Bulletin No. 2026–38
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HIGHLIGHTS
OF THIS ISSUE
Bulletin No. 2026–38
September 14, 2026
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
EMPLOYEE PLANS
Notice 2026-51, page 314.
This notice sets forth updates on the corporate bond
monthly yield curve, the corresponding spot segment rates
for July 2026 used under § 417(e)(3)(D), the 24-month average segment rates applicable for August 2026, and the
30-year Treasury rates, as reflected by the application of §
430(h)(2)(C)(iv).
REG-107855-25, page 333.
These proposed regulations would revise procedures under
§ 1.430(d)-1 for determining the target normal cost and funding target as part of calculating the minimum required contributions for most single-employer defined benefit pension
plans. These proposed regulations address which plan terms
are taken into account in the actuarial valuation of a plan for a
plan year, and what “plan-related expenses” must be included
in determining the minimum required contribution for the plan
year. The proposed regulations would also make other minor
amendments to conform this regulation to changes in other
regulations.
INCOME TAX
CC-00349938-26, page 317.
The proposed regulations would provide guidance regarding
eligible investments, which are the only assets in which Trump
Finding Lists begin on page ii.
account funds may be invested before the first day of the calendar year in which the account beneficiary attains age 18. The
proposed regulations would affect account beneficiaries and
trustees of Trump accounts.
REG-117130-25, page 343.
These proposed regulations provide for the exclusion of
certain income from the calculation of deduction eligible
income for the deduction of foreign-derived deduction eligible income.
REG-119882-25, page 355.
These proposed regulations would provide that the refunded
portion of certain refundable Federal income tax credits
available to individuals is a “Federal public benefit” under
Title IV of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) that cannot be paid
to aliens who are not qualified aliens under PRWORA. These
regulations would affect taxpayers claiming the adoption
tax credit, the American opportunity tax credit, the child
tax credit, and the earned income credit. This document
also provides public notice of changes regarding eligibility
for the refunded portion of such Federal income tax credits
under PRWORA.
The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
September 14, 2026
Bulletin No. 2026–38
Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2026-51
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest rate on 30-year Treasury securities
under § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008 and the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to single-employer plans (except for CSEC plans
Applicable Month
August 2026
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan’s target
normal cost and funding target. Under
this provision, present value is generally
determined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during specified periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.1 However, an election may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.
Section 1.430(h)(2)-1(d) provides
rules for determining the monthly corporate bond yield curve, and § 1.430(h)
(2)-1(c) provides rules for determining
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Consistent with the methodology specified in
§ 1.430(h)(2)-1(d), the monthly corporate
bond yield curve derived from July 2026
data is in Table 2026-7 at the end of this
notice. The spot first, second, and third
segment rates for the month of July 2026
are, respectively, 4.62, 5.62, and 6.51.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. Those percentages are
95% and 105% for plan years beginning
in 2025 and 2026. For this purpose, any
25-year average segment rate that is less
than 5% is deemed to be 5%. The 25-year
average segment rates for plan years
beginning in 2025 and 2026 were published in Notice 2024-67, 2024-41 I.R.B.
726 and Notice 2025-47, 2025-40 I.R.B.
441, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for August
2026 without adjustment for the 25-year
average segment rate limits are as follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
First Segment
Second Segment
Third Segment
4.35
5.28
5.96
The adjusted 24-month average segment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code. The
24-month averages applicable for August
2026, adjusted to be within the applicable
minimum and maximum percentages of
the corresponding 25-year average segment rates in accordance with § 430(h)(2)
(C)(iv), are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning In
Applicable Month
First Segment
Second Segment
Third Segment
2025
August 2026
4.75
5.28
5.96
2026
August 2026
4.75
5.25
5.96
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multi-
employer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) pro-
vides that the interest rate used to calculate
current liability for this purpose must be
no more than 5 percent above and no more
than 10 percent below the weighted average of the rates of interest on 30-year Trea-
Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
1
September 14, 2026
314
Bulletin No. 2026–38
sury securities during the four-year period
ending on the last day before the beginning
of the plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The rate
of interest on 30-year Treasury securities
for July 2026 is 5.10 percent. The Service
determined this rate as the average of the
daily determinations of yield on the 30-year
Treasury bond maturing in May 2056. For
plan years beginning in August 2026, the
weighted average of the rates of interest on
30-year Treasury securities and the permissible range of rates used to calculate current
liability are as follows:
For Plan Years Beginning In
Treasury Weighted Average Rates
30-Year Treasury Weighted Average
Permissible Range 90% to 105%
August 2026
4.59
4.13 to 4.82
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Section 1.417(e)-1(d)(3) provides guidelines for determining the min-
imum present value segment rates. Pursuant to that section, the minimum present
value segment rates determined for July
2026 are as follows:
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
Month
July 2026
Minimum Present Value Segment Rates
First Segment
Second Segment
4.62
5.62
DRAFTING INFORMATION
The principal author of this notice
is Tom Morgan of the Office of Associ-
Bulletin No. 2026–38
ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
315
Third Segment
6.51
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Tony Montanaro at
626-927-1475 (not toll-free calls).
