The DOL has issued a technical release clarifying that Trump Accounts (TAs) and Trump Account Contribution Programs (TACPs) generally will not constitute “employee pension benefit plans” under ERISA § 3(2). TAs are a type of individual retirement account (IRA) that may be established for eligible minors with contributions of up to $5,000 (as adjusted for inflation after 2027) permitted beginning July 4, 2026, including up to $2,500 of employer contributions excludable from an employee’s income under Code § 128. A TACP may also be offered through cafeteria plan salary reductions for contributions made to the TA of an employee’s dependent.
Because ERISA § 3(2) focuses on arrangements that provide retirement income to employees, and TAs generally provide tax-advantaged savings for dependents of employees rather than to employees themselves, the DOL concluded that TAs and TACPs generally would not constitute pension plans—even if fully or partially funded by employer contributions under Code § 128. The guidance also addresses two scenarios in which ERISA coverage could potentially arise:
- Employee as TA beneficiary. A TA may benefit an employee (rather than a dependent), such as in the case of a 16- or 17-year-old employee. The DOL concluded that employer contributions to an employee’s TA during the growth period would not give rise to an ERISA-covered plan, provided that the employer: (1) ensures employee participation is completely voluntary; (2) does not impose conditions on the use of TA funds beyond those permitted under the Code; (3) does not make or influence investment decisions with respect to TA funds; (4) does not represent that the TA or TACP is an employee pension benefit plan or welfare benefit plan; and (5) receives no payment or compensation in connection with a TA.
To dig deeper, visit the original article on the Thomson Reuters blog.