You want to offer a generous new benefit: up to $2,500 per employee toward their kids' Trump Accounts, tax-free. Then someone mentions ERISA — fiduciary duties, annual filings, disclosure documents — and the perk suddenly sounds like a compliance project. The good news is that the Department of Labor has now explained exactly how to stay outside ERISA, and the path is straightforward if you set the program up correctly from day one.
Trump Accounts in 60 Seconds
A Trump Account is a new type of individual retirement account under Internal Revenue Code Section 530A for an eligible child — generally a kid under 18 with a valid Social Security number. Each child can have only one funded account.
The headline features small employers should know:
- $1,000 federal seed deposit for children born between January 1, 2025 and December 31, 2028, when an election is made on their behalf. Kids outside that birth window can still have an account; they just do not get the seed money.
- $5,000 annual aggregate contribution limit per child from all non-government sources combined.
- Growth period rules: from account opening through December 31 of the year the child turns 17, contributions face special limits and the money is meant to stay invested.
- Live since July 4, 2026: contributions could first be made starting that date, and families enroll through the federal portal and app.
Think of it as an IRA for kids with training wheels on — restricted access early, normal retirement-account behavior later.
What Section 128 Lets You Contribute as an Employer
New Code Section 128 allows employers to contribute to the Trump Accounts of employees or their dependents through a qualifying contribution program:
- Up to $2,500 per employee per year for 2026 and 2027, indexed in small increments after 2027. Proposed regulations (REG-101355-26) confirm the mechanics of this cap.
- Per employee, not per child. An employee with three eligible kids still caps your tax-free contribution at $2,500 total across all of their accounts. You can split it among the children's accounts, but the aggregate exclusion cannot exceed the limit.
- Excluded from the employee's gross income up to the limit, and it counts toward the child's overall $5,000 annual cap.
- Multiple employers do not multiply the exclusion. If your employee also works a second job and both employers contribute, the employee can still exclude only $2,500 total. Anything above that is taxable to them — a detail worth stating plainly in your plan communications.
- Written program required. Contributions must be paid under a written Section 128(c) program, and the program must satisfy nondiscrimination testing expected to resemble the rules for Dependent Care assistance programs. Treasury and IRS guidance is still filling in details here.
You can also let employees fund their dependents' accounts with pre-tax salary reductions through a cafeteria plan. Those employee salary-reduction dollars technically ride through your Section 128 program, so they count against the same $2,500 limit.
Why the ERISA Question Matters So Much
If your contribution arrangement were an ERISA-covered pension plan, you would inherit the full apparatus: fiduciary standards for anyone exercising discretion, a written plan with claims procedures, summary plan descriptions, annual Form 5500 reporting, and potential liability for missteps. For a $2,500 family benefit, that overhead would kill adoption.
That is exactly the question employers asked after the accounts were created: does writing a $2,500 check into a worker's kid's account create a pension plan? The DOL's Technical Release 2026-02, issued June 17, 2026, answers it.
What DOL Technical Release 2026-02 Actually Says
The short version: Trump Accounts and employer contribution programs generally will not constitute employee pension benefit plans under ERISA Section 3(2), and therefore are not subject to Title I of ERISA — provided you meet the conditions.
Accounts for employees' dependent children
Contributions to a Trump Account established for an employee's dependent child through an employer contribution program do not create an ERISA plan, as long as participation is completely voluntary and the employer does not:
- Impose extra conditions on the use of the funds beyond what the statute itself requires.
- Make or influence investment decisions for the account.
- Claim the program is an ERISA-covered plan or promise ERISA protections.
- Receive consideration beyond reasonable compensation for the administrative cost of running payroll and remittance.
In other words: offer it, remit the money, and get out of the way.
Accounts for the employee's own benefit
The trickier case is a Trump Account established for the employee personally — relevant mainly for teenage employees who are themselves eligible children. The DOL confirmed these, too, fall outside ERISA if the arrangement satisfies the longstanding IRA payroll-deduction safe harbor (29 CFR 2510.3-2(d)): voluntary participation, no employer endorsement beyond facilitation, no employer contributions beyond the permitted program structure, and no consideration to the employer.
The conditions that actually trip people up
Read the release closely and three risk points stand out:
- Voluntary must mean voluntary. No automatic enrollment with an opt-out, no pressure tied to performance reviews, no "everyone is expected to participate" messaging.
