Introduction: On August 11, 2026, the United States Department of Treasury announced guidance for employer-sponsored programs for contributions to Trump Accounts, as well as arrangements allowing employees to contribute to their dependents’ Trump Accounts on a pre-tax basis. This Legal Alert summarizes the key requirements, tax benefits, compliance obligations, and planning considerations for employers considering Trump Account matching programs.
Trump Accounts Generally
Authorized under the 2025 One Big Beautiful Bill Act (OBBBA), Section 530A of the Internal Revenue Code, colloquially known as a “Trump Account,” creates tax-deferred investment accounts for children. Contributions to Trump Accounts grow tax-deferred, and distributions are generally restricted until the account beneficiary reaches age 18. At least initially, contributions are invested in a low-cost exchange-traded fund that tracks the performance of the S&P 500 Index, which tracks the performance of the 500 largest publicly traded companies in the United States.
Section 128 Exclusion
Effective for taxable years beginning in 2026 and later, Section 128 of the Internal Revenue Code excludes from an employee’s gross income amounts paid by his or her employer as contribution to the employee’s Trump Account (for the benefit of his or her dependents), provided the contributions are made through a qualifying contribution program established by the employer. This exclusion functions similarly to other employer-provided fringe benefits and enables employers to provide retirement or education savings support to their employees on a tax-favored basis.
The maximum annual exclusion is $2,500 per employee (not per eligible dependent). This cap is subject to inflation adjustment beginning in taxable years after 2027.
Establishing a Trump Account Contribution Program
Employers wanting to establish a Trump Account contribution program must meet certain requirements under the Internal Revenue Code similar to those imposed on dependent care assistance programs under Section 129(d) of the Internal Revenue Code.
These requirements are generally:
- A separate written plan document describing the program’s terms;
- Eligibility and benefit rules that do not discriminate in favor of highly compensated employees;
- Reasonable notification to eligible employees of the program’s availability and terms;
- Limitations on benefits provided to shareholders or owners; and
- Recordkeeping and reporting are sufficient to demonstrate compliance.
Matching and Nonelective Contributions
Section 128 of the Internal Revenue Code does not expressly limit employer contributions to matching contributions. Employers may design their programs to provide:
- Matching contributions tied to employee deferrals or contributions;
- Nonelective contributions made to all eligible employees regardless of employee contributions; or
- Hybrid designs combining matching and nonelective features.
The key requirement is that all contributions must be made pursuant to a written plan meeting the nondiscrimination and other requirements analogous to Section 129(d) of the Internal Revenue Code. Employers must carefully design contribution formulas to avoid discrimination in favor of highly compensated employees.
Tax Treatment
Employer contributions to Trump Accounts under a qualifying plan are excluded from an employee’s gross income, up to the $2,500 limit. This exclusion applies for federal income tax purposes and does not require the employee to recognize income at the time of contribution. Employers should be aware that while most states look to federal tax law principles for the imposition of tax, there are exceptions. Given the recency of this announcement, employers should continue to monitor whether any matching contributions would trigger tax consequences at the state level.
Further, Section 128 of the Internal Revenue Code only addresses the exclusion from gross income for federal income tax purposes. The statute does not expressly address whether employer contributions to Trump Accounts are subject to FICA (Social Security and Medicare) or FUTA (federal unemployment) taxes. Employers should monitor future Department of Treasury Guidance to determine the full scope of employment tax treatment obligations that may arise when establishing a Trump Account program.
Employer Deductions
Section 128 of the Internal Revenue Code does not contain an express deduction provision for employer contributions. However, employer contributions made pursuant to a qualifying Trump Account program will likely be deductible as “ordinary and necessary” business expenses under Section 162 of the Internal Revenue Code, subject to applicable limitations and requirements. Employers should verify the deductibility of these contributions with tax advisors and ensure proper substantiation.
Information Reporting
Employers should maintain sufficient records to demonstrate compliance with the Internal Revenue Code and to substantiate the exclusion claimed by employees. Specific information reporting requirements (e.g., Form W-2 reporting, Form 1099 reporting, or other IRS filings) have not yet been established by the Department of Treasury. Employers should anticipate the IRS will require some form of annual reporting to track excluded contributions and ensure compliance. The IRS may also require plan administrators or employers to file annual returns or maintain participant records, consistent with the recordkeeping obligations imposed on other fringe benefit programs.
ERISA Considerations
An employer-sponsored Trump Account contribution program may constitute an employee pension benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) if it provides retirement income or results in a deferral of income extending to the termination of employment or beyond. A plan meeting ERISA’s definition of a pension plan is subject to certain fiduciary, reporting, and disclosure requirements unless an exemption applies.
Certain plans are exempt from ERISA—for example, plans that are unfunded and maintained primarily for a select group of management or highly compensated employees are exempt from most ERISA requirements. Individual retirement accounts are also exempt. However, broadly available employer-sponsored Trump Account programs providing employer contributions to a wide employee population may not qualify for these exemptions.
Employer Action Items
Employers interested in adopting a Trump Account matching program should consider the following steps:
- Consult Tax and ERISA Counsel. Engage experienced advisors to analyze the tax and ERISA implications of a Trump Account contribution program taking into consideration workforce, existing benefit plans, and business objectives.
- Draft a Written Plan Document. Prepare a separate written plan satisfying the requirements of Section 128(c) of the Internal Revenue Code and the analogous Section 129(d) nondiscrimination and operational rules.
- Identify a Trump Account Provider. Select a qualified financial institution or third-party administrator capable of maintaining Trump Account programs.
- Design the Contribution Formula. Determine whether to adopt matching, nonelective, or hybrid contributions, and ensure the formula does not discriminate in favor of highly compensated employees.
- Establish Recordkeeping and Reporting Procedures. Implement systems to track contributions, verify the annual $2,500 limit, and satisfy anticipated requirements from the IRS and the Department of Labor.
- Communicate with Employees. Develop clear, accessible materials explaining the program’s features, benefits, and enrollment procedures.
- Monitor for Guidance. Stay current with IRS and DOL guidance as it is issued and be prepared to amend the program to comply with new requirements.
- Coordinate with Payroll and HR Systems. Integrate Trump Account contribution processing with existing payroll, benefits administration, and tax-withholding systems and processes.