On August 10, 2026, the Treasury Department and the IRS (together, the IRS) released proposed regulations addressing employer contributions to Trump accounts, employee pre-tax contributions to Trump accounts, and the nondiscrimination rules that apply to Trump account contribution programs (“TACPs”). These highly anticipated proposed regulations provide welcome guidance to employers and Trump account trustees but still leave unanswered a number of implementation questions. See our prior alerts here.
Starting this year, employers can contribute to an employee or an employee’s dependent’s Trump account on a tax-free basis, up to a combined $2,500 per year (adjusted annually for inflation after 2027) under a TACP. The TACP must be a separate written plan of an employer that satisfies requirements “similar to” the current dependent care assistance program (“DCAP”) rules governing reasonable notification, the annual statement, and the nondiscrimination tests. These proposed regulations provide helpful guidance on what an TACP entails, which we address below.
What are the TACP Operational Requirements?
The proposed regulations require that a TACP meet the following requirements:
- Separate written plan – The TACP must be set forth in a separate written plan that specifies: (1) the classes of employees eligible to participate; (2) the rules governing employer contributions (including whether the plan permits contributions through a cafeteria plan); (3) the procedures for designating the recipient account; (4) the certification, notice, and reporting procedures; (5) the plan year; and (6) the procedures for correcting administrative failures and for notifying employees and trustees when the employer later determines that amounts previously designated as TACP contributions are not excludable from tax.
- Operational compliance – The employer must follow the terms of the TACP’s written plan.
- Permitted contributions – The employer can only make contributions to a Trump account whose account beneficiary is in his or her growth period and is an employee or an employee’s dependent. Employers can rely on an employee certification that the account beneficiary is eligible for a Trump account contribution and meet other requirements.
- Prohibition on limiting contributions to a particular trustee or trustees – Employers cannot limit contributions to a Trump account held by a particular trustee(s).
- No discrimination – A TACP must not discriminate in favor of highly compensated employees (“HCEs”) (a 5-percent owner during the current or preceding plan year; or an employee with compensation in excess of $160,000 (adjusted annually for inflation) in the preceding plan year (unless the employer made the top-paid group election)).
- Reasonable notification – The employer must provide reasonable notification of the TACP’s availability and terms to all eligible employees.
- Statement of contributions – The employer must furnish a written statement of the prior calendar year’s TACP to each employee. The employer can satisfy this requirement by reporting the contribution amount in box 12 of the Form W-2.
- Required trustee communications – An employer must identify in writing any contribution that it transmits to a trustee as a TACP contribution. If the employer subsequently determines that the amount is not a TACP contribution, the employer must provide a written corrective notice to the trustee within a “reasonable period of time” that contains certain information.
Who Is Eligible to Participate in a TACP?
Under the proposed regulations, an employer can only contribute through a TACP to an employee’s or employee’s dependent’s Trump account. For this purpose, employee means a common law employees and not any self-employed individuals (e.g., partners, sole proprietors, directors serving solely by reason of their service as a director, and 2-percent S corporation shareholders). Dependent is defined by reference to Code section 152 (i.e., a qualifying child or qualifying relative).
How Can Employees Contribute to a Trump Account Through a Cafeteria Plan?
The proposed regulations permit an employee to make Trump account contributions under a TACP through a Code section 125 cafeteria plan, but only the Trump account of the employee’s dependent (and not the employee’s own Trump account). The cafeteria plan must specifically describe the TACP benefit, and an employee must be able to change his/her TACP election at least once per month.
Groom Insight: The preamble explains that a TACP contribution to an employee’s own account (as opposed to the employee’s dependent) would be prohibited deferred compensation because the employee would have a vested right to compensation that may be payable to that individual in a later year.
What is the Maximum Annual TACP Contribution?
The maximum annual employer and employee pre-tax contributions through a TACP cannot exceed the lesser of (1) $2,500 (adjusted for inflation), or (2) the amount specified in the plan document. This limit applies per employee, not per dependent. For example, an employee with three children has only one $2,500 exclusion, although the program could permit the employee to allocate that $2,500 among the three children’s Trump accounts.
Groom Insight: The employee’s receipt of TACP contributions through an employer not in the employer’s controlled or affiliated service group does not disqualify the employer’s TACP or require that the employer issue a corrective notice. In that case, employee will need to reconcile the taxable contributions when filing his or her tax return. Also, the employer does not have a duty to monitor the overall Trump account $5,000 annual contribution limit.
Can Employers Limit Contributions to a Particular Trustee?
No, the proposed regulations provide that an employer cannot limit Trump account contributions through a TACP to a Trump account held by a particular trustee or trustees.
