Section 530A Accounts: What Employers Should Consider Before Offering Contributions to “Trump” Accounts

Section 530A accounts, commonly referred to as Trump accounts, have attracted attention since the enactment of the One Big Beautiful Bill Act in July 2025. While individuals have been able to set up these accounts for their dependents, employers will not be able to contribute to Section 530A accounts for employees until July 4, 2026.  

As employers cannot yet contribute to these accounts, interest in offering employer contributions as a fringe benefit has been spotty. Employer hesitation is understandable: employers face unresolved questions about administration and cafeteria plan integration, as well as potential ERISA exposure for contributing to these accounts. 

What are Section 530A Accounts? 

Section 530A accounts are a new category of individual retirement accounts (“IRA”) that must be designated as a Section 530A/Trump account and established for the benefit of an eligible individual.  

An eligible individual is someone: 

• For whom a valid election to establish a Section 530A account has been made; 

• Who has not attained age 18 before the close of the calendar year in which the election is made; and 

• Who has been issued a Social Security number before the date of the election. 

While Section 530A accounts borrow heavily from traditional IRA rules, Congress created a special pre‑age‑18 “growth period” that significantly restricts how these accounts operate prior to adulthood. Before the beneficiary reaches age 18, several special rules apply: 

• Investments are limited to statutorily defined eligible investments. 

• Section 530A accounts have a separate contribution limit from other IRAs (as discussed below). 

• Distributions generally are prohibited. 

• No deduction is allowed under Section 219 for individual contributions. 

After the beneficiary turns 18, the account transitions to being treated like a traditional IRA, subject to the usual rules governing distributions, required minimum distributions, rollovers, Roth conversions, taxation, and reporting, except the account cannot be used for a SEP arrangement or a SIMPLE IRA plan and taxes on distribution will apply separately from other IRAs. 

During the growth period, five categories of contributions may be made: 

1. Pilot Program Contributions: For eligible children, the federal government provides a one‑time $1,000 contribution. Eligible children are U.S. citizens born after December 31, 2024, and before January 1, 2029, who are “qualifying children” under Code Section 152(c) for purposes of determining dependent status.  
2. Qualified General Contributions: Contributions funded by states or Section 501(c)(3) organizations for members of a qualified class of beneficiaries. A qualified class of beneficiaries is one of the following classes at the time the contribution is made: all beneficiaries in the growth period; all beneficiaries in the growth period who live in a state or geographic area specified by the funding contribution; or all beneficiaries in the growth period who were born in the calendar year specified by the funding contribution. 
3. Employer Contributions: Contributions made under Section 128 that are excluded from the employee’s gross income. 
4. Qualified Rollover Contributions: Contributions made to a new Section 530A account funded through a trustee-to-trustee transfer of the entire account balance from a prior Section 530A account for the same beneficiary.  
5. Other Contributions: Contributions from parents, family members, the beneficiary, or other third parties. 

Total annual contributions are capped at $5,000 per year (indexed for inflation beginning after 2027).  

Employer Contributions and Tax Considerations  

Beginning July 4, 2026, Employers may voluntarily contribute up to $2,500 per year (as indexed for inflation after 2027) to the Section 530A account of an employee or an employee’s dependent. The annual limit applies to the employee, not for each dependent child of an employee.  

These contributions are subject to Code Section 128, which treats the employer contribution as a tax-free fringe benefit, closely following the rules applicable to dependent care assistance programs. In practice, this means that the employer’s Section 128 qualifying contributions are excluded from the employee’s gross income. 

Section 128 qualifying employer contributions must be made pursuant to a Trump Account Contribution Program, explained below. 

While Section 128 qualifying employer contributions are excluded from the employee’s income, the contributions are fully taxed as ordinary income of the beneficiary upon distribution. 

Establishing a Trump Account Contribution Program (“TACP”) 

To qualify for income exclusion under Section 128, employer contributions must be made pursuant to a TACP, which is a separate written plan established for the exclusive benefit of providing contributions to Section 530A accounts of employees or their dependent children.  

TACPs must satisfy requirements similar to those imposed on dependent care assistance programs under Section 129(d), including: 

• Nondiscrimination: The program may not favor highly compensated employees or their dependents with respect to eligibility to participate or benefits available. An IRS representative has indicated informally that the agency intends to issue rules that address nondiscrimination testing for Section 530A accounts and Section 129 programs, specifically adding the average benefits test (currently used for qualified retirement plan nondiscrimination testing) as a method for compliance.  

• Eligibility: The program must be structured to benefit a class of eligible employees that does not discriminate in favor of highly compensated employees or their dependents. For example, the employer may restrict eligibility to benefits-eligible employees or to employees at one geographic location, so long as those classifications do not discriminate in favor of highly compensated employees. 

• Employee Notification: Employers must provide reasonable notice of the program’s availability and terms to employees. 

• Annual Statements: Employees must receive a written statement showing the amounts paid by the employer for the year to an applicable Section 530A account, by January 31 of the following year. 

• Permissible Contributions Only: The plan may offer only contributions that are Section 128 employer contributions excludible from gross income of the employee.   

Employers must also affirmatively designate contributions as Section 128 employer contributions when remitting funds to the account trustee.  

An IRS representative has indicated that it is also considering issuing guidance on relying on employee attestations regarding dependent status or Section 530A account status and how employers of both parents may contribute to a child’s account. 

Should the TACP Integrate with the Employer’s Cafeteria Plan? 

Employers may also consider whether their TACP should integrate with their cafeteria plan to allow for pre-tax employee contributions to Section 530A accounts. 

IRS Notice 2025‑68 signaled the government’s intent to issue regulations addressing how TACPs may be integrated with an employer’s Section 125 cafeteria plans, though these regulations have not yet been published.  

A TACP may be a “qualified benefit” under a cafeteria plan, with a crucial limitation: employee contributions are only permitted when directed to the Section 530A account of the employee’s dependent child. Employee contributions to fund an employee’s own Section 530A account are not permitted under a cafeteria plan because it would be considered impermissible deferred compensation, as the employee would have a vested right to compensation that may be payable to the employee in a later year.  

Open ERISA Questions  

One of the most significant unresolved compliance issues is whether a TACP constitutes an ERISA‑covered plan. According to IRS Notice 2025-68, the Department of Labor and the Treasury anticipate issuing guidance on how to structure a TACP to ensure the program will not be subject to ERISA. 

Neither agency has issued guidance on this point, so it is still unclear to what extent a TACP will be subject to ERISA requirements. If TACPs were to be treated as ERISA plans, employers could face substantial additional fiduciary, reporting, and disclosure obligations.  

Until this question is resolved, employers should monitor regulatory developments closely and assess their risk tolerance before launching a program. 

Final Thoughts 

Employers interested in offering Section 530A account contributions should work closely with legal counsel stay attuned to regulatory developments and carefully weigh the costs and compliance risks before implementing a TACP. 

If you have questions about establishing a TACP, please contact a member of Verrill’s Employee Benefits & Executive Compensation Group.