The Basics
- Common law employers in both the public sector and private sector may contribute up to $2,500 per employee each year to eligible Trump Accounts through a qualifying Trump Account Contribution Program (TACP). The limit applies per employee, not per child, and is subject to inflation adjustments after 2027.
- A qualifying TACP plan must be maintained under a separate written document that addresses eligibility, contributions, employee notices, reporting, account verification, and correction procedures.
- Proposed regulations released in August 2026 provide a detailed framework for program administration and nondiscrimination testing. Although the regulations are not final, employers may rely on them before final regulations are issued.
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What Is an Employer Trump Account Contribution Program?
At its core, an Employer Trump Account Contribution Program (TACP) is a formal benefits initiative that lets employers contribute directly to employees’ (or employees’ dependents’) Trump Accounts tax-free.
Under current limits, employers can contribute up to $2,500 per employee annually or a limit less than $2,500 stated in the employer’s written plan. The employer contributions are excluded from an employee’s federal gross income. The federal limit, which is set to adjust after 2027, applies across dependents and, under the proposed regulations, across employers.
How Can a Trump Account Program Benefit Employers?
Trump Accounts give employers a powerful new tool to enhance their employee benefits package, one that helps employees build long-term savings for themselves or, more commonly, their children or eligible dependents.
Sponsoring or contributing to a TACP can serve as a standout recruitment and retention perk for your organization, giving your employees a major headstart on their family financial planning.
However, securing favorable federal income tax treatment requires careful prep: An employer TACP must satisfy requirements addressing eligibility, nondiscrimination, account verification, employee notices, trustee coordination, and reporting.
Regulations proposed in August 2026 lay out the framework, but because those rules are not yet finalized, staying flexible and informed will be key to keeping your plan fully compliant.
What Do Employers Need to Know?
To qualify for the tax advantages of an employer TACP, the program can’t operate informally. It requires a separate written plan outlining how the plan will run.
The proposed regulations require the documented employer TACP to specify:
- Eligibility: The classes of employees eligible to participate.
- Funding & Structure: The amount of contributions and whether salary reduction contributions may be made through a cafeteria plan.
- Account Tracking: How an employee designates the Trump Account of the employee or a dependent to receive contributions.
- Administration: Required certification, notice, reporting, and trustee communication procedures
- Date: The plan year.
- Oversight & Fix Framework: Procedures for correcting administrative failures and contributions later determined not to qualify for the federal income tax exclusion.
Annual Contribution Limits and Payroll Treatment
Employer contributions count toward the beneficiary’s $5,000 annual limit for private contributions. Under the proposed regulations, employers are not responsible for monitoring employees’ compliance with that account-level limit.
Qualifying contributions are excluded from federal gross income and generally are not subject to federal income tax withholding. But they remain subject to applicable FICA, FUTA, and Railroad Retirement taxes unless another exclusion applies. State and local treatment should be evaluated separately.
Who Can Receive an Employer Contribution?
Only an employee or dependent whose account is still within its growth period — i.e. the account beneficiary is under age 18 — is eligible to receive contributions to a valid Trump Account. As such, contributions to an employee’s own account generally apply only when that employee is a minor.
The proposed regulations allow employers to rely on written employee certifications detailing the beneficiary’s date of birth, relationship to employee, and eligibility — unless the employer knows the certification is incorrect.
The employer must reasonably verify the account through a trustee, payroll processor, or other service provider.
Additional Eligibility and Employer Rules
What kind of employers can participate in an Employer TACP?
Any standard legal entity acting as a common-law employer. This encompasses for-profit businesses (Corporations, LLCs) and nonprofit organizations (501(c)(3) entities), as well as state and local government entities. All of these can establish a written TACP to provide tax-free contributions to their employees.
Which Employees Can Participate in an Employer TACP? The proposed regulations limit participation in employer TACP to common-law employees (i.e., traditional full-time or part-time W-2 employees).
Who is excluded From an Employer TACP? Self-employed individuals — including sole proprietors, partners, individuals serving solely as directors, and more-than-2% S corporation shareholders — may sponsor a program for their employees but may not participate themselves.