September 14, 2026
Table 2026-7
Monthly Yield Curve for July 2026
Derived from July 2026 Data
Maturity
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
20.0
Yield
4.16
4.33
4.47
4.58
4.66
4.72
4.76
4.79
4.83
4.88
4.93
4.98
5.04
5.10
5.16
5.22
5.28
5.34
5.40
5.45
5.51
5.55
5.60
5.64
5.68
5.72
5.76
5.79
5.82
5.85
5.87
5.90
5.92
5.95
5.97
5.99
6.01
6.03
6.05
6.07
Maturity
20.5
21.0
21.5
22.0
22.5
23.0
23.5
24.0
24.5
25.0
25.5
26.0
26.5
27.0
27.5
28.0
28.5
29.0
29.5
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5
34.0
34.5
35.0
35.5
36.0
36.5
37.0
37.5
38.0
38.5
39.0
39.5
40.0
September 14, 2026
Yield
6.09
6.11
6.13
6.16
6.18
6.20
6.22
6.24
6.26
6.28
6.30
6.32
6.34
6.35
6.37
6.39
6.40
6.41
6.42
6.43
6.44
6.45
6.46
6.46
6.47
6.48
6.48
6.49
6.50
6.50
6.51
6.51
6.52
6.52
6.53
6.53
6.54
6.54
6.55
6.55
Maturity
40.5
41.0
41.5
42.0
42.5
43.0
43.5
44.0
44.5
45.0
45.5
46.0
46.5
47.0
47.5
48.0
48.5
49.0
49.5
50.0
50.5
51.0
51.5
52.0
52.5
53.0
53.5
54.0
54.5
55.0
55.5
56.0
56.5
57.0
57.5
58.0
58.5
59.0
59.5
60.0
Yield
6.56
6.56
6.57
6.57
6.58
6.58
6.58
6.59
6.59
6.59
6.60
6.60
6.60
6.61
6.61
6.61
6.62
6.62
6.62
6.63
6.63
6.63
6.64
6.64
6.64
6.64
6.65
6.65
6.65
6.65
6.66
6.66
6.66
6.66
6.66
6.67
6.67
6.67
6.67
6.68
316
Maturity
60.5
61.0
61.5
62.0
62.5
63.0
63.5
64.0
64.5
65.0
65.5
66.0
66.5
67.0
67.5
68.0
68.5
69.0
69.5
70.0
70.5
71.0
71.5
72.0
72.5
73.0
73.5
74.0
74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
78.5
79.0
79.5
80.0
Yield
6.68
6.68
6.68
6.68
6.69
6.69
6.69
6.69
6.69
6.69
6.70
6.70
6.70
6.70
6.70
6.70
6.71
6.71
6.71
6.71
6.71
6.71
6.71
6.72
6.72
6.72
6.72
6.72
6.72
6.72
6.73
6.73
6.73
6.73
6.73
6.73
6.73
6.73
6.74
6.74
Maturity
80.5
81.0
81.5
82.0
82.5
83.0
83.5
84.0
84.5
85.0
85.5
86.0
86.5
87.0
87.5
88.0
88.5
89.0
89.5
90.0
90.5
91.0
91.5
92.0
92.5
93.0
93.5
94.0
94.5
95.0
95.5
96.0
96.5
97.0
97.5
98.0
98.5
99.0
99.5
100.0
Yield
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.75
6.75
6.75
6.75
6.75
6.75
6.75
6.75
6.75
6.75
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.76
6.77
6.77
6.77
6.77
6.77
6.77
6.77
6.77
6.77
6.77
6.77
Bulletin No. 2026–38
Part IV
Notice of Proposed
Rulemaking
Guidance on Eligible
Investments for Trump
Accounts
CC-00349938-26
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations relating to Trump
accounts. The proposed regulations
would provide guidance regarding eligible investments, which are the only assets
in which Trump account funds may be
invested before the first day of the calendar year in which the account beneficiary
attains age 18. The proposed regulations
would affect account beneficiaries and
trustees of Trump accounts.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 20, 2026.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemaking Portal at https://www.regulations.gov
(indicate IRS and CC-00349938-26) by
following the online instructions for submitting comments. In accordance with 5
U.S.C. 553(b)(4), a summary of this proposed rule is also available on the Federal
eRulemaking Portal. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submitted to the IRS’s public docket. Send
paper submissions to: CC:PA:01:PR (CC00349938-26), room 5503, Internal Reve-
Bulletin No. 2026–38
nue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Justin R. Karlin at (202) 3176842; concerning submissions of comments or a public hearing, the Publications
and Regulations Section at (202) 3176091 (not toll-free numbers) or by email
at publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed regulations under section 530A of the Internal Revenue Code (Code) that would
amend the Income Tax Regulations (26
CFR part 1). The proposed regulations
are issued under the express delegation
of authority provided in section 530A(b)
(3)(A)(iv), which authorizes the Secretary
of the Treasury or the Secretary’s delegate
(Secretary) to specify criteria (in addition
to those listed in section 530A(b)(3)(A))
that a mutual fund or exchange traded
fund must meet to be an eligible investment. The proposed regulations are also
issued under the express delegation of
authority under section 530A(g)(3), which
provides that in selecting the trustee of a
Trump account created or organized by
the Secretary, the Secretary shall take
into account the costs imposed by the
trustee on the account or the account beneficiary. Finally, the proposed regulations
are issued under the express delegation
of authority under section 7805(a) of the
Code, which authorizes the Secretary to
“prescribe all needful rules and regulations for the enforcement of [the Code],
including all rules and regulations as may
be necessary by reason of any alteration of
law in relation to internal revenue.”
Background
I. Statutory provisions
Section 70204 of Public Law 119‑21,
139 Stat. 72 (July 4, 2025), commonly
referred to as the One, Big, Beautiful Bill
317
Act, added new sections 530A, 128, and
6434 to the Code. Section 530A provides
for the establishment of a Trump account
for an eligible individual. Section 128 provides rules for employer contributions to
a Trump account. Section 6434 provides
rules for a one-time $1,000 pilot program
contribution by the Secretary to the Trump
account of an eligible child with respect to
whom an election is made under section
6434.
A Trump account is an individual retirement account (as defined in section 408(a))
(IRA) not designated as a Roth IRA that is
established for the exclusive benefit of an
eligible individual (as defined in section
530A(b)(2)) or such eligible individual’s
beneficiaries under section 530A. Special
rules apply to the Trump account during
the period that begins when an initial
Trump account is first established for an
account beneficiary (as defined in section
530A(b)(4)) and ends on December 31
of the calendar year in which the account
beneficiary reaches the age of 17 (the
growth period). The special rules concern
contributions, investments, distributions,
and reporting. After the growth period,
most of the special rules no longer apply,
and the rules under section 408 governing
traditional IRAs generally apply.
The definition of a Trump account in
section 530A(b)(1)(C)(iii) provides that
the written governing instrument creating the Trump account must meet several
requirements, one of which is that no part
of the account funds will be invested in
any asset other than an eligible investment
during the growth period.
Section 530A(b)(3)(A) provides that
the term eligible investment means any
mutual fund or exchange traded fund that
tracks the returns of a qualified index,
does not use leverage, does not have
annual fees and expenses of more than 0.1
percent of the balance of the investment in
the fund, and meets such other criteria as
the Secretary determines appropriate for
purposes of section 530A.
Section 530A(b)(3)(B) provides that
the term qualified index means the Standard and Poor’s 500 stock market index,
or any other index that is comprised of
equity investments in primarily United
September 14, 2026
States (U.S.) companies, and for which
regulated futures contracts (as defined in
section 1256(g)(1)) are traded on a qualified board or exchange (as defined in section 1256(g)(7)). Section 530A(b)(3)(B)
provides that such term shall not include
any industry or sector-specific index, but
may include an index based on market
capitalization.
eligible investments, rules for determining whether an investment is an eligible
investment, and rules on how a trustee1
of a Trump account ensures that a Trump
account meets requirements concerning
eligible investments.
II. Published guidance
Proposed § 1.530A-3(b) would provide definitions of terms for purposes of
section 530A(b)(1)(C)(iii) and (b)(3).
The definitions of eligible investment
in proposed § 1.530A-3(b)(1) and qualified index in proposed § 1.530A-3(b)(5)
restate the definitions in section 530A(b)
(3)(A) and (B).
Notice 2025-68, 2025-52 IRB 856,
informed taxpayers that the Treasury
Department and the IRS intend to propose regulations on Trump accounts. The
notice described guidance expected to
be included in the proposed regulations
in the form of answers to specific questions, including questions about eligible
investments. Notice 2025-68 requested
comments, with a comment period that
ended February 20, 2026, and comments
received in response to the notice are discussed below.