- No strings attached. Vesting schedules, continued-employment requirements for the contribution to "stick," or approval gates on withdrawals beyond statutory rules all point toward an ERISA plan.
- No investment hand on the scale. Recommending a specific fund lineup, defaulting contributions into a particular investment, or negotiating with the account provider over investment options looks like employer discretion — the hallmark of a plan.
A Safe-Harbor Checklist for Your Contribution Program
Use this as your setup checklist before the first dollar moves:
1. Put it in writing
Draft a short Section 128(c) program document: who is eligible, the annual employer amount or formula, how salary-reduction elections work, how contributions are allocated among multiple children, and a statement that participation is voluntary. Keep it with your other benefit plan documents even though it is not an ERISA plan — auditors will ask for it.
2. Keep eligibility broad and neutral
Nondiscrimination rules are still being finalized, but the direction is clear: design the program the way you would a Dependent Care program. Avoid formulas that favor highly compensated employees or owners, and document the business rationale for any eligibility waiting period.
3. Code payroll separately from day one
Create distinct payroll and ledger codes for:
- Direct employer contributions per employee
- Employee pre-tax salary reductions for dependent accounts
- Any after-tax amounts the employee sends independently
You need per-employee annual totals at a glance, because the $2,500 cap is per employee and the $5,000 cap is per child across all sources. If you track contributions in plain-text ledgers, the Beancount documentation covers how to structure separate accounts so each cap reconciles independently. If your payroll system cannot report both dimensions, add a simple reconciliation spreadsheet now rather than reconstructing it at year-end.
4. Track the two caps independently
The most common bookkeeping error is conflating the caps. Maintain:
- Employee-level ledger: total Section 128 contributions (employer money plus salary-reduction dollars) against the $2,500 limit.
- Child-level ledger: all contributions to each child's account against the $5,000 aggregate limit, so you can warn a family before an excess contribution creates a correction headache.
Confirm with the family's account provider what has already been contributed from other sources before you remit late-year amounts.
5. Script what managers may and may not say
Give managers one paragraph: the program is voluntary, the company does not provide investment advice, and questions about investments go to the account provider. Prohibit personalized recommendations, "everyone should max it" messaging, and any suggestion that the benefit is protected by ERISA.
Common Mistakes That Create the ERISA Problem You Were Trying to Avoid
- Treating $2,500 as per-child. An employee with two kids does not unlock $5,000 of tax-free employer money. The excess is taxable wages and a W-2 correction waiting to happen.
- Forgetting the $5,000 child-level cap. Your $2,500 plus the family's own $3,000 already breaches the aggregate limit. Build a pre-remittance check into your process.
- Adding a vesting or tenure hook. "You keep our contribution after one year of service" converts a simple remittance program into something that looks like a pension promise.
- Curating investments. Even well-intentioned fund comparisons in a company all-hands can read as influence. Leave fund selection entirely to the account holder and provider.
- Skipping the written document. Verbal "we'll match up to $2,500" policies fail the Section 128(c) requirement and make nondiscrimination testing indefensible.
- Burying contributions in regular wages. If the amounts are not separately coded, your year-end W-2 exclusion work becomes guesswork, and excess amounts spill silently into taxable income.
What to Watch Next
Three guidance threads are still moving: final IRS and Treasury rules on nondiscrimination testing and program mechanics, the post-2027 indexing of the $2,500 limit, and account-provider reporting that will make the $5,000 aggregate cap easier to monitor. Several large employers have already announced matching programs, which should accelerate standardized payroll integrations — but do not wait for perfect guidance to get the structural pieces right. The DOL's ERISA position is clear enough to build on today.
If you are deciding whether to launch for 2026, a reasonable sequence is: adopt the written program this quarter, configure the two-level tracking, run a small pilot with clear employee communications, and expand once your payroll reports prove the caps are holding.
Simplify Your Financial Management
Adding a family-focused benefit like Trump Account contributions is easier when your underlying payroll and contribution records are clean. Beancount.io offers plain-text accounting that keeps every contribution, cap calculation, and reconciliation transparent, version-controlled, and AI-ready. Get started for free and keep new benefits from turning into year-end surprises.