An employer may put $2,500 a year into a child's Trump account tax free, and the proposed rules say it may not choose which firm holds the account
Two thousand five hundred dollars. That is the whole of it, per employee, per year, however many children are involved and however many employers are paying.
Treasury and the Internal Revenue Service filed proposed regulations for public inspection on Monday morning covering employer contributions to Trump accounts, the first rules to put operating detail on the exclusion Congress created in July 2025. Section 70204 of Public Law 119-21 added section 530A, which describes the accounts, and section 128, which lets an employee leave the employer's contribution out of gross income. The provisions apply to taxable years beginning after 31 December 2025.
A Trump account is a traditional individual retirement account with a set of special rules bolted on. Those rules run only through what the statute calls the growth period, which starts the day the beneficiary's first account is opened and ends on 31 December of the year the beneficiary turns 17. After that it behaves like any other traditional IRA.
The limit belongs to the employee
Proposed section 1.128-2(d)(5) settles a question employers asked repeatedly. The $2,500 is tested against the employee, not against each child, and not against each job.
An employee with three children still has one allowance and may split it between their accounts. An employee with two employers, each running a programme, still has one allowance across both, and going over it does not blow up either programme so long as each written plan bars contributions above the annual limit. The figure is $2,500 for 2026 and 2027 and is indexed after that.
Employers have to tell the employee what went in. The document points at box 12 of Form W-2 and code TA.
The answer employers did not want
Some of them had asked whether they could send contributions to a single trustee, or a short list of them, rather than chasing an account at whichever firm each employee happened to use. The answer is no, and it is emphatic.
Proposed section 1.128-2(d)(6) provides that an arrangement is not a Trump account contribution program at all if the employer limits contributions to accounts held by a particular trustee or trustees. Not a programme with a defect. Not a programme, which means the contributions under it are not excludable from anyone's income.
The reason given is structural. Only one Trump account may exist for a given beneficiary, which is where the analogy to health savings accounts breaks: an employee cannot open a second account at the employer's preferred firm, so letting the employer pick the firm would decide where every child's single account has to live.
Salary reduction works for a child and not for yourself
A Trump account contribution program may be offered through a section 125 cafeteria plan, but only for a contribution to a dependent's account.
A contribution to the employee's own account is deferred compensation, which section 125(d)(2)(A) prohibits, because the employee keeps a vested right to money payable in a later year. Put the money in a dependent's account and the employee gives up dominion and control over it, so there is no future right and no deferral. Elections have to be prospective, and the cafeteria plan has to allow an employee to change or revoke them at least monthly before the salary becomes currently available.
What the employer has to certify, verify and correct
An employer may accept a written certification from the employee covering the beneficiary's status, the beneficiary's date of birth and the absence of any known disqualifying fact, and may rely on it unless it actually knows better. It may not rely on that certification to establish that the account is a real Trump account. For that it needs a method reasonably designed to verify through the trustee, the payroll processor or another service provider, and the proposal offers a unique account identifier as an example while noting that Treasury and the IRS are still working out how to validate this securely and electronically.
When money goes to the trustee, the employer has to flag it as a section 128 contribution. When the employer later works out that an amount was not one, it has to tell the trustee, and 21 calendar days is deemed a reasonable period. The document concedes that this may be operationally difficult and asks for comment on which parts are hardest.
The dependent care half, and the pilot match
The same filing proposes nondiscrimination rules for dependent care assistance programmes under section 129, a provision that has been in the Code since 1981. Treasury says the two sets of rules are in general identical, differing only where section 128 needs something else. The section 129 exclusion is capped at $7,500, or $3,750 for a married individual filing separately, and the four tests are the contributions and benefits rule, the eligibility rule, the owner concentration rule for holders of more than 5 percent, and the average benefits rule that commenters told the agencies has confused taxpayers for years.
One safe harbour is aimed squarely at a problem employers created for themselves by being generous. Companies that announced they would match the government's own pilot payments, which reach children born in calendar years 2025 through 2028 under section 6434, were worried the match would tilt their testing. Proposed section 1.128-3(d) disregards those contributions for two of the three requirements, provided the match is available on the same terms to every employee who is not an excluded employee.
Comments are due 45 days after the rules are published, and the publication line on the filing is stamped for 11 August. A public hearing is set for 15 October at 10 a.m. Eastern, and it is cancelled if nobody asks to speak. The regulations would apply to plan years beginning on or after the date the final version lands, and employers may rely on them before that.
