Many employers are looking for benefits that are meaningful to employees without simply adding another form of current cash compensation. Trump accounts, a new type of individual retirement account for children, give employers another option to consider.
Here’s what you need to know about Trump account employer contribution:
What are trump accounts?
Created by the One Big Beautiful Bill Act of 2025, Trump accounts are intended to help children begin accumulating long-term savings at an early age.
An account may be established for a child who has a valid Social Security number and has not reached age 18 before the end of the year in which the account election is made. A separate federal pilot program provides a one-time $1,000 government contribution for eligible U.S. citizen children born from January 1, 2025, through December 31, 2028.
However, Trump accounts are not limited to newborns or to children who qualify for that federal contribution.
Trump account employer contributions
Since July 4, 2026, there are two primary ways an employer may contribute to Trump accounts:
- Employers may help fund Trump accounts for employees’ dependent children.
- Employers may also allow employees to direct a portion of their own compensation to a dependent child’s Trump account on a pretax basis.
These two approaches are related, but they are not identical.
Should your business consider contributing to Trump accounts?
For employers considering the benefit, the initial question is not simply whether contributions are permitted. Employers should also consider how the contribution program will be designed, who will qualify, how it will be coordinated with payroll and whether the employer wants to fund the benefit directly or facilitate employee savings.
Here are important considerations for employer-funded contributions and employee pretax salary reductions:
Employer-funded contributions
Under Internal Revenue Code Section 128, an employer may establish a written Trump account contribution program and contribute to the Trump account of an eligible employee or the employee’s dependent.
For 2026, as described in current IRS guidance, up to $2,500 per employee may be excluded from the employee’s federal gross income. The limit applies to the employee, not separately to each child. Therefore, an employee with three dependent children does not receive a separate $2,500 exclusion for each child. Instead, the available amount may be directed among qualifying Trump accounts, subject to the employer’s program and the applicable annual limits. The $2,500 limit is scheduled to be indexed for inflation after 2027.
This approach is an employer-paid benefit. For example, an employer might contribute $500 or $1,000 annually for each eligible employee who has a qualifying Trump account. The employer could also develop a contribution formula based on objective eligibility criteria, provided the program complies with the applicable nondiscrimination requirements.
Employer contributions under a qualifying Trump account contribution program are generally excluded from the employee’s federal taxable income. Under current proposed regulations, however, those contributions remain subject to Social Security, Medicare and federal unemployment taxes.
Employers should confirm the treatment under final regulations and applicable payroll reporting guidance before implementation.
Employee pretax salary reductions
An employer may also permit an employee to elect to reduce current salary and have that amount contributed to a dependent child’s Trump account through a Section 125 cafeteria plan.
Unlike a direct employer-funded benefit, this contribution comes from the employee’s own compensation. The employer facilitates the transaction through payroll, allowing the employee to make the contribution on a pretax basis for federal income tax purposes.
The proposed regulations limit this salary-reduction feature to Trump accounts belonging to an employee’s dependent. An employee may not use a Section 125 salary reduction to contribute to the employee’s own Trump account, even if the employee is under age 18 and otherwise has a qualifying account.
An employer could offer either approach or potentially both. For example, an employer might contribute $500 per eligible employee and allow employees to elect an additional $2,000 salary reduction. However, the employer-funded contribution and the employee’s pretax salary reduction share the same $2,500 annual tax-favored limit for the employee. They do not each qualify for a separate $2,500 limit.
Trump account frequently asked questions for employers
Here are some additional considerations and frequently asked questions for employers looking to leverage Trump accounts as employee benefits:
What is the maximum amount an employer can contribute to Trump accounts?
Employer contributions and pretax salary reductions are subject to a $2,500 per-employee limit. That limit applies across all qualifying Trump accounts and, under the proposed regulations, across all employers of the employee.
For example, assume an employee has two dependent children with Trump accounts. The employer contributes $1,000 to the employee and also allows the employee to direct $1,500 of salary to the children’s accounts through a cafeteria plan.
The combined amount is $2,500, so the employee has used the full tax-favored employer-program limit for the year. Since the benefit is per-employee and the employee has two dependent children, the $2,500 can be allocated across multiple accounts at the employee’s discretion.
If both spouses are employees and each qualifies under an employer’s program, each spouse may potentially have a separate $2,500 limit. Contributions must still be coordinated with the overall $5,000 annual limit applicable to the receiving Trump account.
How can employers make qualifying contributions to Trump accounts?
An employer should not simply issue a payment to a child’s account and assume the contribution qualifies for favorable treatment.
To make qualifying employer contributions, the employer must adopt a separate written Trump account contribution program. The program should:
- Identify eligible employees
- Describe the available contributions or benefits
- Establish administrative procedures
- Address how errors or excess contributions will be corrected
The IRS proposed regulations also require the program to be maintained for the exclusive benefit of employees and to satisfy applicable nondiscrimination requirements.
