Treasury Details $2,500 Employer Contributions to Trump Accounts

The Treasury Department and Internal Revenue Service have proposed detailed rules for employers that want to contribute to Trump Accounts, giving companies a clearer framework for adding the new children’s investment accounts to workplace benefit programs. Under the proposal, an employer can make up to $2,500 a year in qualifying contributions for an employee, and those contributions can be directed to the Trump Account of the employee or a dependent.

The $2,500 amount itself is not a new increase. It was established in the 2025 law that created Trump Accounts and described in earlier IRS guidance. What changed on August 11 is the level of detail around how employer programs would operate. The Treasury and IRS proposal spells out written-plan requirements, nondiscrimination rules, reporting procedures and the circumstances in which employees can use salary reduction through a cafeteria plan.

The proposal also puts an important limit on the phrase “tax-free.” A qualifying Section 128 contribution is excluded from the employee’s gross income for federal income-tax purposes, and the IRS says it generally will not be subject to federal income-tax withholding. The proposed regulations state that there is no corresponding exclusion from Social Security and Medicare taxes under FICA or from federal unemployment tax under FUTA, unless another rule provides one. For families comparing the new benefit with other workplace savings options, that distinction matters.

The $2,500 limit is per employee, not per child

The employer contribution limit is $2,500 for 2026 and 2027 and is scheduled to be indexed for inflation after 2027. The proposed rules make clear that the limit applies to each employee in the aggregate, not separately to every child or dependent with a Trump Account.

An employee with two children, for example, could have an employer split a $2,500 contribution between the two children’s accounts, but the employer could not exclude $2,500 for each child under the employee’s Section 128 limit. The proposed regulations published in the Federal Register provide examples showing how the allocation can work.

There is a different result when two spouses are both employees. The proposal gives examples in which each spouse receives a $2,500 Section 128 contribution and both amounts are directed to the same dependent’s Trump Account. Each spouse has a separate employee-level exclusion. The child’s account, however, is still subject to the broader $5,000 annual contribution limit for non-exempt contributions during the account’s growth period.

That $5,000 account limit includes qualifying employer contributions as well as ordinary contributions from parents, relatives and other private sources. It does not count the federal government’s $1,000 pilot contribution, qualified general contributions from eligible governmental or charitable programs, or qualified rollovers. In practical terms, a $2,500 employer contribution can use half of the account’s ordinary annual contribution capacity.

The proposal also addresses workers with more than one employer. If two unrelated employers each contribute $2,500 under qualifying plans for the same employee, the individual employee can exclude only $2,500 in total under Section 128. The excess is included in the employee’s gross income. Each employer does not have to police contributions made by the other employer so long as its own plan prohibits contributions above the applicable limit.

Salary reduction can be used for a dependent’s account

One of the most useful parts of the proposed framework is its treatment of salary reduction. An employer can structure a Trump Account contribution program through a Section 125 cafeteria plan when the employee directs salary to the Trump Account of a dependent. The same salary-reduction treatment is not available for contributions to the employee’s own Trump Account.

This creates two distinct ways an employer program can be funded. A company can provide its own money as a workplace benefit, or a qualifying cafeteria plan can allow an employee to redirect salary to a dependent’s Trump Account within the applicable limits. In either case, the Section 128 contribution can qualify for the federal income-tax exclusion if the program satisfies the rules. The proposal would require cafeteria plans using this feature to let employees prospectively change or revoke their elections at least monthly.

Employers would also have administrative responsibilities. A Trump Account contribution program must be a separate written plan for the exclusive benefit of employees. The plan would need to identify eligible employee classes, specify contribution rules, explain whether salary reduction is permitted, set procedures for designating recipient accounts and establish reporting and correction procedures.

An employer could rely on certain written employee certifications, such as the beneficiary’s status and date of birth, unless the employer knows the certification is wrong. It could not simply accept an employee’s statement that an account is a valid Trump Account. The proposal says the employer must use a method reasonably designed to verify the account through information from the trustee, payroll processor or another service provider.

Contributions would also have to be identified to the account trustee as Section 128 contributions. The amount would be reported to the employee annually, and the 2026 Form W-2 instructions use Box 12 code TA for employer Trump Account contributions. If an employer later determines that a payment was incorrectly treated as a Section 128 contribution, the proposed rules provide a process for notifying the trustee and correcting the classification.

The proposal limits favoritism toward highly paid workers

Treasury and the IRS are also applying nondiscrimination rules to the new benefit. In general, eligibility and contributions under a Trump Account contribution program cannot disproportionately favor highly compensated employees or their dependents. A program that provides benefits on the same terms to all eligible employees satisfies the proposed contributions-and-benefits rule.

The government is trying to accommodate the employer matching programs that have already been announced around the $1,000 federal pilot contribution. The proposal includes a nondiscrimination safe harbor for certain employer contributions tied to that pilot amount when the benefit is offered on the same terms and conditions to all non-excluded employees. The Federal Register notice says a number of major employers have announced plans to match the government’s $1,000 contribution for eligible children born from 2025 through 2028.

Trump Accounts themselves are available for eligible children who have not reached 18 by the end of the year in which the account election is made and who have a valid Social Security number. For children who are U.S. citizens born from 2025 through 2028, the federal government provides a one-time $1,000 pilot contribution when the required election is made. Contributions began after July 4, 2026.

During the growth period, the accounts have tighter rules than ordinary brokerage accounts. Investments are generally limited to qualifying low-cost mutual funds or exchange-traded funds that track an index of primarily U.S. companies. Distributions are generally restricted until January 1 of the year in which the beneficiary turns 18, apart from limited exceptions such as qualified rollovers and distributions of excess contributions. After the growth period, the account generally becomes subject to traditional IRA distribution rules.

The August 11 regulations are still proposed, so Treasury and the IRS can change them before issuing a final rule. Employers do not necessarily have to wait for that final step. The proposal says taxpayers may rely on the proposed regulations for plan years beginning before final regulations are published. Once final regulations are issued, the rules are proposed to apply to plan years beginning on or after the publication date.

Comments are due September 25, and Treasury and the IRS have scheduled a public hearing for October 15. For employers considering the benefit now, the proposal provides a usable blueprint, but it also shows that a Trump Account program is more than simply sending $2,500 to an employee’s child. The income-tax treatment depends on operating a qualifying plan, staying within employee and account-level limits, meeting nondiscrimination rules and handling the required verification and reporting.