On March 9, 2026, the Treasury
Department and the IRS published a
notice of proposed rulemaking (REG117270-25) in the Federal Register (91
FR 11194) on the general requirements
for Trump accounts, certain definitions
relating to Trump accounts, rules regarding the election to open an initial Trump
account, and rules regarding the responsible party for the initial Trump account.
On the same day, the Treasury Department
and the IRS also published a notice of proposed rulemaking (REG-117002-25) in
the Federal Register (91 FR 11203) on
making an election under section 6434
for the Trump account of an eligible child
to receive a $1,000 pilot program contribution. This document proposes rules
regarding eligible investments that implement section 530A(b)(1)(C)(iii) and (b)
(3). The Treasury Department and the IRS
anticipate proposing other rules under section 530A at a future date.
Explanation of Provisions
Proposed § 1.530A-3 would provide guidance relating to eligible investments for Trump accounts. The guidance
includes proposed definitions related to
1
I. Determining whether an investment is
an eligible investment
A. Form of entity
Under section 530A(b)(3)(A), an eligible investment must be either a mutual
fund or an exchange traded fund (ETF).
Neither mutual fund nor ETF is defined in
the Code. Notice 2025-68, in question and
answer (Q&A) D-1, contained definitions
of both terms intended to be consistent
with their ordinary meanings.
One stakeholder recommended that
the definition of ETF be revised so that
it would include ETF share classes of
mutual funds. The Treasury Department
and the IRS agree with the recommendation because ETF share classes are within
the category of investments ordinarily
referred to as ETFs.
Under proposed § 1.530A-3(b)(2), an
ETF would be defined as a domestic corporation (including a regulated investment company (RIC)) that is registered
under the Investment Company Act of
1940, Public Law 76-768, 54 Stat. 789
(the 1940 Act), as amended, and that is
either (i) an “exchange-traded fund” as
defined for purposes of the 1940 Act in
17 C.F.R. § 270.6c-11(a)(1) or (ii) an
entity that operates in substantially the
same manner as an exchange-traded fund
but that is not described in 17 C.F.R.
§ 270.6c-11(a)(1), such as a unit investment trust or ETF share class of a mutual
fund operating as an ETF under exemptive relief granted by the Securities and
Exchange Commission.
Like Notice 2025-68, proposed
§ 1.530A-3(b)(4) would provide that the
term mutual fund means a domestic corporation (including a RIC) that is registered under the 1940 Act as an open-end
company (as defined in 15 U.S.C. § 80a5(a)(1)) and that is not an ETF. Proposed
§ 1.530A-3(b)(3) would define the term
investment fund to mean a mutual fund or
an ETF.
B. Tracks the returns of a qualified index
Section 530A(b)(3)(A)(i) provides
that, to be an eligible investment, a
mutual fund or ETF must track the
returns of a qualified index. Notice 202568 (Q&A D-2) stated that a mutual fund
or ETF tracks the returns of an index if
its investment objective is to provide
investment results that, before fees and
expenses, replicate the performance of
the index, and the fund holds investments
that are reasonably expected to accomplish that objective (by, for example,
holding shares of all of the stocks that are
constituents of the index in proportion to
their weightings).
A stakeholder recommended that
guidance emphasize that the standard is
a requirement to seek to replicate index
returns, rather than to eliminate all deviations of fund performance from index
performance. The Treasury Department
and the IRS confirm that the reference to
the fund’s objective is intended to require
a fund to seek to replicate the returns of
an index.
The stakeholder also recommended
clarifying that an investment fund intending to replicate the returns of an index is
not always required to hold all the underlying stocks included in its chosen index.
An investment fund may hold less than
all of the components of an index and
still closely track the index’s returns. The
Treasury Department and the IRS agree
that tracking the returns of an index does
not require holding each component of
the index. The example in the notice was
illustrative and not an additional requirement, and proposed § 1.530A-3(c)(1)
would acknowledge the possibility of
tracking the returns of an index by holding
less than all of its components.
A reference to a trustee includes a custodian of an IRA that is a section 408(h) custodial account.
September 14, 2026
318
Bulletin No. 2026–38
Notice 2025-68 (Q&A D-2) also
described investment objectives and strategies that are not consistent with tracking
the returns of an index: an objective to
provide investment results inverse to the
performance of the index or a strategy to
outperform or perform differently from the
index. As examples of the latter, the notice
described funds that increase or decrease
exposure to some index constituents based
on the judgment of advisors, or that hold
assets in some or all market conditions
intended to decrease or increase the volatility, risk, or current income associated
with the index.
Stakeholders have asked whether
actively managed investment funds pursuing a strategy other than seeking to
replicate the performance of a particular
index can be eligible investments. Investing Trump account funds in an investment
fund that does not track the returns of an
index would be directly contrary to section 530A(b)(3)(A)(i). These proposed
regulations would follow section 530A(b)
(3)(A)(i), under which an investment fund
that is actively managed is not an eligible
investment.
One stakeholder expressed concern
that the discretion exercised by managers
or advisors of typical index funds would
prevent those funds from being eligible
investments under the standards described
in the notice. Managers or advisors exercise discretion in pursuing their objective
to replicate the returns of an index, including determining which index components
to hold and when to execute trades. The
stakeholder suggested that the language
of the notice describing increased or
decreased exposure to index constituents
based on the judgment of advisors might
be read as disqualifying an investment
based on these or similar exercises of discretion. The Treasury Department and the
IRS acknowledge this concern. Accordingly, proposed § 1.530A-3(c)(2) would
exclude the reference to the discretion of
advisors, so that advisors can make necessary decisions in pursuit of a fund’s
objective to replicate the performance of
an index.
The stakeholder also suggested that the
reference to strategies used to “outperform” an index be eliminated as unnecessary in light of the more general reference
to strategies used to “perform differently”
Bulletin No. 2026–38
from the index. The word “outperform” is
intended to clarify that an objective to perform differently from an index includes an
objective to outperform the index. Therefore, the proposed regulations do not
reflect this suggestion.
One stakeholder asked for clarification
regarding whether an investment fund
may engage in securities lending to generate additional income while still being
considered to track the returns of an index.
Income from securities lending may be
viewed as inconsistent with the general
principle in proposed § 1.530A-3(c)(2)
that an eligible investment may not use
a strategy to perform differently from the
relevant index, because securities lending
generally increases the current income
of the fund. Securities lending, however,
appears to be consistent with the language
and purposes of section 530A(b)(3). The
statute does not mention securities lending, but securities lending by investment
funds is common.
Moreover, an investment fund may
engage in securities lending in a way that
allows the fund to retain all of the economic benefits and burdens associated
with the affected security. Section 1058(b)
describes conditions under which a securities lending transaction is treated as a
nonrecognition transaction to the lender.
