About one month after Trump accounts—investment accounts for U.S. citizens under 18—officially launched, the IRS has released proposed guidance for employer contributions.
The program was created under the One Big Beautiful Bill as a form of individual retirement account for eligible children. In a pilot, the government will provide $1,000 per account in seed funding.
From the start, the administration announced that employers can contribute to the accounts, but hadn’t released details until this week’s IRS proposed rulemaking. According to the agency, employers can contribute up to $2,500 annually, excludable from the employee’s gross income.
The proposal offers clarity on a handful of provisions. For example, the $2,500 contribution limit is applied “per employee rather than per dependent,” according to the IRS, meaning employees with multiple dependents only have one $2,500 contribution excluded from their income.
See also: Trump Accounts move forward as Treasury issues proposed rules
IRS rules around Trump accounts
According to the IRS, employers must have a written plan that stipulates employee eligibility, processes for clerical errors, and details on required employee certifications verifying eligibility, among other provisions. It also emphasizes that employers are responsible for communicating about the program to employees.
The IRS states that “all eligible employees must be given reasonable notification of the availability and terms of the Trump account contribution program. This rule is intended to ensure that employees who are eligible to participate are adequately informed by the employer about the existence of the program and the terms governing participation.”
“Reasonable notification” supports eligibility rules, the proposal states, “because employees cannot have a meaningful opportunity to receive benefits under the program unless they are informed by the employer that the program is available and understand its basic terms.”
According to the rule, employers must notify employees of Trump account contributions, which could occur through the employee’s Form W-2 or other wage and tax statements.
Additionally, the proposal lays out nondiscrimination requirements to ensure higher-paid employees aren’t disproportionately benefitting from the tax advantage. Employers must meet three nondiscrimination tests, similar to IRS requirements for its dependent care assistance programs.
The public comment period is open for 45 days. A hearing on the proposal is set for Oct. 15.
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