The $2,500 Question: What Employers Need to Know About Contributing to Trump Accounts

Key Takeaways

• The One Big Beautiful Bill Act of 2025 (the OBBBA) creates a new tax-advantaged employee benefit by allowing employers to contribute up to $2,500 per employee each year to Trump accounts established for an employee or the employee’s dependents. Programs may be funded with employer contributions, pre-tax employee salary reductions for dependents through a Section 125 cafeteria plan, or a combination of both.
• Employers that offer Trump account contributions must establish a separate written program and satisfy specific nondiscrimination, employee notification, contribution reporting, and trustee notice requirements. Employers permitting salary reductions must also amend their Section 125 cafeteria plans and allow employees to change or revoke their Trump account elections at least monthly.
• Employers should weigh the administrative and employee-relations implications before adopting a program. On the administrative side, employers cannot restrict the trustees to which Trump account contributions are sent, potentially requiring coordination with numerous providers. Service providers are beginning to offer solutions to help employers manage the administrative requirements.  In terms of employee relations, employer-funded contributions are available only to employees with eligible dependents, which some employees without dependents may view as unfair.

Trump accounts are not just a matter for families; they also give employers a new tax-advantaged benefit to offer to employees. The OBBBA created “Trump accounts,” or tax-advantaged savings accounts for children, and a companion tax break that lets employers contribute up to $2,500 per employee each year to the accounts of employees and their dependents.

A Trump account is a type of traditional individual retirement account (IRA) established for the exclusive benefit of a child who is under age 18 and has a Social Security number. From the creation of the account until January 1 of the year the child turns 18 (the growth period), Trump accounts are subject to special rules, such as the account must only be invested in certain eligible investments; distributions generally are prohibited; and contributions are not deductible. After the growth period, the account generally follows the traditional IRA rules.

During the growth period, a Trump account may receive contributions from five different sources:

• Pilot program contributions, meaning a one-time $1,000 deposit from the U.S. Treasury for U.S. citizen children born 2025 through 2028;
• Qualified general contributions, meaning contributions funded by governments or 501(c)(3) organizations for a broad class of children;
• Employer contributions;
• Qualified rollover contributions from another Trump account; and
• Other contributions from parents, relatives, the child, or anyone else.

Employer and “other” contributions share a $5,000 annual limit (indexed after 2027).

The focus of this article is employer contributions. Specifically, this article explains how an employer-sponsored Trump account contribution program is designed and operated, the documentation and notification requirements, and practical considerations for employers. Please note that the regulations on employer contributions to Trump accounts are proposed and not yet final; however, employers may rely on the proposed regulations for plan years beginning before final regulations are published.

Employer Contributions to Trump Accounts: Program Design and Operation

The Basic Rule

The OBBBA added section 128 to the Internal Revenue Code (the Code), which provides for tax-favored employer contributions to Trump accounts. Under Code section 128, an employee may exclude from gross income amounts that his or her employer pays to the Trump account of the employee or the employee’s dependent, if paid under a “Trump account contribution program.” A Trump account contribution program is a separate written plan for the exclusive benefit of employees that meets requirements similar to those for dependent care assistance programs under Code section 129. The exclusion from gross income is capped at $2,500 per employee per year, indexed after 2027. Contributions may be made only to an account whose beneficiary is still in the growth period.

Per Employee, Not Per Child

The $2,500 limit applies per employee rather than per dependent, so an employee with several children still has one aggregate $2,500 exclusion. The employer may permit the employee to choose how to allocate the employer contribution among various Trump accounts. The limit also applies across all employers; excess amounts from multiple employers are taxable to the employee, but they will not disqualify a program from being a Trump account contribution program so long as the program prohibits contributions above the limit. Although employer contributions count toward the $5,000 annual account limit, the employer has no obligation to monitor that limit.

Employer Dollars, Salary Reductions, or Both

Trump account contribution programs may be funded with employer money, with pre-tax employee salary reductions under a Code section 125 cafeteria plan, or with a combination of the two. Employee salary reductions are permitted only for contributions to a dependent’s account, not the employee’s own account.