An investment fund that engages in securities lending continues to provide investors with passive participation in the performance of the index, so long as the fund
retains its economic exposure to the securities lent. Therefore, proposed § 1.530A3(c)(3) would provide, as an exception to
the general rule in proposed § 1.530A3(c)(2), that an investment fund does
not fail to track the returns of an index
because the investment fund engages in
securities lending transactions so long as
the fund retains full economic exposure to
the securities lent.
Stakeholders requested clarification
regarding whether a fund of funds may be
an eligible investment. A fund of funds is
an investment fund that invests in other
investment funds (acquired funds). One
stakeholder recommended that a fund of
funds tracking multiple indices through
its acquired funds be treated as tracking
the returns of a qualified index. Section
530A(b)(3)(A)(i) requires an eligible
investment to track the returns of “a qual-
319
ified index” (emphasis added). A fund of
funds that tracks multiple indices is not
described in section 530A(b)(3)(A)(i).
Providing rules to allow an eligible investment to track multiple indices would also
add unnecessary complexity. Therefore,
these proposed regulations would not treat
any fund, including a fund of funds, that
replicates the returns of multiple indices
as an eligible investment. However, nothing in these proposed regulations would
preclude a fund of funds from being an
eligible investment if it tracks a single
index and meets all of the other requirements in section 530A(b)(3).
C. Does not use leverage
Section 530A(b)(3)(A)(ii) provides
that, to be an eligible investment, a mutual
fund or ETF must not use leverage. Notice
2025-68 (Q&A D-3) stated that a mutual
fund or ETF is considered to use leverage
if, as a result of the fund’s use of borrowings, derivatives, or other strategies that
are economically equivalent to borrowings, a percentage change in the level
of an index tends to cause a materially
greater percentage change in the value of
the fund’s portfolio.
A stakeholder suggested that the leverage standard is unnecessary, because any
fund using leverage as described in Q&A
D-3 would also be failing to track the
returns of an index under Q&A D-2. The
stakeholder also explained that investment
funds may use borrowing or their equivalents to gain efficient exposure to only a
portion of the underlying index and that
this practice, if assessed in isolation, may
lead to material variations in the portfolio as compared to the performance of
the underlying index. The stakeholder
suggested that leverage should disqualify
an investment fund only if the fund’s borrowings or economic equivalents in their
totality is inconsistent with the fund’s
investment objective of seeking to track
the returns of a qualified index.
The Treasury Department and the IRS
recognize that the requirements in section
530A(b)(3)(A) to track the returns of an
index and not to use leverage are closely
related, and that in Notice 2025-68, the
standard for leverage (Q&A D-3) substantially overlaps with the standard for tracking the returns of an index (Q&A D-2).
September 14, 2026
The alternative standard proposed by the
stakeholder, however, would deprive the
leverage provision of any significance
because any fund excluded for use of
leverage under that alternative standard
would also be excluded for not tracking
the returns of a qualified index. The Treasury Department and the IRS, however,
agree with the stakeholder that the statutory exclusion of funds using leverage
should not be read to restrict the transactions that regular index funds (those
not seeking to multiply or magnify index
changes) typically use to gain efficient
exposure to an index. The statutory exclusion of investment funds that use leverage
should be read to exclude the higher-risk
leveraged funds that are less suitable for
many Trump account beneficiaries. Therefore, these proposed regulations would
define leverage by reference to increased
risk.
Proposed § 1.530A-3(d)(1) would
provide that an investment fund is considered to use leverage if the fund uses
borrowings, derivatives, or other strategies that are economically equivalent
to borrowings in a way that materially
increases the risk of loss associated with
an investment in the investment fund.
Under this standard, as under Notice
2025-68, an investment fund uses leverage if, as a result of borrowings or derivatives or another economic equivalent,
a change in the level of the index the
returns of which the fund seeks to replicate tends to cause a materially greater
proportional change in the net value of
the fund’s portfolio. Consistent with the
stakeholder’s recommendation, this standard requires an inquiry into risk associated with the fund as a whole and not one
transaction in isolation.
Notice 2025-68 explained that borrowings and derivatives not entered into
to multiply or magnify index returns generally would not be treated as leverage.
The notice included as examples borrowings to provide liquidity for redemptions
or for purchases of portfolio securities in
connection with investment flows into the
fund, and entering into derivatives as part
of a fund’s strategy to replicate the performance of an index.
Like Notice 2025-68, these proposed
regulations would describe uses of borrowings and derivatives that would not be
September 14, 2026
expected to constitute the use of leverage
for purposes of section 530A(b)(3)(A)(ii).
Under the proposed regulations, however,
whether any use of borrowings or derivatives constitutes the use of leverage would
depend on whether it materially increases
risk of loss. Proposed § 1.530A-3(d)(2)
would provide that an investment fund
is not considered to use leverage merely
because it borrows or uses derivatives as
part of its strategy to replicate the performance of an index, so long as the borrowings or derivatives do not materially
increase the risk of loss associated with an
investment in the investment fund. Thus,
an investment fund is not considered to
use leverage merely because the fund
incurs short-term borrowings to provide
liquidity for redemptions or to purchase
portfolio securities in connection with
investment flows into the fund or because
the fund uses derivatives to gain synthetic
exposure to certain index components.
For an investment fund that engages in
securities lending, proposed § 1.530A3(d)(2) would provide that the investment
fund’s obligation to return collateral to the
borrower of the securities is not treated as
leverage so long as the investment fund
takes appropriate steps to limit the risk
of loss with respect to the collateral. To
limit the risk of loss with respect to cash
collateral, the investment fund must hold
the collateral in cash or highly liquid,
conservative positions (like money market funds). To limit the risk of loss with
respect to non-cash collateral, the investment fund must not sell the collateral or
otherwise use the collateral (for example, by pledging it) to increase the fund’s
exposure to other assets.
D. Qualified index
Section 530A(b)(3)(B) provides that a
qualified index is the Standard and Poor’s
500 stock market index, or any other index
that is comprised of equity investments in
primarily U.S. companies and for which
regulated futures contracts (as defined in
section 1256(g)(1)) are traded on a qualified board or exchange (as defined in section 1256(g)(7)). Section 530A(b)(3)(B)
also provides that a qualified index does
not include any industry or sector-specific
index but may include an index based on
market capitalization.
320
Q&A D-5 in Notice 2025-68 stated that
an index is considered to be comprised of
equity investments if the index is comprised entirely of stocks and similar ownership interests in the form of partnership
or membership interests.
Several stakeholders requested guidance that would allow an index with debt
instruments as components to be a qualified index. Section 530A(b)(3)(B)(ii)
(I) requires a qualified index to be “comprised of equity investments in primarily
[U.S.] companies.” It is consistent with
that statutory language for a qualified
index to include some equity investments
in non-U.S. companies, but not for a qualified index to include components other
than equity investments. Accordingly,
proposed § 1.530A-3(e)(5) would contain
the same all-equity requirement as the
notice.
