A new type of tax-advantaged savings account for children now has a path for employers to help fund it. The Treasury Department and the Internal Revenue Service released proposed regulations this month spelling out how a company can contribute to a worker’s Trump Account without adding to the worker’s taxable income. The headline figure is a cap of $2,500 a year, though the rules that would govern it are still a proposal rather than settled law.
What the proposed IRS regulations cover
The guidance, issued by Treasury and the IRS on August 11, addresses employers that choose to put money into Trump Accounts for their employees or their employees’ dependents. Trump Accounts were created under the tax law informally known as the Working Families Tax Cuts, and this proposal fills in the mechanics of how a workplace contribution program would operate. Nothing in the release compels an employer to offer one; it sets the terms for those that do.
Because the regulations are proposed rather than final, they carry a formal comment period before they can take effect. Treasury and the IRS asked for public input through late September and scheduled a hearing in mid-October, meaning the details could shift before the rules are locked in.
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How the $2,500 employer contribution would work
Under the proposal, an employer could contribute up to $2,500 a year that is excluded from the employee’s income, so the worker would not owe income tax on the amount going into the account. A detail that matters for larger families is that the limit is applied per employee, not per child. A worker with several children who each have a Trump Account could split employer contributions among those accounts, but the total excluded from income could not exceed $2,500 across all of them in a year.
That per-employee framing has a concrete consequence for planning. A worker cannot multiply the tax break by opening accounts for several children and expecting the full amount into each; the exclusion is a single annual ceiling that the employer’s total contributions must fit under, however many children are involved. Any employer money above that line would lose its tax-favored treatment and be handled like ordinary compensation, which is why the cap functions as a hard planning number rather than a soft target a family can stretch.
Reporting on the release, CNBC noted that the framework also contemplates employees directing part of their own pay into the accounts alongside any employer contribution. For families, the appeal is a tax-favored way to build a balance for a child early, though the practical value depends on how many employers ultimately adopt a program.
The plan and nondiscrimination requirements employers would face
The proposal does not let a company hand the benefit only to its executives. To run a Trump Account contribution program, an employer would need to establish a separate written plan for the exclusive benefit of employees, provide for the contributions to employee or dependent accounts, and satisfy nondiscrimination requirements designed to keep the benefit from tilting toward the highly paid. Those conditions mirror the structure of other workplace benefit plans and are meant to make the tax advantage broadly available rather than a perk for a select few. In practice, that means a business could not quietly fund accounts for its owners and top managers while leaving rank-and-file workers out; the written-plan and nondiscrimination conditions are the mechanism that forces the benefit to reach across the payroll, and failing those tests is what would strip the arrangement of its tax advantage.
Where the employer contribution fits in the bigger picture
The proposed rules address only one piece of a broader savings vehicle. A Trump Account is a tax-advantaged account established for a child, and money can flow into it from more than one source, with parents and family members contributing directly and now, if the framework is finalized, an employer adding funds on top. The employer piece is significant precisely because it is money a worker would not otherwise have; a contribution excluded from income is worth more than the same amount paid as taxable wages and then saved, since none of it is lost to income tax on the way in.
The proposal’s allowance for employees to route part of their own pay into the accounts widens the effect further. A worker could pair a modest employer contribution with payroll deferrals of their own, building a balance for a child steadily rather than in a single lump. For families juggling competing savings goals, the draw is the combination of automatic, paycheck-based funding and a tax advantage that most ordinary savings accounts do not carry, provided an employer actually stands a program up, which the rules leave entirely voluntary.
What is still unsettled before the rules take hold
The most important caveat is timing. Treasury and the IRS set a comment deadline of September 25 and a public hearing for October 15, with requests to speak due shortly before, and the agencies estimate the framework could eventually reach tens of millions of children in millions of families along with roughly three million employers. Until the regulations are finalized, employers weighing a program and families counting on the tax break are working from a proposal, and the fine print on eligibility, plan documents, and the nondiscrimination tests could still change before any of it becomes binding.
This article was researched and drafted with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
