As described in earlier Thompson Hine blog posts (here, here, here, and here), Trump accounts continue to take shape as a new employer-sponsored benefit. On August 11, 2026, the Treasury Department and IRS published proposed regulations (REG-101355-26) that answer many of the open questions we flagged previously, most significantly, how salary reduction contributions work through Internal Revenue Code (Code) Section 125 cafeteria plans, how nondiscrimination testing applies to Trump Account Contribution Programs (TACPs), and how the rules compare to the familiar framework for dependent care assistance programs (DCAPs). See the Thompson Hine blog post about DCAP nondiscrimination testing here. Employers can rely on the proposed regulations immediately.

Cafeteria Plan Coordination

Our earlier posts identified the coordination between TACPs and Code Section 125 cafeteria plans as one of the most anticipated pieces of outstanding guidance. The proposed regulations recite the general statutory rule that the terms of a TACP must be set forth in separate written plan document and satisfy certain rules. Although not addressed in the proposed regulations, the statutory rules for DCAPs include a similar separate written plan document requirement. Those rules have long been interpreted in Treasury guidance to be satisfied by including the DCAP provisions in a larger cafeteria plan document.  Accordingly, in the absence of guidance to the contrary, employers may satisfy the TACP document requirements by adopting a cafeteria plan amendment that includes required terms of the TACP.

Specifically, the cafeteria plan amendment needs to specify the classes of eligible employees, procedures for designating the recipient Trump Account, certification, notice and reporting procedures, the plan year, and procedures for correcting administrative failures. It also must specify whether contributions are made from employer assets, through salary reduction, or both.

Cafeteria plans offering Trump Account contributions must also permit employees to prospectively change or revoke elections at least monthly, before salary becomes currently available. This is more flexible than typical cafeteria plan mid-year change rules and is analogous to the HSA election model.  Treasury indicated that it intends to amend the existing cafeteria plan election-change regulations (Treas. Reg. § 1.125-4) to formally incorporate these rules. Finally, as specified in prior TACP guidance, the proposed regulations are clear that salary reduction is permitted only for contributions to a dependent’s Trump Account, never to the employee’s own account, which would constitute impermissible deferred compensation.

Employers can now move forward with cafeteria plan amendments to add a Trump Account salary reduction feature. The monthly election change requirement means payroll systems need to support prospective changes at least every pay period, and most systems already do this for HSA contributions.

Nondiscrimination Testing

The proposed regulations provide the first comprehensive nondiscrimination testing guidance for both TACPs and DCAPs. The rules affect not only Trump Accounts, but also all dependent care benefits under a cafeteria plan; Thompson Hine has discussed those impacts here. The framework has three independent tests.

First, contributions and benefits must be offered on the same terms to all eligible employees. This test is not impacted by different utilization. For example, if the program is designed to provide contributions on the same terms to all eligible employees, this test will not fail simply because more HCEs elect TACP contributions.

Second, the eligibility requirements for a TACP must not discriminate in favor of HCEs.  An employee is considered eligible if the employee has a meaningful opportunity to elect salary reduction or receive an employer contribution, even if no contributions are actually received. The group of eligible employees must satisfy either a numerical safe harbor or a facts-and-circumstances test.  Additional detail regarding the mechanics of this test are described in our DCAP testing blog post here. The safe harbor test requires controlled group employee data in order to determine the percentage of eligible NHCEs and HCEs.

Third, the average contribution received by participating NHCEs must be at least 55% of the average contribution received by participating HCEs. Excludable employees, like employees covered by a collective bargaining agreement and employees under age 21 who have not completed one year of service are excluded from this test entirely. A couple of points:

• Only employees who actually receive contributions are counted in the average; eligible non-participants do not dilute the result.
• A program funded through salary reduction may disregard employees earning less than $25,000.
• Testing is performed as of the last day of the plan year.
• If the test fails, employers can make a relatively straightforward correction by including the excess amount in affected HCE’s W-2 income before the W-2 filing deadline.
• Importantly, although the nondiscrimination rules for TACPs and DCAPs are very similar, the benefits are tested separately. A generous DCAP result cannot offset a failing TACP test.