One stakeholder recommended that
a qualified index include a total-market
index. While the term total-market may
have different meanings, an index that
represents an equity market broadly,
including large-cap, mid-cap, and smallcap companies, may be a qualified index
if the index meets the requirements in
proposed § 1.530A-3(e). (For example,
a regulated futures contract on the index
must be traded on a qualified board or
exchange and the index must be comprised of equity investments in primarily
U.S. companies.)
Q&A D-5 stated that a company is a
U.S. company if it is domestic under section 7701(a)(4). It also included a safe harbor under which an index would be treated
as comprised of equity investments in primarily U.S. companies if U.S. companies
represent at least 90 percent of the index
based on their weightings in the index.
Stakeholders suggested that the 90-percent standard in the safe harbor was a
higher threshold than what the statutory
language suggests. The Treasury Department and the IRS note that a variety of
provisions in the Code use “primarily”
without providing a numerical threshold.
A safe harbor provides certainty for some
indices, so that the Standard and Poor’s
500 stock market index is not the only
index assured of meeting the standard.
Thus, proposed § 1.530A-3(e)(7) would
retain the 90-percent safe harbor approach
of the notice.
Bulletin No. 2026–38
Q&A D-6 in Notice 2025-68 stated
that an index is industry-specific or sector-specific if the inclusion of a company
depends on the kind of business or industry in which the company is engaged.
Stakeholders did not comment on that
aspect of the qualified index requirement,
and proposed § 1.530A-3(e)(2) would
provide substantially the same rule. Under
proposed § 1.530A-3(e)(1), whether an
index is industry-specific or sector-specific would be determined by reference
to the index methodology for the index.
Proposed § 1.530A-3(e)(1) would require
a qualified index to have a publicly available index methodology that describes the
criteria for inclusion in the index and the
construction of the index.
Q&A D-6 also provided that environmental, social, and governance (ESG)
indices are sector-specific. A stakeholder
recommended that an index that has criteria for inclusion based on ESG factors
not be described as a sector-specific index.
The stakeholder explained that describing
an ESG index as a sector-specific index
may generate confusion about the meaning of the term as it is used in other contexts.
The Treasury Department and the IRS
acknowledge that describing an ESG
index as a sector-specific index could generate confusion about the meaning of the
term. Accordingly, proposed § 1.530A3(e)(3) would not describe an ESG index
as a sector-specific index. Nevertheless,
the Treasury Department and the IRS
have determined that it is appropriate to
exclude investment funds that track ESG
indices because they limit exposure to
companies in a way that makes them similar to sector-specific funds. Accordingly,
under the authority provided in section
530A(b)(3)(A)(iv), proposed § 1.530A3(e)(3) would provide that any investment fund that tracks the returns of an
ESG index is not an eligible investment.
Proposed § 1.530A-3(e)(3) would further
provide that an ESG index includes any
index that has, or is marketed as having, a
focus on environmental, social, or governance factors.
Q&A D-6 also defined an index based
on market capitalization, the substance
of which would remain unchanged in
the proposed regulations. Proposed
§ 1.530A-3(e)(4) would provide that an
Bulletin No. 2026–38
index is based on market capitalization if
the inclusion of a company in the index
depends on the company having a market
capitalization within a specified range or
over or under a specified threshold, or that
meets specified ranking criteria.
E. Limit on annual fees and expenses
Section 530A(b)(3)(A)(iii) provides
that, to be an eligible investment, a mutual
fund or ETF must not have annual fees
and expenses of more than 0.1 percent of
the balance of the investment in the fund.
Q&A D-4 in Notice 2025-68 stated
that an investment fund would meet the
requirements of section 530A(b)(3)(A)
(iii) if the sum of its annual fees and its
annual expenses is not more than 0.1 percent of the value of the fund’s net assets.
Q&A D-4 in Notice 2025-68 described a
fund’s annual fees as including any annual
or recurring fees charged by the fund
directly to the investor, as disclosed in a
fund’s prospectus. The notice requested
comments on the appropriate treatment of
fees charged for transactions.
A stakeholder recommended that all
amounts that are not part of an investment
fund’s expense ratio, including transactional fees such as sales charges, loads,
and redemption fees, be excluded from a
fund’s fees and expenses for purposes of
section 530A(b)(3)(A)(iii). Excluding all
fees is inconsistent with the language in
section 530A(b)(3)(A)(iii), which limits “fees and expenses.” Both fees and
expenses reduce the real returns to investors. Excluding transactional fees appears
to be similarly inconsistent with the language and purposes of section 530A(b)
(3)(A)(iii), because an investment fund’s
fees may be entirely transactional fees and
such fees reduce real returns to investors.
Moreover, investment funds can structure
their fees in a variety of ways. A rule that
excludes some fees from the limit in section 530A(b)(3)(A)(iii) based on the form
of the fees would create an incentive for
investment funds to charge or increase
that form of fee. Therefore, the limit on
fees and expenses should apply to recurring fees (as under the notice) and other
fees (on which the notice requested comments).
Proposed § 1.530A-3(f)(1) would provide that an investment fund is not an eli-
321
gible investment if the sum of its annual
fees and annual expenses is more than
0.1 percent of the net value of its assets.
Amounts charged by investment funds
directly to investment fund holders are
referred to as fees and addressed in proposed § 1.530A-3(f)(2). Amounts borne
by investment fund holders indirectly in
the form of costs incurred by investment
funds are referred to as expenses and
addressed in proposed § 1.530A-3(f)(3).
Proposed § 1.530A-3(f)(2)(ii) would
provide that an investment fund’s fees
include all amounts that the fund charges
its investment fund holders directly, without regard to how such amounts are computed, when they are imposed, or how
such amounts are referred to in securities
filings or marketing materials. Under proposed § 1.530A-3(f)(2)(i), the amount of
an investment fund’s annual fees would
generally be the aggregate amount of fees
imposed by the investment fund during the
most recent fiscal year (for purposes of the
fund’s securities filings) that has appeared
in the fund’s prospectus, expressed as a
percentage of the investment fund’s average net asset value for that fiscal year. If
an investment fund’s prospectus discloses
changes to the fund’s fee structure that
would increase the annual fee amount, the
computation must take into account the
change to the fee structure.
Q&A D-4 in Notice 2025-68 indicated
that annual fees and annual expenses will
not include any amount that is paid to a
broker or intermediary and that is not
specified or imposed by or on behalf of
the fund.
Stakeholders recommended that guidance clarify the treatment of charges not
imposed by an investment fund, including
custodial fees or fees to cover the administrative and reporting costs associated with
a Trump account. One stakeholder pointed
out that mutual fund account fees would be
treated as fees of the mutual fund, resulting in differing treatment for mutual funds
and ETFs. Another stakeholder requested
clarification that amounts paid for advice
or planning services are not subject to the
0.1 percent limit.