Groom Insight: Notice 2025-68 previously requested comments on whether an employer could limit the number of trustees of Trump accounts to whom it made contributions under a TACP, as this approach was viewed as facilitating employer uptake due to the ease of administration. Unfortunately for employers, the IRS determined that such an approach would frustrate the purpose of TACP which only allows a single account for each beneficiary (so it rejected the HSA approach, where multiple accounts can be used). So, we will stay tuned for the IRS solution on how to easily fund these accounts.
What Employment Tax and Withholding Considerations Apply for TACPs?
The preamble clarifies that, while qualifying TACP contributions are excluded from gross income for federal income tax purposes, there is no corresponding exclusion from the definition of wages for purposes of FICA, FUTA, and RRTA. Thus, absent another exclusion, those contributions are wages for FICA, FUTA, and RRTA purposes (as applicable).
What Nondiscrimination Testing Rules Apply for TACPs?
A TACP must satisfy three of the four DCAP nondiscrimination rules: (1) the contributions and benefits test; (2) the eligibility test; and the (3) 55% average benefits test. (The IRS also issued similar DCAP nondiscrimination rules – see our alert here: [insert].)
- Contributions and benefits test – A TACP that provides benefits on the same terms for all eligible employees satisfies this requirement. For example, a TACP that allows all non-HCEs to reduce salary in the same amount as HCEs meets this test, even if eligible employees elect to receive different amounts of contributions. However, a TACP cannot provide more favorable terms for HCEs than for non-HCEs.
- Eligibility test – The TACP must benefit employees who qualify under an eligibility classification that the employer establishes that is reasonably based on objective business criteria. Reasonable classifications include specified job categories, the nature of compensation (salaried or hourly), geographic location, and similar bona fide business criteria. The classification must pass either a facts and circumstances test or a numerical safe harbor test.
- Average benefits test –The average benefits provided to non-HCEs under all TACPs of the employer must equal at least 55% of the average benefits provided to HCEs under all TACPs of the employer. The average benefits provided to HCEs or non-HCEs for a plan year generally equals the total dollar amount of contributions provided under all of the employer’s TACPs to HCEs or non-HCEs, respectively, divided by the number of HCEs or non-HCEs, respectively, to whom the employer provided contributions during the year (including through pre-tax salary reduction). Importantly, the denominator counts only employees who actually receive contributions, meaning that an employer does not need to take into account employees who do not make any election for purposes of this rule. This test must be satisfied as of the last day of the plan year. An employer can exclude employees who receive less than $25,000 in annual compensation from testing.
If a TACP fails the average benefits test on the last day of the plan year, it can still satisfy the average benefits test if the employer takes “remedial measures” by treating an “excess contribution” received by an HCE as wages and reporting those amounts on Form W-2 for the year the contributions were made. The “excess contribution” is measured against a quotient equal to the average non-HCE benefit divided by 0.55. If all HCEs exceed that quotient, each HCE’s income inclusion is the excess of that HCE’s benefit over the quotient. If not all HCEs exceed that quotient, the TACP may allocate the reduction among HCEs in any reasonable manner, including methods similar to those used in Treas. Reg. § 1.401(k)-2(b)(2)(iii). Because the excess is no longer a TACP contribution, the employer must also provide the trustee a corrective notice.
- Pilot program safe harbor – Importantly, for employers that signed on to provide a $1,000 match for babies, there is relief. The proposed regulations disregard employer TACP contributions made under a “pilot matching contribution arrangement” for purposes of the contributions and benefits test and the average benefits test. For this relief, the arrangement must be designed to provide contributions because the account beneficiary is both a dependent of an employee and an eligible child within the meaning of Code section 6434(c), and the arrangement must make contributions available on the same terms and conditions to all employees who are not excluded employees (employees who have not attained age 21 and completed one year of service and employees covered by a collective bargaining agreement where the relevant benefits were subject to good-faith bargaining).
If a TACP would qualify but for a failure to satisfy nondiscrimination testing, the arrangement remains a TACP with respect to non-HCEs but not the HCEs.
Effective Date
The proposed regulations would apply to plan years beginning on or after the date the IRS publishes final regulations. However, taxpayers can rely on the proposed regulations before the final regulations are published.
Next Steps
Although the guidance is welcomed, the proposed regulations are substantial and create a number of action items for employers that wish to implement a TACP. We have a sample plan document and employer checklist that can get interested employers started, but will still need some guidance on how to fund these contributions to go live this year. The IRS requests comments, which are due 45 days after the proposed regulations are published in the Federal Register. There is a public hearing on October 15, 2026 at 10:00 a.m. ET. Please reach out to any of the attorneys listed on this alert if you would like assistance with submitting comments or designing your TACP.
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