IRS Issues Proposed Rules for Employer 'Trump Account' Contributions
New IRS proposed regulations detail the requirements for employers to establish tax-advantaged contribution programs for 'Trump Accounts,' including plan documents, contribution limits, and nondiscrimination rules.
The U.S. Treasury and IRS have released proposed regulations clarifying how employers can contribute to new 'Trump Accounts,' a tax-advantaged savings vehicle for employees' dependents under Internal Revenue Code Section 128. The guidance provides the first concrete framework for employers considering offering this new benefit, addressing key operational questions such as the requirement for a formal written plan, a $2,500 annual per-employee contribution limit (indexed for inflation), and specific nondiscrimination tests modeled on those for dependent care flexible spending accounts. Notably, the rules clarify that employers cannot restrict contributions to a particular trustee and explicitly prohibit investing account funds in ESG-themed index funds. While the proposal answers many threshold questions, it leaves several administrative challenges unresolved, including procedures for contribution corrections and satisfying annual reporting obligations. Employers and their benefits counsel can now begin to evaluate the feasibility of such programs but will need to monitor for final regulations before full implementation.