The 0.1 percent limit in section 530A(b)
(3)(A)(iii) is part of the definition of an eligible investment. The limit does not apply
to trustee fees. Therefore, custodial fees or
similar charges that are associated with a
September 14, 2026
Trump account itself rather than with any
particular investment fund are analyzed as
trustee fees, which are discussed later in
this preamble. If an account beneficiary
pays an amount to an advisor for advice
on whether to open a Trump account or
what investment to select, and the advice
and the amount are entirely independent
of any investment fund, then the amount is
not within the scope of the annual fees of
an investment fund. Given the definition
of annual fees, a rule specifically excluding an amount having no connection to
any fund appears to be unnecessary and
more likely to confuse than clarify the
definition. A sales load, however, is part of
a mutual fund’s annual fees, even though
the amount charged may ultimately benefit a financial intermediary, because it is a
cost of investing in a particular investment
fund.
Proposed § 1.530A-3(f)(2)(iii) would
provide that amounts charged to an
account beneficiary by a trustee for providing an account are not treated as part
of any investment fund’s annual fees but
as trustee fees. A fee charged by a Trump
account trustee or financial intermediary
for a service, such as carrying out a purchase or sale of an investment fund is not
considered a part of the investment fund’s
fees if the fee is not charged on behalf of
or at the direction of the investment fund,
is not paid (directly or indirectly) to the
investment fund, and is not attributable to
any cost of offering the investment fund.
See part IV of this Explanation of Provisions regarding fees and expenses charged
by a Trump account trustee.
Q&A D-4 in Notice 2025-68 described
a fund’s annual expenses as the amount
set forth in its prospectus as total annual
operating expenses. Investment funds are
already required to compute and report
these amounts. A fund’s total annual operating expenses is also used to compute the
fund’s expense ratio, which is a metric
that is commonly published and referred
to in comparing investment funds. No
comments were received regarding the
approach to annual expenses in the notice,
and proposed § 1.530A-3(f)(3) would provide substantially the same rule.
Proposed § 1.530A-3(f)(3) would provide certain additional clarifications to
aid in the computation of a fund’s total
annual operating expenses. These include
September 14, 2026
that if an investment fund’s prospectus
lists total operating expenses reduced by
fee waivers or expense reimbursements,
the reduced amount applies for purposes
of section 530A(b)(3)(A)(iii). In addition,
proposed § 1.530A-3(f)(3) would provide
that if an investment fund has multiple
share classes, annual expenses are computed separately for each class, based on
the expenses and assets allocable to each
class.
II. Trustee procedures regarding eligible
investments
Section 530A(b)(1)(C)(iii) provides
that the written governing instrument
creating a Trump account must meet the
requirement that no part of the account
funds will be invested in any asset other
than an eligible investment during the
growth period.
Q&A D-7 of Notice 2025-68 stated that
a trustee must have procedures in place
to monitor and enforce the requirements
of section 530A(b)(1)(C)(iii). The Q&A
stated that it is not sufficient merely for a
written governing instrument of a Trump
account to state the prohibition of section 530A(b)(1)(C)(iii); the trustee must
comply with the prohibition. The Q&A
stated that the procedures may, but are not
required to, be in the written governing
instrument.
A stakeholder questioned whether
there is authority for requiring operational
compliance with the eligible investment
requirements for Trump accounts. Section
530A(b)(1)(C) imposes limits by reference to the written governing instrument
of a Trump account, which cannot be
enforced by the IRS. Therefore, the stakeholder suggests any failure by a trustee to
follow the written governing instrument is
a contractual violation enforceable by the
account beneficiary.
The Treasury Department and the IRS
interpret the language of section 530A(b)
(1)(C) as requiring not just specific language to be contained in the written governing instrument but also as requiring
operational compliance with the language
set forth in the written governing instrument. The trustee is in the best position to
ensure that an account meets requirements
of section 530A(b)(1)(C), which concern
contributions, distributions, and invest-
322
ments. Thus, the trustee must structure
its operations to ensure the account meets
the requirements. Without such an operational compliance requirement, the written instrument is not, in fact, the written
governing instrument.
This approach of requiring operational
compliance with Code requirements in the
written governing instrument is consistent
with how the Treasury Department and
the IRS have interpreted statutory rules
for section 401(a) plans that, on their face,
could be read to suggest only a requirement that needs to be set forth in a plan
document. For example, section 401(a)(9)
provides that “[a] trust shall not constitute a qualified trust under this subsection
unless the plan provides that the entire
interest of each employee” will be distributed in accordance with section 401(a)
(9)(A) (emphasis added). The Treasury
Department and the IRS have interpreted
this language as requiring operational
compliance in order to maintain qualified
plan status under section 401(a).
Proposed § 1.530A-3(g) would provide
procedures for a trustee to follow to ensure
that Trump account funds are invested in
accordance with section 530A(b)(1)(C)
(iii), including for selection of eligible
investments and default eligible investments, situations in which funds temporarily need not be invested in an eligible
investment, and monitoring of investment
funds. Many of these procedures involve
an account beneficiary, who generally will
have another person acting on their behalf
while they are a minor.
Proposed § 1.530A-3(g)(2) would provide that the written governing instrument
must include the procedures described in
proposed § 1.530A-3(g)(4), (5), and (7).
Proposed § 1.530A-3(g)(3) would clarify
that if an account does not comply with
section 530A(b)(1)(C)(iii), taking into
account the flexibility added by proposed
§ 1.530A-3(g), the account will cease to
be a Trump account and cease to be an
IRA.
Q&A D-7 of Notice 2025-68 also
stated that these procedures with respect
to the growth period must include at least
that the trustee must offer only eligible
investments as investment options for a
Trump account, and the trustee must select
a default eligible investment and must
promptly invest any uninvested funds in
Bulletin No. 2026–38
the default eligible investment, unless
directed by or on behalf of the account
beneficiary to invest the funds in a different eligible investment.
Stakeholders sought clarification
regarding default eligible investments,
including whether a trustee may have only
one default eligible investment, whether
any eligible investment may be the default
eligible investment, and whether an
account beneficiary may specify another
eligible investment as the designated eligible investment for that particular account
beneficiary.
Proposed § 1.530A-3(g)(4)(i) would
provide that a trustee must limit investments available for Trump account investments to investment funds that the trustee
has determined are eligible investments.
Proposed § 1.530A-3(g)(4)(ii) would
provide that a trustee must establish for
each Trump account under the trustee’s
administration a default eligible investment in which all contributions, proceeds
from sales or other dispositions, and any
other amounts for investment (other than
amounts addressed by proposed § 1.530A3(g)(4)(iii)) will be invested unless the
account beneficiary specifies that the
Trump account be invested in a different
eligible investment for the contribution or
other amount. Proposed § 1.530A-3(g)(4)
(ii) also would provide that the default eligible investment can be a single eligible
investment or a combination of eligible
investments in specified proportions, and
that the default eligible investment(s) must
be clearly disclosed to account beneficiaries. Proposed § 1.530A-3(g)(4)(ii) would
provide that the requirement to establish a
default eligible investment does not preclude arrangements between a trustee and
the account beneficiary that give effect to
different preferences on an ongoing basis.
