The IRS Has Written the Rules for Employer Contributions to Trump Accounts. Comments Close September 25.

The Treasury Department and the Internal Revenue Service have published proposed regulations explaining how an employer may put money into a Trump account for an employee or an employee's child, and what the arrangement has to look like to keep that money out of the employee's taxable income. The proposal, REG-101355-26, appeared in the Federal Register on August 11, 2026, and is carried in Internal Revenue Bulletin 2026-37, dated September 8. Written comments are due September 25.

What the exclusion is worth

Section 128 allows an employer to contribute up to $2,500 a year without the employee counting it as income. The figure is subject to inflation adjustment after 2027. The proposed regulations make a point that matters for larger households: the limit applies per employee, not per dependent. An employee with three eligible children gets one aggregate $2,500 exclusion, not three.

Contributions may only go to the Trump account of an employee or of an employee's dependent, and only during what the statute calls the growth period, which runs until December 31 of the year the beneficiary turns 17. Dependents are defined by cross-reference to section 152.

Who counts as an employee

The proposal uses the common-law definition of employee. That excludes partners, sole proprietors and certain S corporation shareholders. Self-employed people cannot participate in their own capacity as employees.

The nondiscrimination tests

This is the part that will occupy benefits departments. A section 128 program, like a section 129 dependent care assistance program, has to satisfy several tests aimed at keeping the benefit from tilting toward highly compensated employees.

• Contributions and benefits: the terms of the program must not discriminate in favour of highly compensated employees.
• Eligibility: the classification of who may participate must be reasonable and based on objective business criteria.
• Average benefits: average benefits for non-highly-compensated employees must be at least 55% of the average for highly compensated employees.
• Owner concentration, which applies to section 129 programs only: no more than 25% of benefits may go to people owning more than 5% of the business.

Employees under 21, employees with less than one year of service and certain collectively bargained employees may be excluded from the testing population.

Salary reduction, and where it is not allowed

Contributions made through a cafeteria plan by salary reduction are permitted for a dependent's account but not for the employee's own account. A plan that allows salary reduction must permit prospective election changes at least monthly.

A safe harbour tied to the federal pilot

Section 6434 provides a $1,000 federal contribution under a pilot programme. An employer that matches that $1,000 gets relief from the contributions-and-benefits nondiscrimination testing, provided the match is offered on identical terms to every non-excluded employee.

Fixing a failed test

The proposal offers a remediation route. An employer may correct certain nondiscrimination failures by the deadline for furnishing Forms W-2, by including the excess benefits in the income of the highly compensated employees who received them.

Reporting

Employers must report section 128 contributions in Box 12 of Form W-2 using code TA. That is a new code, and payroll systems will need it before the first reporting cycle in which contributions are made.