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, 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.