Michael Chittenden’s commentary appeared in Tax Notes in an article about the administrative and legal concerns regarding participation in the Trump administration’s tax-deferred investment program for children, otherwise known as Trump accounts.
The issues affecting nondiscrimination rules and costs may need to be addressed if the Trump administration and other politicians want to push their goal to have employers contribute to the section 530A Trump accounts.
Michael said that while “it’s helpful to have some guidance,” he still hasn’t seen much interest among employers offering the accounts as a benefit.
The statute and Notice 2025-68 both say that the Trump accounts are subject to nondiscrimination rules similar to those under section 129, which is a limiting factor for employer participation, Michael said. “Historically, a lot of companies have trouble with their [section] 129 plans passing nondiscrimination testing not because they’re designed in a way that is discriminatory or offered to a discriminatory group of employees, but simply because of the way in which the benefit is used by different groups of employees,” Michael explained.
That could be a problem for employers as well because only employees with children can benefit from the employer’s Trump account participation, and employees who are highly compensated are more likely to have children, Michael said.
Thus, employers “can end up with a plan that discriminates solely through the effects of demographics and not anything to do with the actual design,” Michael added.
Michael said he sees no way around the administrative costs and overhead for the employer if it offers participation in the Trump accounts as a benefit, but he added that the ability for the $2,500 contribution to be made through salary reduction on the part of the employee reduces the cost to the employer.
The recent guidance states that the $2,500 employer contribution can be made through a salary reduction under a section 125 cafeteria plan, allowing for the employee to contribute their own pretax salary into the account. However, if the contribution is coming from the employer’s own funds, “that would make it a much more expensive benefit to offer,” Michael said.
Michael questioned how the benefit could be structured to avoid ERISA when it involves employer money but said that if that structuring can be done, it could increase participation interest.
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