Proposed § 1.530A-3(g)(4)(iii) would
provide that the trustee of a Trump account
must disclose to the account beneficiary
how amounts received as dividends or
other distributions from eligible investments will be invested unless the account
beneficiary gives different instructions
regarding the dividends and distributions.
For example, amounts received as dividends and distributions might be reinvested in the same eligible investments
that paid the dividends or other distributions or invested in the Trump account’s
Bulletin No. 2026–38
default eligible investment. Proposed
§ 1.530A-3(g)(4)(iii) would also provide
that the trustee may give effect to directions from the account beneficiary that a
specific distribution, or distributions generally, be invested in a different way that
complies with section 530A(b)(1)(C)(iii).
Q&A D-8 of Notice 2025-68 stated
that, during the growth period, the trustee’s procedures may not permit funds in a
Trump account to be invested in a money
market fund but may permit an amount
received as a contribution, a dividend or
other distribution from an eligible investment, or an amount received as a result
of a disposition (such as sale) of an eligible investment, to be held in cash for the
time reasonably necessary to complete the
investment of the amount in an eligible
investment.
Stakeholders
recommended
that
amounts should be permitted to be held in
cash for the time reasonably necessary to
complete a distribution, rollover, or payment of fees. Proposed § 1.530A-3(g)(5)
(i) would provide that a trustee may permit
an amount received in a Trump account
as cash, such as an amount received as a
contribution, proceeds of a sale or other
disposition, or a distribution, to be held
in cash for the time reasonably necessary
to complete an investment, reinvestment,
distribution, rollover, payment of fees, or
other transaction permitted under section
530A.
Q&A D-9 of Notice 2025-68 stated
that, during the growth period, the trustee’s procedures must require reasonable ongoing monitoring by the trustee
regarding whether a fund held by a Trump
account continues to be an eligible investment. This Q&A also stated that in the
event that a fund held by a Trump account
ceases to be an eligible investment during
the growth period, the Trump account will
no longer be permitted to be invested in
such fund.
Stakeholders made a variety of recommendations and sought clarification with
respect to the trustee’s obligation to monitor the status of its existing investments
as eligible investments. These recommendations include providing a safe harbor
regarding when a trustee would be treated
as satisfying its obligations relating to
monitoring investment funds. For example, one stakeholder recommended that
323
trustee monitoring be based on periodic
review and reliance on public disclosures.
Stakeholders also recommended a 120day grace period for a fund to regain eligible investment status (by, for example,
adjusting its fees and expenses) or for the
trustee to dispose of shares in the fund and
reinvest the proceeds in an eligible investment.
The Treasury Department and the IRS
recognize that day-to-day monitoring by a
trustee regarding whether an investment
fund continues to be an eligible investment raises significant practical concerns.
The Treasury Department and the IRS
agree with stakeholders that a safe harbor
requiring trustees to make periodic determinations regarding eligible investment
status would be more administrable for
trustees.
Proposed § 1.530A-3(g)(6) would
require that the trustee’s procedures provide for monitoring of investment funds
in which the trustee’s Trump accounts
are invested, with an initial determination
whether the investment fund is an eligible
investment when the trustee first offers the
investment fund to any Trump account for
which it is the trustee and then subsequent
periodic determinations that the investment fund continues to be an eligible
investment. Proposed § 1.530A-3(g)(6)
would provide that the trustee may rely on
an investment fund’s prospectus and other
public documents required by Federal
securities laws in making determinations
of eligible investment status. Proposed
§ 1.530A-3(g)(6) would also provide that
a trustee is treated as monitoring investment funds in which the trustee’s Trump
accounts are invested if the trustee’s periodic determinations occur at least once
every 12 months.
Proposed § 1.530A-3(g)(5)(ii) would
provide that in the event an investment
fund ceases to be an eligible investment,
the trustee’s procedures must require the
prompt sale or disposition of shares in the
investment fund and the reinvestment of
the proceeds in an eligible investment.
Specifically, proposed § 1.530A-3(g)(5)
(ii)(A) would provide that a trustee must
sell or dispose of shares in the investment
fund and reinvest the proceeds within 30
days of when the investment fund ceases
to be an eligible investment. Proposed
§ 1.530A-3(g)(5)(ii)(B) would provide
September 14, 2026
that the time when an investment fund is
treated as ceasing to be an eligible investment is determined based on whether the
trustee is in compliance with the monitoring and periodic determination requirements in proposed § 1.530A-3(g)(6). If
the trustee is not in compliance with the
monitoring and periodic determination
requirements in proposed § 1.530A-3(g)
(6), the investment fund is treated as ceasing to be an eligible investment on the
first day that the investment fund does
not meet the requirements to be an eligible investment. If the trustee is in compliance with the monitoring and periodic
determination requirements of proposed
§ 1.530A-3(g)(6), the time of the trustee’s
next periodic determination in accordance
with proposed § 1.530A-3(g)(6) or, if
earlier, the time that the trustee acquires
actual knowledge that the investment is no
longer an eligible investment, is treated as
the time the investment fund ceases to be
an eligible investment. This provision is
intended to address concerns regarding the
timing of identifying and then disposing
of shares in an investment fund expressed
in stakeholders’ requests for specific time
thresholds for dispositions.
Stakeholders discussed what notice a
trustee should be required to provide to
an account beneficiary when an investment fund in which the account beneficiary’s funds are invested ceases to be
an eligible investment. One stakeholder
contemplated notice to an account beneficiary before the trustee reinvests the
proceeds from the sale of the fund that
ceases to be an eligible investment. The
Treasury Department and the IRS believe
that requiring notice before reinvestment
unnecessarily slows down reinvestment.
Proposed § 1.530A-3(g)(5)(ii) would not
require notice to account beneficiaries
before selling or disposing of shares in the
investment fund but would require notice
to account beneficiaries after reinvestment
of the proceeds about how the proceeds
are reinvested.
Proposed § 1.530A-3(g)(7) would
provide that if a trustee has adopted
the required procedures but a portion
of the assets in a Trump account is not
invested in an eligible investment due to
an administrative error by the trustee (for
example, due to an oversight or mistake
in applying the procedures), the trustee
September 14, 2026
must sell or dispose of the assets that are
not invested in an eligible investment
and reinvest the proceeds in an eligible
investment within 30 calendar days from
the first day that portion was not invested
in an eligible investment. Furthermore,
the trustee must disclose to the account
beneficiary the duration of the error, the
assets that were held during the error
period, and the amount reinvested in an
eligible investment at the end of the error
period.
Regarding the proposed correction
of administrative errors, the Treasury
Department and the IRS are considering providing a rule that would allow a
trustee, in the case of its administrative
error, to replace, to the extent needed,
earnings in the account that the account
would have had if the account had been
properly invested in an eligible investment. Such replaced earnings would not
be considered contributions subject to
the contribution limitation under section
530A(c)(2). Comments are requested
regarding such a rule.
