Since Congress created "Trump Accounts," many employers have been asking the same question: Are we now required to fund these accounts for our employees? The short answer is no. The law creates an optional, tax-favored benefit employers may offer. It does not require employers to contribute. Employers that choose to offer the benefit, however, will take on real compliance obligations.

What Are Trump Accounts?

Trump Accounts were created by the One Big Beautiful Bill Act, signed into law on July 4, 2025. They are a new type of IRA set up for the exclusive benefit of children. The legislation also funds a federal pilot program: the government makes a one-time $1,000 contribution for each eligible U.S. citizen child born from 2025 through 2028.

Parents and other people may contribute up to $5,000 per year in total.

Employer Contributions Are Voluntary

New Internal Revenue Code Section 128 permits employers to contribute to the Trump Account of an employee or an employee's dependent. Up to $2,500 per year can be excluded from the employee's income, and that contribution counts toward the $5,000 annual limit. A few details matter:

• The $2,500 exclusion applies per employee, not per child.

• The limit is indexed for inflation after 2027.

• Contributions must be made under a written Trump Account Contribution Program (TACP).

• Partners, sole proprietors, and 2-percent S corporation shareholders cannot take part in a program for themselves.

Nothing in the statute or in IRS guidance to date requires an employer to set up a program.

Obligations If You Offer a Program

Employers that adopt a TACP will take on obligations, including:

• Administration. A written plan, verification of accounts, coordination with trustees, and reporting.

• Nondiscrimination testing. The program must pass three tests modeled on the dependent care assistance (Section 129) rules. There is a safe harbor for matching the $1,000 federal pilot contribution.

• Trustee notices. When making a contribution, the employer must tell the trustee it is a Section 128 contribution. If the employer later learns a contribution did not qualify, it must notify the trustee.

• Employee statements. Employees must receive an annual statement by Jan. 31. Reporting the amount on Form W-2 can satisfy this requirement.

Open Questions

Several areas are still unsettled:

• Proposed rules only. Treasury and the IRS issued proposed regulations on Aug. 11, 2026. Final rules may be different.

• ERISA status. The Department of Labor and Treasury expect to issue guidance on how to structure a program so it is not covered by ERISA. If ERISA applies, employers would face fiduciary duties, Form 5500 filings, and bonding requirements.

• Cafeteria plans. The proposal would allow employees to make Section 128 contributions through a Section 125 cafeteria plan. Some advisers recommend waiting for final guidance before implementing this feature.

• Limiting trustees and fixing errors. Commenters asked whether employers can limit the number of trustees they send contributions to, and how to self-correct nondiscrimination failures.

Practical Takeaways

• No action is legally required. If you don't want to offer this benefit, you don't need to do anything.

• Decide whether to offer it. A TACP may help attract and keep workers with young families. Weigh that against the administrative cost.

• Check your data before committing. Nondiscrimination testing may limit how much highly compensated employees can receive.

• Talk to your payroll and benefits vendors about W-2 reporting and trustee communications.

• Watch for final regulations and ERISA guidance before launching salary-reduction features.