Employers can now put money in a child’s Trump Account, tax-free, if they write the plan first.
Section 128 lets an employer contribute up to $2,500 a year to an employee’s Trump Account or a dependent child’s, without the employee paying income tax on it. The IRS proposed the rules in August 2026, so the details are still settling. What is clear is that it takes a separate written plan and a nondiscrimination test.
What the proposed rules say so far.
These are proposed regulations, not final ones, but employers may rely on them before they are finalized. Treat the details as subject to change.
The $2,500 Limit
The exclusion is capped at $2,500 per employee for 2026 and 2027, indexed for inflation after that. It counts contributions from all of the employee’s employers and applies per employee, not per child. Anything above the cap is wages.
Who Can Receive It
The employer can contribute to the employee’s own account or to the account of an employee’s dependent. The account holder has to be a child under 18. Owners who are not common-law employees, such as partners, sole proprietors and two percent S corporation shareholders, cannot take part themselves.
Payroll Treatment
Under the proposal, excludable contributions are not subject to federal income tax withholding but remain subject to Social Security, Medicare and federal unemployment taxes. Contributions are reported on the W-2 in box 12 with code TA.
A separate written plan, and a test it has to pass.
Employers can’t simply start sending money. The proposal asks for the following.
A Written Program
A separate written plan, for the exclusive benefit of employees, that sets out who is eligible, how much is contributed, how employees designate accounts, the notice and reporting steps, the plan year and how mistakes are corrected.
Nondiscrimination
Contributions can’t favor highly compensated employees. Eligibility has to meet a reasonableness test or a safe harbor, and average benefits to non-highly compensated employees must be at least 55 percent of the average for highly compensated employees. Employees under 21 with less than a year of service can be left out.
Notice and Reporting
Eligible employees must be told about the program. The employer identifies each contribution to the account trustee when it is made and gives employees a written statement of contributions each year, which the W-2 can satisfy.
Where it touches the rest of your benefits.
A new account type means decisions about your plan documents, payroll and communications.
Salary Reduction
A cafeteria plan can allow pre-tax salary reduction for a dependent’s account only, not the employee’s own. The cafeteria plan has to be amended, and employees must be able to change elections monthly.
The Federal Match
The proposal gives special treatment to employer matches of the $1,000 federal pilot contribution for eligible children, which is disregarded in two of the three tests if offered on the same terms to all employees who are not excluded.
Recruiting Value
For employers who compete on benefits for younger families, a contribution is an inexpensive and visible addition. Whether it is worth building depends on who works for you.
Section 125 cafeteria plans → Benefits for early-career hires →
What employers ask about Trump Account contributions.
Is this required?
No. It is a voluntary benefit. An employer that doesn’t offer it does nothing differently.
Are the rules final?
No. The IRS issued proposed regulations in August 2026 and scheduled a public hearing for October 15. Employers may rely on them before they are final, but the final version could change the details.
Do owners get the benefit too?
Not directly if they are partners, sole proprietors or two percent S corporation shareholders. They can offer the program to their common-law employees.
Related guides.
Section 125 Cafeteria Plans
Pre-tax premiums and benefits under a written plan.
Dependent Care FSAs
The related rules for childcare assistance.
Section 127 Educational Assistance
Tuition and student loan help.
Tell us who you are trying to reach.
We’ll tell you whether a Trump Account contribution fits your workforce, what it would cost, and what the written plan and cafeteria plan need to say. No cost, and no obligation.
Your current cafeteria plan
Roughly how many employees have children
A rough annual budget
Whether you already match anything
Rough answers are fine. We build the numbers from there.
Laws and rules referenced
Federal Register: Employer Contributions to Trump Accounts and Nondiscrimination Rules for Dependent Care Assistance Programs (REG-101355-26) — Proposed regulations under Sections 128 and 129, published August 11, 2026.
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