Key Takeaways
- Employers may contribute up to $2,500 annually to eligible employees’ or dependents’ 530A accounts.
- Proposed IRS regulations would require employer contribution programs to operate under a written plan and satisfy nondiscrimination requirements.
- Employers may generally rely on employee certifications to verify eligibility but must also take steps to verify that contributions are made to valid 530A accounts.
- Employees may be able to make pretax contributions to a dependent’s 530A account through a Section 125 cafeteria plan.
- New Treasury regulations also establish automatic enrollment procedures for eligible children and clarify rules for government-funded and qualified general contributions.
The One Big Beautiful Bill Act (OBBBA) introduced Section 530A accounts, also known as “Trump Accounts,” as a new tax-advantaged savings vehicle for eligible children. While parents and grandparents may contribute to these accounts, employers may also use them as an employee benefit.
The IRS and U.S. Treasury Department have recently issued guidance that helps clarify how employer contribution programs can operate. Proposed regulations released in August address employer contributions, while temporary regulations issued in September establish automatic enrollment procedures and provide additional rules for account funding.
For employers evaluating whether to offer a 530A account benefit, the guidance provides important details on plan administration, employee eligibility and compliance requirements.
Employer Contributions to 530A Accounts
Under the OBBBA, employers may contribute up to $2,500 annually to the 530A accounts of employees’ dependents, or to employees’ own accounts if they are young enough to remain eligible. The $2,500 limit will be adjusted for inflation after 2027.
Employer contributions generally are excluded from employees’ federal taxable income. However, Social Security, Medicare and federal unemployment taxes generally still apply.
Written Plan Requirements for Employer Programs
Under the August proposed regulations, an employer contribution program must be governed by a separate written plan established exclusively for employees.
The plan must specify:
- Eligible employee classes
- Rules governing employee contributions, including contribution amounts and whether contributions may be made through a Section 125 cafeteria plan
- Procedures for employees to designate receiving accounts
- Certification, notice and reporting procedures
- The plan year
- Procedures for correcting administrative failures and notifying employees and trustees when contributions previously treated as excludable are later determined not to qualify
A program that fails to operate according to its written plan would not qualify as a 530A account contribution program under the proposed regulations. As a result, contributions could become subject to federal income tax.
Which Employers are Eligible?
The proposed regulations define “employee” more narrowly than many practitioners expected.
Self-employed individuals, including sole proprietors, partners and 2% S corporation shareholders, generally would not be eligible to participate in an employer contribution program. However, those businesses could still establish programs that benefit eligible employees.
Eligibility Requirements for Employer Contributions
Employers may contribute only to accounts whose beneficiaries:
- Are in their growth period, and
- Are employees or employees’ dependents
A beneficiary’s growth period begins when the account is established and ends on December 31 of the calendar year in which the beneficiary turns 17.
Employee Certifications and Account Verifications
The proposed regulations would allow employers to rely on written employee certifications confirming:
- The beneficiary is the employee or is expected to be the employee’s dependent during the year the contribution is made
- The beneficiary’s date of birth
- The employee is unaware of any facts that would make the beneficiary ineligible
Employers generally may rely on these certifications unless they have actual knowledge that the information is incorrect.
However, certifications alone are not sufficient. Employers also must use a reasonable method to verify that contributions are being made to a valid 530A account. Verification may be obtained from an account trustee, payroll provider or another service provider.
Nondiscrimination Rules for Employer Contribution Programs
Employer contribution programs may not favor highly compensated employees (HCEs) or their dependents.
The proposed regulations largely mirror the nondiscrimination rules that apply to dependent care assistance programs. Programs generally must satisfy:
- Contributions and benefits tests
- Eligibility tests
- Average benefits tests
If a program fails these requirements, HCEs could lose the federal income tax exclusion for some or all employer contributions.
Relief for Employers Matching Government Contributions
The proposed regulations acknowledge that some employers intend to match the government’s $1,000 pilot program contribution for eligible children.
To encourage these programs, the regulations would allow employers to disregard these matching contributions when applying the contributions and benefits test and the average benefits test, provided the matching benefit is offered on the same terms and conditions to all eligible employees who are not otherwise excluded for nondiscrimination testing purposes.
This special rule does not eliminate the eligibility test requirement.
Additional Rules Employers Should Consider
Payroll Deduction Contributions
The proposed regulations would allow employees to make pretax contributions through a Section 125 cafeteria plan to a dependent’s 530A account.
Employees generally could not make pretax cafeteria plan contributions to their own accounts.
A cafeteria plan offering this benefit would need to:
- Specifically describe the benefit
- Allow employees to prospectively change or revoke salary-reduction elections at least monthly
- Implement changes before the affected compensation becomes currently available
Contribution Limits
Employer-funded contributions and cafeteria plan salary-reductions contributions share the same $2,500 annual limit.
These contributions also count toward the account’s overall annual contribution limit of $5,000.
The following amounts do not count towards the $5,000 limit:
- The $1,000 government-funded pilot contribution
- Qualified general contributions
The proposed regulations also clarify that employees working for multiple employers during the year cannot exclude more than the applicable annual limit across all employers combined.
Employee Notices and Reporting
Employers would be required to notify eligible employees about the availability and terms of the contribution program.
They also would need to provide annual reporting showing the amount of employer contributions made during the prior year, such as through Form W-2 reporting.
Treasury Guidance on Automatic Enrollment
While the August proposed regulations focus primarily on employer contributions, September temporary regulations address account enrollment and funding.
Under the temporary regulations, the Treasury Department automatically established 530A “auto accounts” on October 1, 2026, for eligible children who did not already have an account. Additional auto accounts may be established periodically.
An auto account may receive the $1,000 government-funded contribution available to U.S. citizen children born between January 1, 2025, and December 31, 2028, if a parent, legal guardian or other eligible individual makes the required election.
However, before an account can receive employer contributions or most family contributions, a parent, guardian or other individual must claim the account and complete an electronic verification process.
The temporary regulations also establish rules for qualified general contributions made by governments and tax-exempt organizations and allow certain contributions of publicly traded stock to qualify.
Evaluate Whether a 530A Contribution Program Makes Sense
The September temporary regulations apply to tax years beginning on or after January 1, 2026, and expire September 30, 2029.
The August proposed regulations would apply to plan years beginning on or after the date final regulations are published. A hearing on the proposed regulations is tentatively scheduled for October 15, 2026.
For employers, the recent guidance provides a clearer framework for offering 530A account benefits. However, establishing and administering a compliant program will require careful consideration of eligibility rules, verification procedures, nondiscrimination testing and reporting obligations.
As additional guidance becomes available, employers should continue evaluating whether a 530A account contribution program aligns with their employee benefit strategy and administrative capabilities.
Contact Boulay to discuss how the evolving guidance on 530A accounts may affect your organization and employee benefit programs.