An employer that wants to help a worker save for a child’s future could soon have a straightforward, tax-free way to do it — at least on paper. The Treasury Department and the Internal Revenue Service floated proposed regulations on Aug. 11, 2026, spelling out how a company could contribute up to $2,500 a year into a Trump Account belonging to an employee or that employee’s dependent, with the money excluded from the worker’s taxable income. Nothing in the proposal forces an employer to offer this, and nothing in it has taken effect: the rule is open for public comment, and any company that wants to run the program still has to wait for it to become final before building one.
How the tax-free contribution would actually work
The mechanism comes from Section 128 of the tax code, a provision added last year in the law widely known as the One, Big Beautiful Bill Act, alongside the Section 530A rules that created Trump Accounts in the first place. An employer can put money into the Trump Account of an employee or of any dependent of that employee, and the amount is excluded from the employee’s gross income up to $2,500 per year, a figure that starts adjusting for inflation after 2027.
Treasury and the IRS spelled out in the proposal that a company has to set up what the rule calls a “Trump account contribution program” to do this: a separate written plan, for the exclusive benefit of employees, that follows nondiscrimination rules similar to the ones that already govern employer-sponsored dependent-care assistance plans — meaning the contributions and who gets to participate cannot be skewed toward the highest-paid employees on the payroll. The proposed rule also lets a company leave out certain employees when testing for that fairness requirement — workers who have not yet turned 21 and completed a year of service, for instance, or employees in a union whose dependent-care benefits were already bargained separately — using exclusion categories borrowed directly from the existing dependent-care assistance rules.
Free retirement updates: Social Security and Medicare change every year, and nobody sends you a memo. Our free Retirement Shield newsletter breaks down what changed and what to do. Get it free in your inbox.
The $2,500 counts against a $5,000 yearly ceiling
Trump Accounts are not a bottomless bucket. The proposed rule lays out that total contributions to any one Trump Account are generally capped at $5,000 a year, adjusted for inflation, no matter how many different people or sources are putting money in — a parent, a grandparent, a friend, and now potentially an employer. A federal $1,000 pilot deposit made through the IRS for eligible children born between 2025 and 2028, and certain lump-sum “qualified general contributions” that governments or nonprofits route through the Treasury Department to an entire eligible group, are carved out and do not count toward that $5,000 limit. An employer’s contribution under Section 128 does count toward it, though, so a family that already puts money into the account on its own has less room left for an employer to fill before the account bumps against the yearly cap.
Why the account itself still has a fairly locked door
Whoever ends up funding it, a Trump Account behaves less like a checking account and more like a locked-in retirement plan built for a child. It is a type of traditional individual retirement account, and per the IRS’s own election form, a parent or other authorized adult opens one for an “eligible child” any time before the calendar year in which that child turns 18 — the $1,000 pilot bonus is the part limited to children born in 2025 through 2028, not the account itself. Once opened, the account sits in what the rule calls a “growth period” that runs until Dec. 31 of the year the child turns 17, and during that stretch no money can be pulled out at all; the balance can only move by a direct transfer into a new Trump Account or, in the year the beneficiary turns 17, into an ABLE account. The dollars inside also have to stay invested the same way for everyone: tracking a broad index of mostly U.S. company stocks, without borrowed money, and with fees capped at one-tenth of one percent a year.
How Trump Account savings measure up against a 529 plan
The same regulatory package that spells out the employer contribution rules also weighs Trump Accounts against the college-savings plan most families already know. Treasury’s own analysis in the proposal notes that pre-tax contributions to a Trump Account will not be universally better for a family than a Section 529 plan, but calls the two “competitive” with each other — a comparison that, by the agency’s own admission, does not account for the “kiddie tax” on a child’s unearned income or for how withdrawals might affect a college student’s financial aid eligibility. For a worker whose employer is weighing whether to build a program under Section 128, that means the Trump Account contribution is one more tool sitting alongside, not automatically replacing, whatever college or retirement savings a family already has in place.
What happens between now and a final rule
None of this is settled law yet. Treasury and the IRS are taking public comments on the proposal through Sept. 25, 2026, and have scheduled a public hearing for Oct. 15, with requests to speak due two days before that. Only after reviewing that input can the agencies issue a final rule, and until they do, no employer has a legal framework in place to actually start a Trump Account contribution program — meaning the $2,500 tax-free benefit described in the proposal is, for now, a benefit that exists on paper for a company to build toward, not a check that any worker can expect their employer to write.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
More Financial Reading
