Employers whose employees may have dependent children under the age of 18 may want to amend their cafeteria plans to allow tax-deferred elective deferral contributions by those employees into their own children’s 530A accounts (also known as “Trump Accounts”).

Trump Accounts are individual retirement accounts which can be established no earlier than July 4, 2026 for U.S citizen minors with Social Security numbers. These accounts are permitted to grow on a tax-deferred basis until the funds are tapped by the beneficiaries after attaining the age of 18. Parents or guardians can establish these accounts on behalf of their dependent children by filing a Form 4547 with the Internal Revenue Service.

Who Can Contribute to Trump Accounts?

Trump Accounts are permitted to receive contributions from several sources, including seed funding provided by the federal government for newborns, qualified contributions from certain organizations, and contributions from the account beneficiary, the beneficiary’s parents or guardians, and other private contributors. The cap is $5,000 per annum per dependent for contributions from sources other than the government.

As another source of contributions, employer contributions under newly enacted Internal Revenue Code section 128 can be made for dependents of employees if the employer establishes a Trump Account contribution program, which must be operated under certain rules governing dependent care assistance programs.

Per IRS Notice 2025-68, employer contributions can be made by employers either through employer funds or via employee elective deferral contributions under a Section 125 cafeteria plan, or a combination of the two. Section 125 cafeteria plans allow employees to choose between taxable cash compensation and certain qualified benefits without triggering immediate taxation on the value of those benefits.

Contribution Limits for Employers and Employees

Employers may deposit no more than $2,500 into Trump Accounts for an employee’s dependents on an income tax-free basis. The $2,500 cap encompasses both contributions made by an employee with pre-tax dollars and those that the employer contributes through matching or other contribution arrangement. Importantly, the $2,500 limit applies per employee rather than per dependent. Contributions can be made until the calendar year in which the dependent beneficiary of the account reaches age 18.

Neither employers nor employees via cafeteria plan contributions can contribute pre-tax dollars to a Trump Account for which the employee is the designated beneficiary. That arrangement would constitute a deferred compensation plan, which cannot be part of a cafeteria plan.

Nondiscrimination Considerations

Before adding Trump Account plans to company cafeteria plans, employers will need to analyze the benefit’s impact on nondiscrimination compliance. Section 125 plans are subject to testing designed to ensure that highly compensated employees do not disproportionately benefit from the plan.

Employers will need to analyze how Trump Account contributions interact with those rules. Because a Trump Account benefit is only useful to employees who have dependents under age 18, these employees may skew on the younger and less well-compensated side of many workforces, meaning that the discrimination testing may not pose an issue; however, the testing must be considered.

Talent Attraction and Retention Benefits

Offering a Trump Account through a cafeteria plan offers employees an opportunity to defer income taxation on funds being used to fund an account for their own children. For employers competing for talent, this structure could make Trump Accounts an appealing addition to an overall compensation package and may help to attract and retain talent.

Looking Ahead: Employer Planning Considerations

As additional regulatory guidance emerges, employers should evaluate whether Trump Accounts could become a useful component of their overall employee benefits strategy. Employers considering adoption should also review their cafeteria plan documents and payroll systems to determine what amendments or administrative changes may be required to implement the benefit.

Kathy Conklin and Derek Brondum are members of Kean Miller’s Tax and Employee Benefits groups, where they advise a wide range of clients on ERISA, federal and state and local tax (SALT), estate planning, and succession matters. Working collaboratively across offices, the team develops practical, multidisciplinary strategies to anticipate issues, minimize risk, and efficiently resolve complex tax matters through negotiation or formal litigation when necessary.