Labor & Employment Law Daily Wrap Up, BENEFITS NEWS—IRS proposes rules for employer contributions to ‘Trump accounts,’ updates ‘nondiscrimination’ standards, (Aug 11, 2026)

By WK Editorial Staff

Under the proposed rulemaking, employers could contribute up to $2,500 annually tax-free to a Trump account owned by an employee or the employee’s dependent.

The Internal Revenue Service (IRS) today published proposed regulations implementing new tax rules for employer contributions to “Trump accounts,” savings vehicles created by the One, Big, Beautiful Bill Act of 2025, while also providing guidance on nondiscrimination testing for dependent care assistance programs. A public hearing is scheduled for October 15, 2026.

Annual exclusion. Under the proposed rule, employers could contribute up to $2,500 annually, tax-free to employees, to a Trump account owned by an employee or the employee’s dependent. The exclusion applies per employee, not per child, and contributions above the statutory limit would be treated as taxable compensation. Employers would be required to maintain a separate written plan, provide employee notices, report contributions on Form W-2, and verify that contributions are made to valid Trump accounts.

The regulations also clarify that salary-reduction contributions through a Section 125 cafeteria plan may be used only for contributions to a dependent’s Trump account, not the employee’s own account. Employers would be prohibited from restricting contributions to accounts maintained by particular trustees.

“Nondiscrimination.” In addition, the proposal establishes comprehensive nondiscrimination standards for both Trump account contribution programs and dependent care assistance plans. The rule would require benefits and eligibility terms not to favor highly compensated employees and would create safe harbors for eligibility testing. The IRS also proposes correction mechanisms allowing certain testing failures to be remedied through income inclusion for affected highly compensated employees before Form W-2 reporting deadlines.

The Treasury Department and IRS said the guidance is intended to reduce compliance burdens and encourage employer adoption of Trump account programs, including employer matches tied to the federal government’s $1,000 Trump account pilot contributions for eligible children born from 2025 through 2028. Comments on the proposed regulations are due 45 days after publication.

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