What Are Trump Accounts, and How Can Employers Contribute?

What is a Trump Account?

A Trump Account is an account for a child, set up under Section 530A. Contributions belong in the growth period, before the calendar year the child turns 18. Starting the year the child turns 18, the account generally follows the usual traditional IRA rules. The parent or guardian opens the account, and the employer never holds the money.

This is an employer benefit, not a charitable donation. The dollars land in the child's account. The child needs a Social Security number.

How can employers contribute to an employee's child's Trump Account?

There are two ways in. The company can contribute its own money to an employee's child's account, or the employee can elect pre-tax pay through the Section 125 plan. You can also offer both. Either way, it's an employer benefit written as a separate Section 128 program. If employees contribute pre-tax, the cafeteria plan you already have is amended to add it.

• The company contributes. You fund the child's account from company money. An employee with more than one child can split the dollars.
• The employee contributes pre-tax. Through the Section 125 plan, the employee elects a salary reduction into a dependent's account. The tax code treats that as an employer contribution, so it counts toward the same $2,500.
• One thing people miss. Pre-tax pay can go only to a dependent's account, not to the employee's own account.

How much can an employer contribute to a Trump Account?

Up to $2,500 per employee each year can be excluded from the employee's federal income. That's one cap per employee, not per child, and it covers company money and pre-tax pay combined, across every employer. Separately, each account has a $5,000 annual limit from all sources, and employer dollars count toward it. The $2,500 is indexed after 2027.

If an employee sets up after-tax payroll deductions outside the program, those still count toward the child's $5,000 annual limit.

A $1,000 federal pilot contribution is also available for eligible children born in 2025 through 2028. It doesn't use up the $5,000.

Are employer Trump Account contributions tax-free?

Not fully. Under the proposed rules, a qualifying contribution is excluded from the employee's federal income tax, but payroll taxes still apply: Social Security, Medicare, and federal unemployment tax. Plan for that before the first contribution. For employee salary reductions, confirm with your CPA.

• California: Starting with tax year 2026, SB 180 brings the exclusion into California income tax as well.
• Arizona and Utah: State treatment hasn't been verified yet. If you have employees there, check with your CPA.
• Reporting: Contributions show on the employee's W-2 in Box 12 with code TA.

How does an employer set up a Trump Account contribution program?

You need a written Section 128 program plus an amendment to your Section 125 cafeteria plan. A line saying "Trump Accounts are allowed" isn't enough. If the program isn't written, or you don't follow it, the income exclusion fails. Here's the short list of steps under the proposed rules.

1. Adopt a written Section 128 program and amend your Section 125 plan.
2. Give eligible employees notice of the program.
3. Collect a certification from the employee for each child.
4. Verify each child's account with the account's trustee or another provider. You can't rely on the employee's word alone.
5. Send contributions directly to the trustee, never to the employee or the child, and tell the trustee each payment is a Section 128 contribution. The program can't limit which trustees employees use.
6. Report contributions on the W-2, Box 12, code TA.

The written program should spell out:

• Which employees are eligible
• Whether the money comes from the company, from pre-tax pay, or both
• How an employee designates the child's Trump Account
• Certification, employee notice, and reporting
• The plan year
• How an administrative mistake gets corrected

Employees also have to be able to change their elections at least once a month, before that pay is currently available.

Do Trump Account contributions have nondiscrimination rules?

Yes. Section 128 borrows the tests from the dependent-care rules. Contributions and benefits can't favor highly compensated employees, and eligibility has to be based on a reasonable classification that doesn't favor them. The average contribution non-highly compensated employees actually receive has to be at least 55% of the average for highly compensated employees. Also, no more than 25% of contributions can go to owners of more than 5% of the company and their spouses or dependents.

For salary-reduction contributions, employees earning under $25,000 may be disregarded, and the average-benefits test is run on the last day of the plan year. If the program fails these tests, only the highly compensated employees lose the income exclusion; everyone else keeps it. An employer contribution that matches the $1,000 federal pilot contribution can use a nondiscrimination safe harbor.

Is a Trump Account program an ERISA plan?

Generally not. The Department of Labor's Technical Release 2026-02 says contributions to an employee's dependent's Trump Account generally do not create an ERISA plan, if the conditions in that release are met. That does not replace the written plan, so you still need the written Section 128 program and the Section 125 amendment.

Are the Trump Account employer rules final?

Not yet. These are proposed federal rules, and employers may rely on them now, before final rules are issued. Contributions could start July 4, 2026. A public hearing on the employer rules is scheduled for October 15, 2026. If finalized as proposed, the rules would apply to plan years beginning on or after the final rules are published. Details can still change, so it makes sense to plan now and have your tax advisor review the document before the first contribution.

Who can help a small business set up Trump Account contributions?

We can help. We already place group medical, dental, life, and ancillary coverage for employers. For Trump Accounts, we help with the written program and the Section 125 amendment, and give employees a plain explanation. We never hold the money.

Tell me which version you want: company money, employee pre-tax pay, or both. I'll tell you what the amendment has to contain and what payroll has to be able to do.

See how it works and estimate the dollars, or call me at 888-954-8999.

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This is for informational purposes only and is not legal or tax advice. Please review with your own attorney or CPA before acting on it.

NP Benefit Services, Norco, California | 888-954-8999 | CA License #0C10932 | Licensed in California, Arizona, and Utah