Practical Considerations for Employers Implementing Trump Account Contributions as a Retention and Recruitment Tool

Introduction

When Trump Accounts were introduced in the One Big Beautiful Bill Act (“OBBBA”), employers considering contributing to these tax-advantaged individual retirement accounts for minors faced many legal questions. Do the rules under Internal Revenue Code Sections 128 and 530A apply differently depending on whether the Trump Account belongs to the employee (if, e.g., the employee is 16 or 17 years old) or the employee’s dependent? And, perhaps most pressingly, does an employer contributing to, or allowing employees to contribute to, a Trump Account inadvertently create an “employee pension benefit plan” under the Employee Retirement Income Security Act of 1974 (“ERISA”)?

As we discussed in our Legal Update last month, the Department of Labor’s (“DOL”) Technical Release 2026-02, issued on June 17, 2026, answered many open questions. It confirmed that Trump Account contribution programs (“TACPs”) generally will not constitute employee pension benefit plans under ERISA, whether the Trump Account holder is the employee or the employee’s dependent, provided that the employer meets a number of conditions.

With those questions largely resolved, employers must now determine whether and how to position TACP contributions within their recruitment and retention strategy. On paper, a TACP is an attractive addition to a family-friendly benefits menu: up to $2,500 in annual employer contributions excludable from the employee’s gross income, invested in low-cost index funds, plus the ability to facilitate employee contributions into the Trump Account. But like any new benefit, employers should take a thoughtful approach to maximize TACPs’ strategic value.

Benchmarking TACPs Against the Benefits Menu

To evaluate whether TACPs justify budget allocation (which may come at the expense of a different benefit), employers may wish to compare them against options from the existing menu of related benefits:

Dependent Care FSAs

Under Code Section 129, a dependent care assistance program permits employees to set aside up to $5,000 annually in pre-tax dollars for qualifying childcare expenses. The benefit is immediate and consumable, as it offsets current-year costs for parents with children under age 13. But it generates no long-term investment growth and is subject to “use it or lose it” forfeiture. A TACP contribution, by contrast, is a long-duration savings vehicle that inures to the benefit of the child.

TACPs and dependent care FSAs therefore complement rather than displace each other. Pairing a dependent care FSA funded by an employee with pre-tax contributions with a TACP funded by both employee and employer contributions addresses immediate childcare cost pressure and long-term financial security for an employee’s family. Some employers, however, may find that the cost of administering and contributing to a TACP outweighs the cost of maintaining a dependent care FSA program.

Student Loan Repayment Assistance

Under Section 110 of SECURE Act 2.0 and related guidance, employers may treat qualifying student loan payments as elective deferrals for purposes of matching contributions in certain defined contribution plans, including 401(k) and 403(b) plans. For employees in their twenties and thirties carrying significant student debt, the relief of a retirement-plan match on loan payments may outweigh the abstract, decades-deferred benefit of a contribution to a (potential future) child’s Trump Account. For employers, funding both programs may be cost-prohibitive. To the extent that employers fund the student loan repayment match from funds already earmarked for a traditional retirement plan match, however, the addition of a TACP could present less of a financial burden.

529 College Savings Plan Contributions

Some employers already offer matching or seed contributions to 529 education savings plans as a recruitment tool. Section 529 plans allow a broader investment menu, cover a wider range of qualified education expenses, and are not subject to the growth-period investment restrictions that constrain Trump Accounts. But there is no federal statutory exclusion for employer contributions to a 529 plan; the contributions are generally treated as taxable compensation includable in the employee’s income and subject to income and payroll tax. By contrast, employer contributions to the Trump account of an employee’s dependent are excluded from the employee’s gross income up to $2,500 annually. This is a straightforward advantage for employees, especially those in higher tax brackets.

Health Savings Account Contributions

HSAs and TACPs share a basic structural similarity: both are individually owned, tax-advantaged accounts to which employers may contribute without creating an ERISA-covered plan, a parallel that the DOL itself drew. However, they serve different purposes in a benefits portfolio and may reach different populations. HSA contributions address current and near-term medical expenses (with an investment component for employees who can afford to let balances accumulate), are available only to employees enrolled in a high-deductible health plan, and benefit the employee directly as well as their dependents. TACP contributions build long-term savings for an employee’s child, are available regardless of health plan enrollment, and benefit a dependent. The two benefits may be seen as complementary components of a total rewards package.

The more instructive lesson from the HSA comparison is to consider how employers have utilized HSAs as benefit features over time. Over nearly two decades, employers have evolved HSA contribution designs from flat annual deposits into sophisticated structures: tiered contributions by salary band, wellness incentives, matching arrangements, and enhanced seed contributions for new hires. Employers may consider similar structuring for TACPs (provided that the program satisfies applicable Code Section 128 nondiscrimination requirements, which may constrain an employer’s ability to limit TACPs to the employee subpopulations where the benefit is most valued). Employers that view TACPs not as a static flat contribution but as a designable program with room for creative structuring will extract more recruitment and retention value from the benefit over time.

A Decision Framework for Total Rewards Committees

Rather than adopting a TACP simply because it is newly available, employers will want to consider a variety of factors:

• Demographic fit. What percentage of the workforce has qualifying dependents in the age range where TACP compounding is most valuable, i.e., very young children? If the answer is low, the benefit’s reach may not justify displacing budget from broader-reach alternatives.

• Competitive context. Are industry peers or geographic competitors offering TACPs? If adoption becomes widespread, failing to offer the benefit may create a perceived gap in benefits. If few competitors have adopted TACPs, value depends on whether the specific workforce would value the benefit.

• Budget trade-offs. Does the TACP budget represent new dollars or reallocation from existing benefits? If a TACP displaces budget for 529 matching, student loan assistance, or dependent care FSA employer contributions, the trade-off should be modeled against the employee populations that benefit from each alternative.

• Administrative cost. TACPs require establishing a separate written employer plan, administering Section 128 nondiscrimination testing, payroll system implementation, employee communications, and coordinating the $2,500 annual contribution limit across potential multi-employer scenarios (which guidance has not yet fully resolved). These administrative costs should be weighed against the expected value.

Conclusion

TACPs represent a novel addition to the total rewards toolkit: a federally tax-advantaged employer contribution that builds long-term wealth for employees’ children, at a cost to the employer that is both modest and fully deductible. Depending on an employer’s workforce demographics, Section 128 contributions to dependents’ accounts may be a good complement to other benefits that will help capture recruitment and retention value.