Employers may be able to contribute to these accounts for employees’ eligible dependents through a Section 128 plan. IRS and Treasury guidance is still developing, so employers should be cautious about finalizing a plan until additional rules are released.
Employers may contribute up to $2,500 per employee, not per dependent child.
Contributions made through a qualifying Section 128 plan would be excluded from the employee’s taxable income.
If the plan permits, employees can make pre-tax contributions through the employer’s Section 125 cafeteria plan for eligible dependent(s). These contributions are part of the $2,500 limit.
Employers must maintain a nondiscrimination written plan, provide employee notices, and issue annual contribution statements.
Contributions are allowed to eligible dependents of business owners.
The child is the beneficiary of the account. The employer does not own or control the Trump Account and generally serves only as a contributor.
Only one funded Trump Account may exist for a child at a time. Another parent, relative, or other authorized person generally cannot establish a second account for the same child. An existing account may be transferred to the employer plan trustee through a trustee-to-trustee transfer.
During the child’s growth period, funds generally cannot be withdrawn and must be invested in qualifying low-cost, broad-market funds.
Other individuals, such as parents, grandparents, or relatives, may contribute to the child’s existing account, subject to the overall annual contribution limits, currently $5,000 per year, per beneficiary.
If your business is considering offering Trump Account contributions, our team can help you understand the tax implications, establish a compliant section 128 plan, and determine if this benefit is right for your business.
