On August 11, 2026, the IRS published proposed regulations providing guidance on employer contributions to Trump Accounts under new Section 128 of the Internal Revenue Code. The regulations are only proposed and would not take effect until the plan year following the year in which these regulations are finalized (thus, 2027 at the earliest). Employers can rely on the proposed regulations in the meantime. Issues discussed below may change before the guidance is finalized.
Background
A Trump Account contribution program is a separate written plan maintained by an employer for the exclusive benefit of its employees, providing contributions to the Trump Accounts of employees or the employees’ dependent(s). There are two main types of contributions: (1) contributions elected by the employee, potentially on a pretax basis, and (2) contributions made by the employer, also potentially on a pretax basis.
Contributions qualifying under Code § 128 can be excluded from the employee’s gross income, subject to an annual cap of $2,500 per employee (indexed for inflation after 2027). This includes both employee-elected contributions and employer contributions. Critically, this is a per-employee limit — not a per-dependent limit — meaning an employee with multiple children still has only one aggregate $2,500 exclusion across all dependents.
Trump Account contribution programs cannot discriminate in favor of highly compensated employees. Accordingly, actual utilization of the program could result in the program being considered discriminatory and require the employer to take corrective action.
Proposed Guidance
The proposed guidance addresses several issues of interest to employers considering a Trump Account contribution program:
- Detailed Written Plan Document: The proposed regulations note that the following issues must be addressed in the written plan document, some of which are not yet fully developed:
- Eligible employee classes
- Rules governing amount of employer contributions and whether they can be made pretax
- Procedures for employees to elect to participate
- Various certification requirements by employees with respect to the accounts
- Required employer notices to employees
- Procedures for correcting administrative failures and furnishing corrective notices when contributions are later determined not to be excludable from income taxation
- Cannot Limit Account Trustees: An employee must establish a Trump Account in order for the employee or their dependent to receive any contributions, including employer contributions. An employer offering a Trump Account contribution program is not permitted to only make contributions to specified trustees and instead will have to make a contribution to whatever account trustee has been selected by the participating employee. This could require employers to have to make contributions to dozens of different Trump Account trustees.
- Complicated Correction Administration: In the event a Trump Account contribution program fails the required nondiscrimination testing, the employer must take corrective action with respect to contributions made on behalf of highly compensated employees. The employer must notify the Trump Account trustee that received contributions from the employer within 21 days of any failure.
- Employer Verification: Although employees are allowed to self-certify that they have an eligible Trump Account, the employer cannot rely solely on such certification. Instead, the employer must have a method reasonably designed to verify that a contribution is made to a valid Trump Account.
- FICA Taxes: Although contributions to a Trump Account can be on a pretax basis, they will still be subject to Federal Insurance Contributions Act (FICA) payroll taxes. The employer’s payroll provider will need to update its payroll system before an employer can establish a Trump Account contribution program.
- Self-Employed/Partner/Sole Proprietor Exclusions: Trump Account contribution programs can only benefit employees as defined under the common-law standard. This would exclude self-employed individuals, partners in a partnership, sole proprietors, or a two-percent shareholder of an S-Corporation.
- Discrimination Testing: Contributions and benefits received from a Trump Account contribution program will be subject to annual discrimination testing to ensure the accounts are not disproportionately benefiting highly compensated employees (defined using the same definition as qualified retirement plans). In the event of a discrimination testing failure, the employer will have to take corrective action.
- Testing Exclusion: The proposed regulations note that an employer wishing to make a $1,000 contribution (or lesser amount) to those born between 2025-2028, mirroring the contribution available for such individuals from the federal government, will not have those contributions subject to the nondiscrimination testing (although the eligible class of employees must still be nondiscriminatory).
Conclusion
Employers who wish to await final guidance will most likely not set up a Trump Account contribution program until 2027 at the earliest. Interested employers will need to determine whether their payroll provider can properly administer the program, including ensuring the proper FICA taxation and W-2 reporting. Due to the complexities involved in administering these programs, an employer will more than likely look to a third-party service provider to help establish and administer these programs, instead of administering them in-house. If you have questions about Trump Account contribution programs, please contact a member of the Faegre Drinker benefits and executive compensation team.
The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.
