The Treasury Department and the IRS have published proposed regulations offering significant new guidance on Trump account contribution programs under Internal Revenue Code Section 128.
The guidance is designed to provide clarity on the rules governing these programs and give employers greater confidence when considering the benefit for their workforce.
A Trump account is a modified traditional IRA established for a minor child, with assets restricted to low-cost, unleveraged mutual funds and ETFs tracking broad US equity indices during a defined growth period.
The growth period generally runs through the calendar year before the account beneficiary turns 18, during which investment options remain deliberately limited to broad-market instruments.
A Trump account contribution program is an employer benefit under Code Section 128 that permits employers to contribute directly, allow employee pre-tax contributions, or offer both simultaneously.
Employers may contribute up to $2,500 annually to the Trump accounts of eligible employees or their dependents, with that limit applying per employee rather than per dependent child.
Employees may also make their own pre-tax contributions of up to $2,500, less any employer contributions, through a Code Section 125 cafeteria plan that specifically describes the benefit and permits prospective monthly election changes.
Any Trump account contribution program must be set out in a separate written plan exclusively for employee benefit, specifying eligible classes, contribution rules, account designation procedures, reporting requirements, the plan year, and correction procedures.
The definition of employee under the program is restricted to common-law employees, meaning partners, sole proprietors, and 2% S corporation shareholders are all excluded from participation.
A self-employed individual may sponsor a Trump account contribution program but is not permitted to participate in it personally, and controlled group members are aggregated for compliance purposes.
Employers may rely on written employee certifications confirming a beneficiary’s identity, date of birth, and eligibility, but verification that the recipient account qualifies as a valid Trump account must come through the trustee or a payroll processor.
Each contribution must be affirmatively identified to the trustee as a Code Section 128 contribution, and a corrective notice must be issued within 21 days if a contribution is later found not to qualify.
Nondiscrimination rules require that the program does not favour highly compensated employees with respect to contributions, eligibility, or average benefits, broadly mirroring the rules that apply to dependent care assistance programs under Code Section 129.
A safe harbour provision exists to accommodate employers that choose to match the federal pilot contribution, providing some flexibility for businesses navigating the nondiscrimination requirements.
Where nondiscrimination conditions are not met, highly compensated employees typically lose the tax benefits associated with the program, making compliance testing a critical step before launch.
Employers considering implementation should begin drafting the required written plan, coordinate with payroll and recordkeeping vendors on trustee verification, and model nondiscrimination tests against their workforce before proceeding.