Pilot Match Safe Harbor

Many major employers have announced plans to match the government’s $1,000 pilot contribution. The proposed regulations provide welcome certainty: pilot match contributions are automatically excluded from the nondiscrimination requirements described above as long as the matching contribution is offered on the same terms to all employees who are not excludable and the employer uses reasonable measures to establish eligibility, such as verifying a dependent’s age or confirming receipt of the pilot contribution. Any level matching amount qualifies for this safe harbor, it does not need to be dollar-for-dollar or equal to $1,000. Excludable employees, such as employees covered by a collective bargaining agreement and employees under age 21 who have not completed one year of service, are not required to receive the match to qualify for the safe harbor.

The safe harbor applies to the pilot match contribution arrangement (PMCA) portion of the plan even if the employer’s TACP provides other Trump Account contributions (e.g., salary reduction). Those other contributions remain subject to the standard nondiscrimination testing rules.

Trustee Selection

One of the most operationally significant rules: an employer may not limit contributions to Trump Accounts held by a particular trustee or trustees. Unlike HSAs where employers commonly designate a preferred custodian, the proposed regulations prohibit any trustee restriction. Because only one Trump Account can exist per child, Treasury is concerned that allowing employers to restrict trustees would lock out employees whose children have accounts at different institutions.

This means employers must be prepared to route contributions to multiple destinations, as is the case with ordinary payroll and even payroll-deduction IRA programs. This creates payroll integration challenges that employers have not confronted on a wide scale with respect to similar employee benefit salary reduction arrangements.

Account Verification

The proposed regulations require employers to verify that contributions are going to valid Trump Accounts. An employee certification alone is not sufficient. The employer must use a method “reasonably designed to verify, through information provided by the trustee, payroll processor, or other service provider” that the account is valid.

Treasury offered one example: the employee provides a unique account identifier that the employer or its vendor can use to confirm validity. But Treasury also acknowledged it is “exploring ways in which this information can be validated in a secure, electronic way.” This acknowledgement signals that the infrastructure for systematic verification does not yet exist, but Treasury has made clear that it is working to ensure that such a structure will exist in the future.

Other Rules

• FICA/FUTA: TACP contributions are excluded from federal income tax but remain subject to FICA and FUTA. They are not subject to income tax withholding.
• Self-employed individuals: Partners, sole proprietors, and 2% S-Corp shareholders cannot participate in a TACP (though they may sponsor one for their common-law employees). This is a narrower definition of “employee” than for DCAPs, which include self-employed individuals based on different statutory language.
• Corrective notices: If an employer later determines a contribution does not qualify as a TACP contribution, it must notify the trustee within 21 calendar days.
• W-2 reporting: TACP contributions are reported in Box 12 with code “TA.”

Thompson Hine Takeaways

The proposed regulations represent the most significant piece of Trump Account implementation guidance to date and resolve the key open items identified in our earlier posts.  With this guidance, employers can take the following steps:

• Draft the plan. With this guidance now in hand, employers can begin shaping plan design including drafting TACP written plan documents and, as applicable, cafeteria plan amendments to include TACP contributions on behalf of their employees.
• Coordinate with vendors. Employers can also begin coordinating with vendors on the monthly election-change requirement and the ability to route contributions to multiple trustees. Employers should expect that payroll administrators, benefits platforms, and trustees will need time to build or adapt systems, particularly for multi-trustee routing and account verification. Early conversations with vendors about implementation timelines and capabilities may be helpful.
• Model testing. Employers may wish to model the eligibility safe harbor and 55% average benefits test using current workforce data and anticipated participation rates, and structure pilot matches on the same terms for all eligible employees to take advantage of the safe harbor.

Employers and service providers who plan on administering TACPs may also consider submitting comments on operationally challenging provisions before the comment period closes in approximately late September 2026, with the October 15, 2026 public hearing providing another opportunity to address account verification protocols, corrective notice mechanics, and the burden of routing contributions to multiple trustees.

Employers should continue monitoring state tax conformity guidance and final regulations.