Trump Accounts for Employers: What Section 128 Actually Allows

Beginning July 4, 2026, employers gained a new way to contribute to Trump Accounts for employees or their dependents. For employers thinking about retention, the opportunity is real — but it should be evaluated on the actual tax rules, not on “free money” claims.

WHAT SECTION 128 ALLOWS

Under Internal Revenue Code Section 128, an employer may contribute up to $2,500 per employee per year to a Trump Account of an employee or an employee's dependent through a qualifying Trump Account contribution program. The $2,500 limit is subject to cost-of-living adjustments after 2027. These employer contributions count toward the account's general $5,000 annual contribution limit.

THE CONTRIBUTION CAN BE EXCLUDED FROM FEDERAL GROSS INCOME — IF THE RULES ARE MET

Qualifying Section 128 employer contributions are excluded from the employee's federal gross income. The employer must maintain a separate written Trump Account contribution program and satisfy applicable requirements, including nondiscrimination-related rules.

Important: federal income-tax exclusion does not automatically mean “no payroll tax.” Treasury and IRS proposed regulations issued in August 2026 state that Section 128 does not itself create a corresponding exclusion from FICA or FUTA wages. Employers should model payroll treatment with qualified tax and payroll advisers rather than assume the contribution eliminates employer payroll taxes.

CAN SECTION 125 BE INVOLVED?

The Department of Labor reports that Treasury has advised that Section 128 employer contributions may be offered through salary reduction under a Section 125 cafeteria plan when the contribution goes to a dependent's Trump Account, but not when it goes to the employee's own Trump Account. That is a specialized design question and should be reviewed before implementation.

WHAT ABOUT ERISA?

DOL Technical Release 2026-02 says Trump Accounts and Section 128 contribution programs generally will not constitute ERISA pension plans when structured within the conditions described by the Department. That is more precise than saying ERISA “does not apply.” Structure and employer involvement matter.

WHY EMPLOYERS MAY CARE

A family-oriented long-term savings benefit can add another dimension to an employer's benefits package. Whether it is valuable to your workforce depends on employee demographics, contribution level, communication and the rest of your benefits strategy.

THE ERP APPROACH: VERIFY THE ECONOMICS FIRST

Employee Retention Pros believes benefit funding should begin with verified numbers. Review current health-plan costs, payroll structure, vendor spend and legitimate tax-advantaged opportunities. If recurring savings exist, an employer can then decide whether to use some of those dollars for benefits such as Section 128 contributions.

That is different from promising that Trump Accounts themselves create “zero-cost” payroll savings. They do not automatically do so.

EMPLOYER IMPLEMENTATION CHECKLIST

1. Confirm employee and dependent eligibility.
2. Choose a contribution design and budget.
3. Have qualified tax/benefits advisers review the written program.
4. Confirm payroll and reporting treatment.
5. Review nondiscrimination requirements.
6. Coordinate account setup and employee communication.
7. Measure participation and perceived value.

Important: This article is educational and is not legal, tax, accounting, investment, payroll or ERISA advice. Proposed federal regulations can change before becoming final.