Passing the test: IRS proposed rules address Trump account contribution programs and nondiscrimination testing

The One, Big, Beautiful Bill Act (OBBBA) added section 530A to the Internal Revenue Code of 1986, as amended (Code) to create Trump accounts, which became effective as of July 4, 2026. One form of Trump account contribution under the OBBBA is employer contributions under Code Section 128, which can be either employer-funded contributions or pre-tax salary deferrals through a cafeteria plan. Employer contributions must be made pursuant to a written TACP document that satisfies certain requirements regarding eligibility, notification, reporting, and nondiscrimination testing requirements similar to DCAP nondiscrimination testing requirements. The IRS and Treasury had never previously provided regulations or other guidance regarding DCAP nondiscrimination testing, leaving employers to rely on minimal language in Code Section 129. While some guidance on Trump accounts was provided earlier this year (see our prior legal alert “Recent Trump accounts guidance: Implications for employers and beyond”), employers looking to implement TACPs had many open questions. 

Designing TACPs

The NPRM provides the following notable guidance on TACPs: 

• Written Plan Requirement. The written plan document needs to specify: (i) the classes of eligible employees, (ii) employer contribution rules (including whether pre-tax salary deferrals through a cafeteria plan are permitted), (iii) procedures under which an employee must designate the Trump account of the employee or dependent of the employee to receive contributions, (iv) required certification and notice procedures, (v) the plan year, and (vi) procedures for correcting administrative failures and furnishing corrective notices.
• No Trustee Restrictions. One open question has been whether employers can require that employer contributions be directed towards specific trustees selected by the employer, similar to health savings accounts. The NPRM confirms that an employer may not restrict TACP contributions to Trump accounts held by a specific trustee. 

• Eligible Employees. The NPRM confirms that self-employed individuals such as partners and 2% owners of an S-corporation cannot participate in a TACP. 
• Employee Notification. Employers must provide eligible employees with reasonable notification of the availability and terms of the TACP. The NPRM does not prescribe specific content or delivery requirements for this notice, giving employers flexibility in how they communicate the benefit.
• Employee Certification. Employers may rely on written employee certifications that a contribution recipient is an eligible Trump account beneficiary, but cannot rely solely on an employee’s certification that the destination account is a valid Trump account. A separate verification method using information from the trustee, payroll processor, or other service provider would be required.
• Employees with Multiple Dependents. The NPRM confirms that an employee with multiple dependents may allocate employer contributions between multiple Trump accounts, as long as the total amount contributed on behalf of the employee does not exceed the per-employee annual contribution limit ($2,500 per employee in 2026).
• Contribution Limits. The TACP contribution limit applies per employee, not per dependent, and applies to all employer contributions made on behalf of the employee, even if the employee participates in multiple TACPs with different employers. Similar to monitoring 402(g) contribution limits, the NPRM confirms that although employers must limit employer contributions under the employer’s own TACP to the annual limit, employers do not have responsibility for verifying that an employee’s total contributions, including those from other employers, comply with the Section 128 limit or the Section 530A contribution limit ($5,000 per eligible beneficiary).
• Tax Withholding and W-2 Reporting. The NPRM clarifies that although TACP contributions are exempt from federal income tax, they are not exempt from FICA and FUTA, so employers will need to withhold employment taxes from these contributions. TACP contributions must be reported on the employee’s Form W-2 in the manner specified in the Form W-2 instructions (in Box 12, with code “TA”).
• Salary Reduction Contributions. Employees are permitted to make pre-tax salary deferral contributions through an employer’s cafeteria plan, but only to a dependent's Trump account (and not to the employee’s own Trump account). Unlike most cafeteria plan elections, under the proposed rules, employees must be able to make prospective salary reduction elections throughout the calendar year, at least on a monthly basis.

• Corrections. If any amount previously identified as a TACP contribution is later determined not to qualify, the employer must provide written notice to the trustee identifying the affected account, the calendar year in which the contribution was made, and the disqualified amount determined. The employer must provide this corrective notice within a reasonable period after discovering the error (21 days is deemed reasonable).

Nondiscrimination Testing Guidance

TACPs must meet requirements similar to the DCAP nondiscrimination rules under Code Section 129. The NPRM includes parallel regulations under Code Section 128 and Code Section 129, the first time the IRS has provided guidance on DCAP nondiscrimination testing. TACPs must satisfy the following nondiscrimination tests: 

• Contributions and Benefits. Contributions and benefits cannot discriminate in favor of highly compensated employees (based on the same definition as the qualified plan nondiscrimination testing rules). TACPs that provide the same benefits on the same terms and conditions to all eligible employees will satisfy this requirement.
• Eligibility. The TACP must benefit employees who qualify under an eligibility classification that is nondiscriminatory and based on objective business criteria. These rules are similar to the Code Section 410(b) coverage test that applies to qualified plans.
• Average Benefits Test. The average benefits of non-highly compensated employees must be at least fifty-five percent (55%) of the average benefits provided to highly compensated employees.

Code Section 6434 provides for a one-time government contribution to the Trump accounts of eligible children born after December 31, 2024, and before January 1, 2029. If employers make a one-time matching contribution of these government contributions (Pilot Program Match), the Pilot Program Match will be excluded from the contributions and benefits test and the average benefits percentage test of nondiscrimination testing (but not the eligibility test).

The proposed DCAP regulations under Code Section 129 generally track the TACP nondiscrimination rules, except that they also address the owner concentration test, which is unique to DCAPs. This test requires that no more than 25% of amounts paid or incurred by the employer for dependent care assistance during the year be provided to shareholders/owners who own more than 5% of the employer.

Employers may rely on these proposed regulations before final regulations are issued. The NPRM highlights the complexities of these programs, and employers will need to carefully coordinate program design with payroll, cafeteria plan administration, and trustee processes.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.