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Proposed IRS and Treasury regulations would let an employer use prospective salary reductions through a section 125 cafeteria plan to fund an employee’s dependent’s Trump Account. They would not allow employees to use that payroll route for their own accounts. The proposal remains proposed; it describes the rules’ applicability as beginning with plan years on or after a final rule is published in the Federal Register.
Who could use the cafeteria-plan option
The proposed route is limited to contributions to an employee’s dependent’s Trump Account. An employee could elect to reduce future salary through a section 125 cafeteria plan for that purpose, subject to the proposal’s plan and administrative requirements.
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The proposal bars using cafeteria-plan salary reduction for the employee’s own Trump Account. The proposed preamble explains that distinction in terms of control over the money: an employee gives up dominion and control over an amount directed to a dependent’s account, while retaining a future right to the value in the employee’s own account. The IRS therefore treats an own-account contribution as deferred compensation for this purpose.
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How elections would work
Elections must be prospective. An election, change, or revocation could apply only to salary that is not yet currently available to the employee. A cafeteria plan would have to specifically describe the Trump Account contribution benefit and allow participants to change or revoke elections prospectively at least monthly.
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In practice, employers considering the feature would need payroll and benefits processes capable of applying an election only to eligible future salary and of handling changes on the required schedule. The proposal also includes rules for certifications, notices, contribution reporting, communications between the employer and trustee, and correcting administrative failures.
What employers would need in writing
A qualifying Trump Account contribution program must be maintained under a separate written employer plan for employees’ benefit. Under the proposal, that plan would need to cover:
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- Which classes of employees are eligible.
- How contributions are determined and in what amounts.
- Whether section 125 salary reduction is available.
- How employees designate their own or a dependent’s account.
- Certification, notice, and reporting procedures.
- The plan year.
- Procedures for correcting administrative failures.
The program would also be subject to nondiscrimination requirements. The proposal says it may not restrict contributions to accounts held by a particular trustee or trustees.
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The IRS’s 2026 Form W-2/W-3 instructions identify Code TA for employer contributions under a section 128 Trump Account contribution program and state an annual employer-contribution exclusion limit of $2,500 per employee. That figure is the limit stated in those 2026 instructions; it should not be read as a limit on every possible contribution type or as a guarantee that the proposed cafeteria-plan rules are already in effect.
Status, timing, and what remains unsettled
The regulations are proposed, not final. The proposal says its rules would apply to plan years beginning on or after publication of a final rule in the Federal Register. The cited IRS materials establish that the proposal had not become final as of October 9, 2026. Employers should therefore distinguish the proposed framework from rules that are currently operative and check for later IRS or Treasury action before changing a plan.
The proposed-rule notice scheduled a public hearing for October 15, 2026, and listed September 25, 2026, as the deadline for comments and hearing requests. The IRS announcement described a different date for hearing requests, so those materials do not support stating a single uncontested hearing-request deadline.
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What the proposal means for employees and employers
For an employee, the key distinction is the destination of the contribution: the proposed salary-reduction option is for a dependent’s Trump Account, not the employee’s own account. For an employer, the option would entail more than adding a payroll deduction; it would require a separate written plan, prospective election administration, nondiscrimination controls, and procedures for reporting, trustee communications, and corrections.
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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsThe proposal’s preamble also discusses an illustrative comparison of section 529 savings and Trump Account contributions. Its modeled assumptions include a 10% annual nominal return, a 27% present marginal tax rate, and a 17% future marginal tax rate. These are inputs to an example, not observed returns or a general recommendation, and they do not establish that one account type is preferable for every family.
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