Trump account contribution programs involve more than plan design and contribution limits. Employers also need to navigate proposed nondiscrimination rules that affect how these programs are designed, tested and administered. These rules help preserve the tax-favored status of benefits by preventing programs from disproportionately favoring highly compensated employees.

This blog is the second in a two-part series on Trump account contribution programs. The first installment, “What Employers Need to Know About Proposed Trump Account Contribution Rules,” reviewed the proposed employer contribution rules for Trump accounts, including payroll deductions, written plan requirements, contribution limits and key implementation considerations. This installment focuses on proposed nondiscrimination rules, related dependent care assistance program (DCAP) guidance, testing requirements and correction options.

The proposed rules provide several important clarifications, including a safe harbor for certain employer matches of federal Trump account seed money, guidance on counting only employees who receive benefits in the 55% average benefits test, and correction options for failed tests. For DCAPs, the rules clarify how longstanding nondiscrimination requirements apply, including the owner concentration rule and related wage reporting corrections.

What nondiscrimination tests apply to Trump account contribution programs?

Trump account contribution programs must satisfy three nondiscrimination tests to ensure benefits are not provided disproportionately to highly compensated employees (HCEs) or their dependents, as follows.

1. Contributions and benefits. Contributions and benefits provided under the plan must not discriminate in favor of HCEs or their dependents. A plan generally passes if benefits are offered on the same terms to all eligible employees, even if amounts vary based on employee elections or use.
2. Eligibility. The employer’s eligibility classification must be reasonable and based on objective business criteria (e.g., job category, salaried or hourly compensation, geographic location). The classification must also be based on all facts and circumstances or use a numerical safe harbor test.
   1. Safe harbor test. The safe harbor test compares the share of eligible non-HCEs to the share of eligible HCEs. It is generally satisfied if that ratio is at least 90%, reduced as the workforce becomes more heavily weighted toward non-HCEs.
3. 55% average benefits test. Average benefits provided to non-highly compensated employees must be at least 55% of the average benefits provided to HCEs. RSM US noted that the proposed rules clarify a long-standing point of confusion: “Only employees who actually receive a benefit greater than zero would be counted in this calculation.” Testing should be performed as of the last day of the plan year, and the average benefits test can disregard employees earning less than $25,000.
   1. Corrective action. If a plan fails the average benefits test, the employer may correct the failure by including any excess benefits provided to HCEs in their income by January 31 of the year following the testing year. For example, employers would have until January 31, 2027 to correct testing failures for the 2026 calendar year.

Is there a safe harbor for matching federal seed money?

The proposed rules include a nondiscrimination safe harbor for employers that match the federal government’s $1,000 Trump account seed money contribution for eligible children. These matching contributions may be excluded from certain nondiscrimination tests if the employer offers them on the same terms and conditions to all eligible employees.

How would the proposed rules clarify DCAP testing?

For 45 years, employers have applied DCAP nondiscrimination tests without detailed IRS guidance, leading to inconsistent testing methods and results, according to Verrill. The proposed rules are intended to help address that uncertainty.

DCAPs help employees pay eligible dependent care expenses on a tax-free basis, often through dependent care flexible spending accounts. Eligible expenses may include care for qualifying children under age 13 and for certain spouses or dependents who cannot care for themselves. The annual exclusion from an employee’s gross income is limited to $7,500, or $3,750 for married individuals filing separately. DCAPs must also meet applicable eligibility and nondiscrimination requirements, and the proposed rules explain how those tests apply.

In addition to the three tests described above, DCAPs must satisfy a fourth test specific to dependent care benefits—the owner concentration test—and the new guidance provides a correction option for failed owner concentration tests.

• Owner concentration test. No more than 25% of dependent care benefits paid or incurred by the employer may go to more-than-5% owners and their spouses or dependents.
  • Corrective action. If a DCAP fails the owner concentration test, the employer may correct the failure by treating the excess benefit as taxable wages for the affected owners or principal shareholders, including their spouses and dependents. To determine the taxable amount to be included as wages on Form W-2, the employer subtracts the permitted concentration amount from the benefit provided to those individuals. The permitted concentration amount equals 25% of the total dependent care benefits provided to all participants during the year, divided by the number of participating owners or principal shareholders.

Which employees may be excluded from nondiscrimination testing for both programs?

When applying nondiscrimination rules to Trump account contribution programs and DCAPs, an employer can exclude employees who:

• Are under age 21 and have not completed one year of service
• Are covered by a collective bargaining agreement, if there is evidence that the benefits were part of good faith bargaining between the employer and employee representatives.

How should employers prepare for implementation?

Employers that sponsor Trump account contribution programs or DCAPs should consider taking the following steps now.

• Review current DCAP practices. Check whether plan terms and administration align with updated nondiscrimination rules.
• Confirm which employees are counted in testing. Verify whether the service provider counts only employees who receive benefits in the average benefits test.
• Test contribution formulas before finalizing them. Assess how workforce demographics, participation and proposed contribution formulas may affect the 55% average benefits test.
• Review testing results before Form W-2 deadlines. Work with payroll and third-party administrators to identify testing issues and make any needed HCE adjustments before Form W-2 deadlines.

What comes next?

Employers should watch for changes until the rules are finalized. Comments on the proposed rules are due September 25, 2026. A public hearing is scheduled for October 15, 2026 at 10:00 a.m. ET. Requests to speak, along with topic outlines, must be submitted by 5:00 p.m. ET on October 13, 2026.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.