Controlled Groups: Related organizations or businesses that are treated as a single employer under the employee benefit aggregation rules generally must be combined when applying the program requirements and nondiscrimination tests.
Splitting Contributions: The program or the employee’s election may allocate contributions among the employee’s eligible Trump Account and the Trump Accounts of one or more dependents, subject to the employee-level annual limit.
Dependents & Tax Filing: Dependent status follows the federal tax definition. For divorced or separated parents and married individuals filing separately, a child generally cannot qualify as the dependent of both parents. For a married couple filing jointly, a child may be treated as the dependent of both spouses.
How Do TACP’s Nondiscrimination Rules Work?
The IRS’ proposed rules prevent an employer TACP from discriminating in favor of highly compensated employees. You can ensure your organization’s compliance by:
- Offering the same contributions and benefits to all eligible employees. This generally satisfies the contributions and benefits requirement, even if individual elections produce different amounts.
- Using fair and objective criteria. If you limit who can participate, you must use a reasonable, nondiscriminatory (i.e. fair and objective) classification. Relevant criteria may include job category, compensation type, and geographic location.
- Following the IRS proposed rules outlining a facts-and-circumstances test and numerical safe harbor that consider workforce coverage, representation across pay levels, the plan’s ratio, and business justification. (Note: The IRS uses “business” as a generic legal term for any employer’s operations — nonprofit and other public sector organizations included.)
What’s the Average Benefits Test?
The average benefits test ensures lower earners actually benefit from the program; not only leadership teams. In short, the average benefit provided to non-highly compensated employees must be at least 55% of what highly compensated employees receives.
A few caveats: The proposed calculation generally includes only employees who receive an amount greater than zero during the plan year and is determined as of the last day of that year. Certain employees are excluded, including certain collectively bargained employees and those under age 21 who have not completed one year of service.
Matching the Federal Pilot Contribution: Rules for Employers
To kickstart TACP savings, the federal government provides a federal pilot contribution, a one-time $1,000 seed deposit for eligible children born between 2025 and 2028. If your organization or business chooses to offer a matching contribution for employees whose kids receive the $1,000 seed, the IRS gives you a break on some compliance testing:
- Tax Testing Relief: Qualified employer matches on the federal pilot contribution won’t count against you during standard contributions-and-benefits or average-benefits nondiscrimination tests.
- Fair-Access Rule: To earn this testing pass, the match must be offered on equal terms to every eligible employee in the organization.
- Eligibility Still Applies: You must still pass general eligibility classification tests, and you can use basic safeguards, such as asking for age verification or proof of the federal deposit, to verify eligibility before paying out the match.
(Keep in mind: any employer matches outside of this specific federal pilot program remain subject to standard IRS testing rules.)
Employee Salary Reduction Contributions
A cafeteria plan may allow salary reductions for a dependent’s Trump Account, but not the employee’s own account. Under the proposed regulations, the cafeteria plan must describe the benefit and allow prospective election changes or revocations at least monthly. Coordination with payroll and trustees is essential.
Employee Notices, Trustee Coordination, and Reporting
Eligible employees must receive reasonable notice of the availability and terms of the employer TACP. (The proposed regulations do not prescribe a particular delivery method or notice format.)
Employers must also provide a written statement showing qualifying contributions made for the employee during the prior calendar year. This requirement may be satisfied through Form W-2 reporting. (The 2026 Form W-2 instructions require these contributions to be reported in Box 12 using code “TA.”)
When making a contribution, you must identify it as a qualifying employer contribution to the trustee. You must also notify the trustee if an amount is later determined not to qualify. The proposed regulations provide a 21-day safe harbor for that corrective notice.
Employers may not require employees to use a particular Trump Account trustee. Therefore, you’ll need an administrative process capable of coordinating contributions and account information with the trustee(s) that participating employees select.
What Happens if an Employer Trump Account Program Fails Testing?
The proposed regulations provide limited relief for certain nondiscrimination failures. If your employer TACP plan otherwise qualifies but fails one or more nondiscrimination requirements, the favorable treatment generally remains available for non-highly compensated employees, while the failure affects highly compensated employees.
