Trump account proposal caps contributions and bars trustee steering

The proposed regulations for Trump account contribution programs borrow from a template employers already know. The Treasury Department and IRS released the proposal on August 10. It would let employers put up to $2,500 a year into each worker's Trump account tax-free. The figure would be inflation-adjusted after 2027. Contributions move through a TACP — a separate written plan. Groom Law says the duties are 'similar to' the dependent care assistance program rules: reasonable notice, an annual statement, and nondiscrimination tests.

The eligibility list is short. The regulations define employee as a common law employee. That leaves out partners, sole proprietors, directors whose only role is board service, and 2-percent S corporation shareholders. Dependents come from Code section 152: qualifying children and qualifying relatives.

Workers who want to fund a Trump account from pre-tax wages have one path, and it points at somebody else. Contributions through a Section 125 cafeteria plan must land in a dependent's Trump account, never the employee's own. Employer contributions are the only way to build the employee's own account. The cafeteria plan has to state the benefit in writing, and employees must be able to change their election at least once a month — a requirement that will test payroll systems built for status-change events.

The same provision creates an odd split. Pre-tax employee money can only reach a dependent's account, so a worker wanting to grow their own balance from a paycheck has to rely on the employer's contribution. The proposal treats the TACP as a family savings vehicle first and an employee retirement vehicle second — if the final rule keeps that structure.

The annual limit is the lesser of the amount specified in the plan document and $2,500. That figure adjusts for inflation after 2027. The cap applies per employee, not per dependent. Groom Law's example: the cap does not multiply with children. A worker with three children gets one $2,500 exclusion. The plan may allow that amount to be allocated across the children's accounts. The per-employee structure keeps recordkeeping at the household level.

The regulations prohibit employers from restricting TACP contributions to a Trump account held by a particular trustee. That answers a hanging implementation question: no employer can steer the benefit toward one custodian's product. The likely effect is a wider range of account providers competing for the same contributions, with employees free to choose where the money lands.

None of this is free. The DCAP scaffold comes with obligations: a separate written plan, notification to participants, annual statements, and nondiscrimination tests. Employers that have run a dependent care plan will recognize the machinery; employers that have not will be learning it in a year when contributions are already live. The separate written plan requirement also means a TACP cannot be bolted onto a 401(k) document; it stands on its own.

Because the contribution authority is already live for 2026, employers cannot wait for final regulations if they want to make contributions this year. The proposal lays out the framework, but Groom Law's alert notes that implementation questions remain. The 'similar to' language around the DCAP rules leaves room for interpretation: will the IRS apply dependent care notification and testing rules literally, or adapt them to the Trump account context? The answers will matter for recordkeepers designing the TACP product, and for employers deciding whether to build a plan now and amend after the final rule, or hold off and miss the first year of the tax break.

The design choices set a precedent for a new savings vehicle. The per-employee cap keeps the tax break from multiplying across large families, and it keeps administration straightforward. Borrowing the DCAP framework hands compliance staff a known quantity. The trustee ban keeps the market open, preventing employers from locking employees into one custodian. The cafeteria plan asymmetry — pre-tax money for dependents, employer money for the employee — is the provision most likely to draw comment letters. If the final rule keeps that split, the TACP will be a family vehicle, not an individual retirement-style account, and workers building their own balances will have to rely on the employer's contribution alone.