---
title: "Employer-Sponsored Trump Account Contribution Programs (TACPs)"
date: 2026-01-20
author: "siteadmn"
featured_image: "https://contempohcm.com/wp-content/uploads/2026/01/2026-0120-Contempo-IRS-lays-out-framework-for-employer-sponsored-TACPs.jpg"
categories:
  - name: "Wage Compliance"
    url: "/category/wage-compliance.md"
tags:
  - name: "OBBBA"
    url: "/tag/obbba.md"
  - name: "TACP"
    url: "/tag/tacp.md"
---

# Employer-Sponsored Trump Account Contribution Programs (TACPs)

## What the IRS Has (So Far) Clarified

A strong benefits package can set your organization apart in recruiting and retention. The recently enacted One Big Beautiful Bill Act (OBBBA) created **Trump Accounts (TAs)** for eligible children and introduced **Trump Account Contribution Programs (TACPs)** that let employers contribute on employees’ behalf. In December 2025, the IRS released initial guidance that sketches the basic framework for offering this benefit.

## Quick Overview

- **Start date:** TAs can be opened and funded beginning **July 4, 2026**; no contributions are allowed before then.
- **Who can contribute:** Parents, guardians, qualifying relatives, and employers (plus other governmental and taxable entities) may contribute during a child’s “growth period.”
- **Annual cap:** Up to **$5,000** in *aggregate* contributions per beneficiary per year may be made during the growth period.
- **Pilot contribution:** U.S. citizens **born 1/1/2025–12/31/2028** may qualify for a one-time $1,000 government-funded contribution that doesn’t count toward the $5,000 limit.
- **Tax treatment:** TA contributions aren’t deductible, but contributions and earnings grow **tax-deferred** while in the account.

## How TAs Work

An eligible TA may be established for any child with a Social Security number who’s **under age 18** at the end of the tax year. During the growth period, distributions are generally prohibited except for limited items such as certain rollovers, returns of excess contributions, or after a beneficiary’s death. After the growth period ends, a TA is treated like a **traditional IRA** and follows the same general rules.

**Investment rules.** TA funds must be invested in **ETFs or mutual funds that track a qualified index of primarily U.S. equities**, and those investments must meet additional IRS criteria (including limits on leverage and fees).

## What Employers Need to Know About TACPs

In **[Notice 2025-68](https://www.irs.gov/pub/irs-drop/n-25-68.pdf)**, the IRS signaled it will propose regulations and provided preliminary clarifications for employer-sponsored TACPs. Key takeaways include:

- **Excludable employer contributions:** Employees may exclude from income **up to $2,500 per year** in employer TACP contributions starting **July 4, 2026** (indexed for inflation **after 2027**). The **$2,500 limit is per employee**, not per dependent.
- **Trustee notification:** When making a TACP contribution, employers must notify the TA **trustee** that the deposit is a **TACP employer contribution** and is **excludable** from the employee’s gross income.
- **Cafeteria plan option:** Employers may allow **pretax salary reductions** under a cafeteria plan **only when** payroll deductions go **directly to a dependent’s TA**. Employees **cannot** use a cafeteria plan to fund their **own** TAs.
- **Plan document & compliance:** A TACP must be maintained under a **separate written plan** and will be subject to **nondiscrimination** and **notice/reporting** requirements similar to **Section 129 dependent care assistance programs**.
- **More guidance coming:** The IRS intends to address how TACPs coordinate with cafeteria plan rules and has requested **public comments** to inform proposed regulations.

## Implementation Checklist

If you’re evaluating TACPs, consider the following steps:

1. **Benefit design:** Decide whether to offer a TACP **standalone** or **under your cafeteria plan**.
2. **Contribution tracking:** Set up systems to monitor the **$2,500 excludable employer limit** per employee and the **$5,000 aggregate per-beneficiary limit**.
3. **Trustee coordination:** Establish a process to **flag contributions** correctly for TA trustees.
4. **Employee communications:** Prepare clear materials explaining **eligibility, timing, limits, and investment constraints**.

©2026

> **Note:** This article summarizes points from preliminary IRS guidance and is for general information only; consult counsel before adopting or modifying your benefit plans.



## Frequently Asked Questions (FAQs)

**1) When can TACPs begin and when can TAs first be funded?**  
TACPs can begin when TAs may be established and funded on **July 4, 2026**; contributions aren’t permitted before that date.

**2) What’s the maximum employer contribution employees can exclude from income?**  
Employees may exclude up to **$2,500 per year** in employer TACP contributions starting July 4, 2026; the amount will be **indexed for inflation after 2027**. The limit is **per employee, not per dependent**.

**3) Who is eligible for the one-time $1,000 pilot contribution?**  
Children who are **U.S. citizens born after December 31, 2024, and before January 1, 2029** may qualify for a **one-time $1,000** government-funded contribution that doesn’t count toward the annual limit.

**4) Can employees use pretax salary reductions to fund TAs?**  
Yes, but only **to a dependent’s TA** under a cafeteria plan; employees can’t use pretax salary reductions to fund **their own** TAs.

**5) How must TA assets be invested?**  
TA assets must be invested in **ETFs or mutual funds tracking a qualified index of primarily U.S. equities**, subject to additional IRS criteria such as limits on leverage and fees.