Impact of Proposed Trump Account Regs
To implement the new Trump account program, Congress created a new IRC Section 128 to allow employers to make contributions on a pre-tax basis. When the employer establishes a Section 128 program, the contributions are technically treated as employer contributions so that the amounts aren't currently taxable. In a notice of proposed rulemaking (NPRM), the IRS clarified that Trump accounts as employment benefits must be administered pursuant to a written plan document, titled Trump account contribution program (TACP). Employees must receive notice of the terms (and existence) of the program, as well as contributions made on their behalf. The written document must specify the classes of employees who are eligible to participate, contribution formulas and whether the employee can elect to contribute via salary reduction under a Section 125 cafeteria plan. The NPRM also lays out certain administrative details and non-discrimination rules.
We asked two professors and authors of ALM's Tax Facts with opposing political viewpoints to share their opinions about whether the initial proposed Trump account rules will have a significant impact in motivating employers to offer these benefit programs.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: The proposed regulations provide employers with the roadmap that they need to establish this powerful employment benefit from an administrative standpoint. The fact is that while the regulations may not address every single issue that employers must be concerned with, they do provide the necessary framework. Rolling guidance from the IRS is extremely common—so that the rules can account for industry-specific comments and ensure the final rules reflect best possible practices.
Bloink: The administrative hurdles associated with the new Trump accounts will make it very unlikely that employers will realistically be able to roll Trump accounts out for 2026. A 2026 transition period, allowing 2026 contributions into 2027, should be a key component as we move through the fourth quarter. As it stands, it's just not realistic for employers to establish Trump accounts as employment benefits and fund them for the 2026 tax year.
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Byrnes: The regulations are clear that these Trump programs will be administered in accordance with many of the rules that apply to longstanding employee benefit options (i.e., dependent care assistance programs). All that's required is good faith compliance—as is always the case, the IRS is unlikely to go after employers who learn of changes after the fact.
Bloink: A centralized system is going to be critical to implementing the Trump account program when it comes to the employment benefit angle. Coordination among employers, employees, payroll processors, benefits administrators, etc. will be critical going forward. These are complex administrative issues that will absolutely act as a deterrent to employers who are interested in rolling out Trump account programs in the near future.
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Byrnes: There's no reason why employers can't establish the benefit accounts for the 2026 tax year. The regulations do everything possible to simplify how the programs will operate--because they present very similar issues that apply with respect to existing programs that employers are familiar with already. Employers can use that as a roadmap to implement the Trump account programs until further guidance is possible.
Bloink: Yes, these accounts can be likened to longstanding programs. Still, unique issues have yet to be resolved. For example, many in the industry are advocating for a system that allows employers to limit the number of trustees they'll deal with. Without those limits, employers could be required to deal with dozens of trustees--an administrative burden that could discourage employers from even attempting to roll out programs before full guidance is finalized.