For an average benefits test failure, the proposed rules allow the test to be treated as satisfied if the employer includes the excess benefits in the income of affected highly compensated employees by the Form W-2 furnishing deadline. However, as the employer, you must also provide the required corrective notice to the Trump Account trustee because the affected amount is no longer treated as a qualifying contribution.
What Employers Should Consider Before Launching a TACP Plan
- Define the objective. Determine whether the program will provide a flat employer contribution, a match, a federal pilot contribution match, salary reduction contributions, or a combination.
- Set eligibility. Identify the eligible employee groups and evaluate the classification under the applicable nondiscrimination rules.
- Prepare the written plan. Document eligibility, contributions, certifications, account verification, notices, reporting, trustee communications, and correction procedures.
- Confirm administration. Determine whether payroll, HR, and service providers can administer the employee-level limit, verify accounts, transmit contributions, and identify qualifying payments.
- Coordinate plan documents. If salary reduction contributions will be permitted, align the program with the employer’s cafeteria plan.
- Communicate with employees. Provide reasonable notice of the program’s availability and terms, including employee responsibilities for account designation and certification.
- Evaluate nondiscrimination. Review the program’s contribution structure, eligibility classification, and average benefits results under the proposed rules.
- Address tax reporting. Coordinate Form W-2 reporting and procedures for amounts later determined not to qualify for the federal income tax exclusion.
- Monitor developments. Track changes as the proposed regulations move through the rulemaking process and update the program when necessary.
Effective Date and Reliance on the Proposed Rules
The employer contribution provisions apply to taxable years beginning after Dec. 31, 2025. The proposed regulations would apply to plan years beginning on or after final regulations are published, but employers may rely on the proposed rules before that date. Employers using that reliance should follow the proposed framework and retain flexibility for changes in the final regulations.
Your Takeaway
Trump Accounts may give your organization a meaningful new way to support its employees and their families. Favorable federal income tax treatment, however, depends on more than making a contribution. Employers need a separate written program, a compliant eligibility and contribution structure, reliable account verification, employee notices, trustee coordination, reporting, and nondiscrimination compliance.
The August 2026 proposed regulations provide employers with a clearer path forward and may be relied upon before final regulations are issued. But, because the rules remain proposed, employers should preserve flexibility in program documents and administrative processes.
Rehmann’s Client Accounting and Advisory Solutions team can help employers evaluate program options associated with a Trump Account contribution program. Contact an advisor to find out if an employer TACP might be a useful tool for your organization.
Frequently Asked Questions
Q. Can an employer contribute separately for each of an employee’s children?
A. An employer may allocate contributions among qualifying Trump Accounts designated under the program, but the federal income tax exclusion is limited to $2,500 per employee each year, or a lower limit stated in the plan. The limit is not multiplied by the number of children.
Q. Does the employer need a written plan?
A. Yes. A qualifying Trump Account contribution program must be maintained under a separate written plan. The proposed regulations specify the principal terms and administrative procedures the plan would need to include
Q. Are contributions reported on Form W-2?
A. Yes. Qualifying employer contributions are reported in Box 12 using code “TA.” Form W-2 reporting may also satisfy the annual written-statement requirement.
Q. Do employer contributions count toward the beneficiary’s annual account limit?
A. Yes. Employer contributions count toward the beneficiary’s $5,000 annual limit for private contributions. Under the proposed regulations, the employer is not responsible for monitoring compliance with that account-level limit.
Q. Are employer contributions subject to payroll taxes?
A. Qualifying contributions are excluded from federal gross income and generally are not subject to federal income tax withholding. They remain subject to applicable FICA, FUTA, and Railroad Retirement taxes unless another exclusion applies. State and local treatment should be evaluated separately.
Q. What if an employee receives contributions from multiple unrelated employers?
A. The $2,500 exclusion applies to the employee’s aggregate contributions from all employers. Each employer must enforce the limit under its own program but generally is not responsible for monitoring contributions made by an unrelated employer. Any aggregate excess is included in the employee’s income.