If employees are permitted to use pretax salary reductions, the employer must also review its Section 125 cafeteria plan. An existing cafeteria plan should not be assumed to permit Trump account elections automatically. The plan document, payroll configuration and employee election procedures should be reviewed and updated as necessary.
Do all owners and workers qualify for the Section 128 tax exclusion?
The Section 128 exclusion is designed for common-law employees. Under the proposed regulations, partners, sole proprietors, self-employed individuals, individuals serving solely as directors and 2% S corporation shareholders may not receive the Section 128 tax exclusion.
Those individuals may still establish a program for eligible employees of the business even though they cannot personally participate in the tax-favored benefit. A shareholder who is also a common-law employee of a C corporation may be eligible if the employer’s program permits participation.
This distinction may be particularly important for closely held businesses. An employer interested primarily in contributing to owners or owner-family members should obtain advice before implementing the program.
What are the Trump account contribution program nondiscrimination requirements?
A Trump account contribution program may define which employees are eligible, but it cannot be designed in a way that favors highly compensated employees or their dependents in violation of the nondiscrimination rules.
The proposed regulations permit classifications based on objective business criteria, such as job category, salaried or hourly status, or geographic location. A program that provides the benefit on the same terms to all eligible employees should typically satisfy the applicable benefits test. By contrast, a program designed around a narrow group of selected individuals may create a compliance problem.
If a program fails the nondiscrimination rules, the exclusion may be lost for highly compensated employees while remaining available for other eligible employees. Therefore, employers should evaluate the proposed eligibility group and contribution formula before adopting the program.
Who is responsible for Trump account setup?
An authorized individual, typically a parent or guardian, is responsible for the Trump account setup, and must first make the election to establish the account. The employer does not establish the child’s Trump account.
What are the guidelines for employer administration of Trump accounts?
Here are some general guidelines for employer administration of Trump accounts:
- Before processing a contribution, the employer will need enough information to confirm that a valid account exists and that the contribution can be transmitted to the appropriate trustee or custodian.
- The employer should develop a process for obtaining employee certifications, monitoring contribution limits and addressing rejected or excess deposits. Because contributions can come from several different sources, the employer may not know everything deposited into a child’s account.
- Employee communications should explain the applicable limits and the employee’s responsibility to disclose information needed to prevent or correct an excess contribution.
How are Trump accounts different from 529 education savings plans?
Here are some key differences between Trump accounts and 529 education savings plans:
|
|
Trump accounts |
529 education savings plans |
|
Purpose |
Long-term savings account for a child that transitions to traditional IRA rules when the child reaches age 18. |
Tax-advantaged investment account that can help families save on education-related expenses. |
|
Tax treatment of earnings |
Earnings grow tax-deferred. |
Earnings grow tax-free. |
|
Access to funds |
Amounts usually cannot be withdrawn before January 1 of the year in which the child turns 18. |
Funds can be withdrawn as needed for qualified education expenses. |
|
Withdrawals |
Once accessible, the account becomes subject to traditional IRA rules. Future distributions may be taxable and, depending on the child’s age and use of the funds, may also be subject to an early distribution penalty.
|
Withdrawals are generally federal tax-free when used for qualified education expenses. |
A Trump account is not simply another version of a 529 education savings plan.
An employer should avoid presenting the account as producing tax-free college savings. Instead, it is better described as a long-term savings and investment vehicle that may help a child begin accumulating assets at an early age.
Is a Trump account contribution right for your organization?
Trump account contributions may be right for your organization if you want to offer a visible, family-focused benefit. An employer contribution could help distinguish your organization’s benefits package, while a payroll salary-reduction option could make it easier for employees to save consistently if the employer does not want to fund the benefit directly.
Before proceeding, employers should consider:
- Whether the employer will make a contribution, offer employee salary reductions or provide both
- Which employees will be eligible
- Whether owners and other intended participants qualify
- How the contribution formula will satisfy nondiscrimination requirements
- Whether the existing Section 125 cafeteria plan must be amended
- Whether the payroll administrator can process and report the contributions correctly
- Who will prepare and maintain the written program
- How account information, employee elections and annual limits will be monitored
- How the benefit will be explained to employees without overstating its tax advantages
Trump accounts give employers another way to support employees and their families, but the benefit requires more than adding a new payroll deduction. Employers should coordinate the program’s tax, payroll and employee-benefit components before offering the benefit or depositing funds.
Because the regulations are not final and administrative guidance may continue to develop, employers should also confirm the current requirements before implementing a Trump account contribution program.
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If you’re considering differentiating your benefits offerings with Trump accounts, thoughtful planning is essential. Wipfli’s tax advisors can help you assess the opportunity, navigate compliance requirements and develop an approach that aligns with your organization’s goals.