Limitations

The employer is not permitted to limit the Trump account trustees to which contributions will be made. This is different than how many employers design other account- based programs, like health savings accounts (HSAs), where the employer limits its contributions to a single HSA vendor and then allows employees to move that money into a different HSA of the employee’s choice.

Nondiscrimination

Trump account contribution programs are subject to certain nondiscrimination requirements, which warrant in-depth analysis. Please see our article on these nondiscrimination requirements here.

No ERISA Plan (Generally)

In a Technical Release, the Department of Labor expressed its view that Trump accounts and Trump account contribution programs generally are not ERISA pension plans, provided that participation is voluntary and the employer does not (i) restrict the use of funds beyond the limits imposed by the Code, (ii) make or influence investment decisions, (iii) represent the program as an ERISA plan, or (iv) receive compensation in connection with a Trump account.

Documentation and Notification Requirements

An employer that implements a Trump account contribution program will need to comply with several documentation and notification requirements.

• Written Plan Document: The employer will need to adopt a separate written plan that describes: the classes of eligible employees; the rules governing contributions, including contribution amounts and whether employees may contribute through the employer’s section 125 cafeteria plan; how employees designate the Trump account to receive contributions; the certification, notice, and reporting procedures described in this article; the plan year; and the procedures for correcting administrative failures (such as a failed nondiscrimination test), including the furnishing of notices to employees and trustees when contributions originally treated as nontaxable are determined to be taxable. The employer must also operate the program in accordance with the written plan’s terms.
• Amendments to the Section 125 Cafeteria Plan: If the employer permits employees to make pre-tax contributions to their eligible dependents’ Trump accounts through the employer’s section 125 cafeteria plan, the employer will need to amend the cafeteria plan to describe the Trump account contribution as an additional benefit available under the plan. Instead of the usual “change in status” limits on mid-year election changes, the plan must permit participants to prospectively change or revoke their Trump account elections at least monthly, for any reason.
• Employee Certification: Although not required, an employer may rely on an employee’s written certification (paper or electronic) stating (i) that the account beneficiary is the employee or is anticipated to be the employee’s dependent for the taxable year of the contribution; (ii) the beneficiary’s date of birth, which allows the employer to confirm the beneficiary is within the growth period; and (iii) that no facts known to the employee would make the beneficiary ineligible to receive a contribution for that year. The employer may rely on the certification unless it actually knows the certification is incorrect.
• Employee Notification: An employer must notify eligible employees of the availability and terms of the Trump account contribution program. The proposed regulations require only that the notice be “reasonable,” without specifying its contents. As a starting point, we recommend that the notice include the same type of information required in the plan document and, if applicable, the section 125 cafeteria plan.
• Contribution Statement: The employer must provide each employee with a written statement of the Trump account contributions made for the employee during the prior calendar year. This requirement can be satisfied by properly reporting the amounts on the employee’s Form W-2 for such year.
• Written Notices to Trustee: Each time an employer transmits an amount to a Trump account trustee, the employer must provide the trustee a written statement identifying the amount as a section 128 contribution. If the employer later determines that all or part of the amount was not a section 128 contribution, the employer must provide the trustee a written correction notice identifying the affected account, the calendar year of the contribution, and the amount that does not qualify. This notice generally must be furnished within 21 calendar days after the employer’s determination. The employer must also adopt procedures for providing these trustee notices.

Practical Considerations

• The biggest stumbling block for an employer wishing to adopt a Trump account contribution program is the rule that the employer may not limit the trustee(s) to which contributions are remitted. As a result, an employer would have to track each employee’s Trump account trustee and send contributions to what may eventually be dozens of different providers. Fortunately, service providers to employer plans have started to announce new offerings to assist employers in this regard.
• An employer should also consider employee relations issues if it chooses to contribute employer funds to employees’ Trump accounts, rather than simply allowing employees to make pre-tax contributions. While most employer-provided benefits are available regardless of whether an employee has dependents, this contribution would be available only to employees with dependents, which some employees without dependents may view as unfair.
• Finally, if the employer permits employees to contribute through section 125 cafeteria plan salary reductions, the employer will need to establish a process to capture those elections (and election changes) and properly implement them in its payroll system.