IRA) under new Code Section 530A for an “eligible individual”—generally, a child under age 18 (as of year-end when the account is opened) with a social security number. Each beneficiary may have only one funded Trump Account.

Trump Accounts have a “growth period” from account establishment through December 31 of the year the beneficiary turns 17. During this period, special rules apply pertaining to contribution limits, investment limitations, and distribution/withdrawal restrictions. Following the growth period, traditional IRA rules under Code Section 408 generally apply.

During the growth period, Trump Accounts may receive several types of contributions:

1. pilot program contributions ($1,000 from the U.S. Treasury for eligible children born 2025-2028);
2. qualified general contributions from governmental entities or charities;
3. Section 128 employer contributions (up to $2,500 per employee);
4. qualified rollover contributions (trustee-to-trustee transfers); and
5. contributions from other sources, such as the account beneficiary, parents, or other family members.

Pilot program, qualified general, and qualified rollover contributions are unlimited. All other contributions—including Section 128 employer contributions and personal contributions—are subject to an aggregate annual limit of $5,000 (indexed for inflation after 2027). Section 128 employer contributions are separately capped at $2,500 per employee (not per dependent).

During the growth period, funds may only be invested in “eligible investments”: mutual funds or ETFs tracking a qualified index (e.g., S&P 500), without leverage and with annual fees of no more than 0.1%. Money market funds and cash are generally not permitted during the growth period.

Distributions during the growth period are limited to qualified rollovers, ABLE rollovers, excess contribution corrections, and death of the beneficiary. Hardship distributions are not permitted. After the growth period, traditional IRA distribution rules apply, with gains taxed as ordinary income upon withdrawal.

Employer Contributions: Tax and ERISA Considerations

Under new Code Section 128, employers may contribute up to $2,500 per employee per year (indexed after 2027) to Trump Accounts for employees’ dependents. These contributions are excluded from the employee’s gross income and count toward the $5,000 aggregate limit. Importantly, the $2,500 cap is per employee, not per dependent—so contributions for multiple children of one employee are aggregated.

A key compliance uncertainty facing employers is the application of nondiscrimination requirements. IRS Notice 2025-68 states that “requirements similar to” the Section 129 dependent care assistance program rules apply, including nondiscrimination, eligibility, notification, and benefits requirements.

Under the Section 129 framework, employers cannot favor highly compensated employees (HCEs)—in 2026, generally those earning over $160,000 in the prior year, plus officers and more-than-5% owners. The Section 129 rules also incorporate a 55% average benefits test, requiring that at least 55% of program benefits go to non-HCEs.

Without specific guidance on how these rules apply to Trump Accounts, employers face uncertainty in structuring compliant programs. For example, the 55% test has historically been challenging for dependent care FSAs because HCEs tend to participate disproportionately.

Separately, the DOL recently issued Technical Release 2026-02, clarifying that Trump Account programs “generally will not constitute ‘employee pension benefit plans’” under ERISA Section 3(2), even with Section 128 employer contributions. The guidance also addressed Trump Accounts for employees who are themselves eligible children (primarily working 16- and 17-year-olds), confirming these fall outside ERISA if the IRA safe harbor regulations (29 CFR 2510.3-2(d)) are satisfied.

The DOL guidance also permits employers to extend existing IRA payroll deduction programs to Trump Accounts for post-growth period contributions, provided the employer does not endorse the program (though a hyperlink to the official Trump Account website is permitted). This aligns with ERISA’s safe harbor for voluntary benefit arrangements (see our Alert and podcast on recent related litigation).

Outstanding Questions and Open Issues

While Trump Accounts have now taken effect, the regulatory framework remains incomplete. IRS Notice 2025-68 provides a general overview, and proposed regulations under Code Sections 530A and 6434 (issued March 2026) address election mechanics and the pilot program. However, these rules explicitly reserve additional rulemaking on contributions, investments, distributions, and reporting.

Employers considering Trump Account contribution programs should be aware of the following unresolved compliance issues:

• Nondiscrimination Testing Methodology. No IRS guidance clarifies how the Section 129-like nondiscrimination rules apply to employer Trump Account contributions, including how the 55% average benefits test should be calculated.
• Written Plan Document Requirements. No sample plan document or model language has been released for Trump Account contribution programs.
• Contribution Mechanics. The IRS has not issued detailed guidance on how employers should make Section 128 contributions to employees’ Trump Accounts, including coordination with trustees and reporting requirements.
• Cafeteria Plan Integration. While the IRS has indicated that Trump Account contributions may be offered via salary reduction under Section 125 for dependents, detailed guidance on coordinating these arrangements has not been issued.
• Form W-2 Reporting. The IRS has not provided guidance on how Section 128 employer contributions should be reported (or excluded) on employees’ W-2 Forms.

Key Takeaways

Trump Accounts may become a valuable recruiting and retention tool. The $2,500 annual tax-free employer contribution, combined with years of compound growth potential, could be compelling for employees with children. However, given the significant regulatory gaps, employers should proceed cautiously and monitor IRS and Treasury guidance as additional regulations are expected.

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If you would like to discuss Trump Account contribution programs or have questions about compliance considerations, please reach out to the authors or your regular Ropes & Gray advisor.