The IRS recently issued guidance in anticipation of the rollout of Trump Accounts in 2026. Trump Accounts are investment accounts for individuals under the age of 18 that function similarly to Individual Retirement Accounts (IRAs). No contributions can be made to Trump Accounts until July 4, 2026. Employer-based Trump Accounts will need to be established at the specific financial institution or institutions designated by the Treasury Department. The IRS announced that it intends to issue regulations consistent with the guidance. This client alert discusses the portions of the guidance that are relevant to employers.
Overview
Employers may make their employer contributions or may facilitate employee salary reduction contributions. The employer contributions will not be taxable income to the employee. The employee salary reduction contributions will be taken on a pre-tax basis. In order for either type of contribution to occur, the employer must adopt a Trump Account Contribution Program (a "Program").
- The Program must be reflected in a written plan document.
- The Program must not discriminate in favor of highly compensated employees. The IRS has indicated that the nondiscrimination rules for Programs will be similar to those for dependent care assistance programs.
- For 2026 and 2027, Trump Accounts are subject to an aggregate annual contribution limit of $5,000. Certain contributions (such as rollovers) do not count toward this limit. However, the employer and employee contributions discussed in this alert both count toward the limit.
Employer Contributions
Employers may contribute to the Trump Account of an employee or of an employee's dependent. (Because Trump Accounts can be established only for individuals under the age of 18, we anticipate that most employer contributions will be to accounts for employees' dependents.)
- The IRS and the Department of Labor anticipate issuing guidance on how to structure employer contributions so that they do not create an ERISA plan.
- For 2026 and 2027, employer contributions are limited to $2,500 per employee per year. (The limit is subject to cost-of-living adjustments for future years.) The employer contribution limit is an aggregate number for all accounts related to a single employee. For example, if Emily Employee has three children with Trump Accounts, Emily's employer cannot contribute $2,500 to each child's account; the employer may contribute up to $2,500 total.
Employee Contributions
Employees may make pre-tax salary reduction contributions to their dependents' Trump Accounts.
- The Program must be incorporated into the employer's Section 125 cafeteria plan. The IRS has indicated that it will issue rules related to the coordination of Programs and cafeteria plans.
- For 2026 and 2027, employees' pre-tax salary reduction contributions are limited to $2,500 per employee per year, less the amount of any employer contribution. (The limit is subject to cost-of-living adjustments for future years.)
We will provide updates on Trump Accounts when additional guidance is published.
* * *
If you have questions regarding this client alert, please contact the authors, any member of Venable's Employee Benefits and Executive Compensation Group, or your regular Venable lawyer.