The Treasury Department and the
IRS recognize the importance of helping
account beneficiaries receive the benefits
of a Trump account, particularly because
account beneficiaries are minors. Therefore, in addition to the proposed correction
procedures included in these proposed
regulations, the Treasury Department and
the IRS request comments regarding other
failures under section 530A(b)(1)(C) that
may be appropriate for correction and proposed corrections for such failures (taking into account that trustees must have
procedures in place to prevent most such
failures). The Treasury Department and
the IRS intend to provide additional correction procedures for trustees, as needed,
to correct certain Trump account failures.
Comments are additionally requested
regarding whether potential Trump
account corrections should be included
as part of the IRA correction procedure
authorized under section 305(c) of Public
Law 117-328, 136 Stat. 4459 (December
29, 2022), commonly referred to as the
SECURE 2.0 Act.
Q&A D-10 of Notice 2025-68 stated
that a trustee may permit funds in a Trump
account to be invested in multiple eligible
investments. The Treasury Department
and the IRS confirm that a Trump account
324
may be invested in any number of eligible
investments, and proposed § 1.530A-3(g)
(1) would provide that Trump account
funds may be invested in one or more eligible investments.
III. Request for Comments Regarding
Stock Contributions as part of a
Philanthropic Contribution
The Treasury Department and the IRS
intend to exercise regulatory authority
conferred by section 530A(a) to issue
regulations that would allow contributions of readily tradable public company
stock to be made to Trump accounts as
part of a philanthropic contribution. The
regulations would require that the stock
transferred to the Treasury Department
for this purpose must satisfy certain criteria and other requirements to be treated
as a charitable contribution. All other
contributions to Trump accounts would
continue to have to be made in cash
pursuant to section 408(a)(1), and such
funds would continue to be subject to
the requirement in section 530A(b)(1)(C)
(iii) that they cannot be invested in any
asset other than an eligible investment
during the growth period.
IV. Request for Comments Regarding
Trustee Fees
Section 530A is intended to promote
long-term investing for the benefit of children. Section 530A contains provisions
designed to maintain a low cost for these
accounts. In particular, section 530A(b)
(3)(A)(iii) limits eligible investments to
those with low annual fees and expenses
and section 530A(g) permits the Secretary
to take into account costs imposed by the
trustee on the account or the account beneficiary when selecting the trustee. Additionally, commenters and other stakeholders have expressed concerns with the
potential for fees and expenses to diminish the account balances over time (especially given the small initial balances and
long expected holding periods). One commenter raised the concept of expressly
prohibiting additional fees because such
fees are not contemplated in the statutory
language.
The Treasury Department and the IRS
are considering ways to keep costs down
Bulletin No. 2026–38
for these accounts, and request comments
on alternative ways in which this might be
achieved, including the possibility of prohibiting trustees from charging any fees
with respect to the account beneficiary
or the eligible investments held by the
account beneficiary.
Proposed Applicability Dates
The regulations are proposed to apply
to taxable years beginning on or after January 1, 2026, except for paragraph (g) of
the regulations, which is proposed to apply
to taxable years beginning on or after the
date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register (finalization
date). In accordance with section 7805(b)
(2) of the Code, the Treasury Department
and the IRS intend to publish final regulations within 18 months of the date of
enactment of section 530A. A taxpayer or
a trustee may rely on the proposed regulations for taxable years beginning before
the finalization date if the taxpayer or
trustee, respectively, follows these proposed regulations in their entirety and in a
consistent manner.
Special Analyses
I. Regulatory Planning and Review
Executive Orders 12866 and 13563
direct agencies to assess costs and benefits of available regulatory alternatives
and, if regulation is necessary, to select
regulatory approaches that maximize net
benefits (including potential economic,
environmental, public health and safety
effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the
importance of quantifying both costs and
benefits, reducing costs, harmonizing
rules, and promoting flexibility.
The proposed regulations have been
designated by the Office of Management
and Budget’s (OMB’s) Office of Information and Regulatory Affairs (OIRA)
as subject to review under Executive
Order 12866 pursuant to the Memorandum of Agreement (MOA, July 4, 2025)
between the Treasury Department and the
OMB regarding review of tax regulations.
OIRA has determined that the proposed
rulemaking is significant under section
Bulletin No. 2026–38
3(f) of Executive Order 12866 and subject
to review under Executive Order 12866
and section 1(b) of the MOA. Accordingly, the proposed regulations have been
reviewed by OMB. This proposed rule is
not expected to be considered a regulatory action under Executive Order 14192
because it does not impose any more than
de minimis regulatory costs.
Need for Regulation
The proposed regulations would provide guidance relating to eligible investments for Trump accounts under section
530A. The proposed regulations would
define terms related to eligible investments, provide rules for determining
whether an investment fund is an eligible
investment, and provide procedures for a
trustee of a Trump account to ensure that
a Trump account meets requirements concerning eligible investments.
The Statute and the Proposed Regulations
Public Law 119-21, commonly
referred to as the One, Big, Beautiful Bill
Act, added new sections 530A, 128, and
6434 to the Code. Section 530A describes
Trump accounts, section 128 describes
certain employer contributions to Trump
accounts, and section 6434 describes the
Trump accounts contribution pilot program. The proposed regulations provide
guidance on eligible investments in a
Trump account under section 530A(b)(3).
Section 530A defines a Trump account
as an IRA with some special rules. Most
special rules that distinguish Trump
accounts from other IRAs apply only
during the growth period. The first day of
the growth period is the day the account
is established, and the final day of the
growth period is December 31 of the
calendar year in which the account beneficiary attains age 17. The rules for traditional IRAs generally apply after the
growth period. A Trump account may be
established for the benefit of a child prior
to the calendar year in which the child
attains age 18 if the child has been issued
a social security number.
In general, distributions from Trump
accounts are not permitted during the
growth period. The entire balance of
a Trump account may be rolled over in
325
a direct trustee-to-trustee transfer to a
new Trump account of the account beneficiary. The entire balance of a Trump
account may be rolled over in a direct
trustee-to-trustee transfer to an ABLE
account of the account beneficiary in the
calendar year the account beneficiary
attains age 17.
Funds in a Trump account may only
be invested in eligible investments during
the growth period. An eligible investment
generally is a mutual fund or ETF that
tracks an equity index of primarily U.S.
companies, such as the S&P 500 index,
does not use leverage, and has annual fees
and expenses of no more than 0.1 percent
of the balance of the investment in the
fund.
Trump accounts may receive contributions from nonprofits, governments,
employers, and individuals. In general,
contributions to a Trump account are subject to an annual limit of $5,000, adjusted
for inflation.
Governments and nonprofits may make
qualified general contributions through
the Treasury Department, and such contributions must be allocated in equal
amounts to the Trump accounts of every
account beneficiary in a qualified class.
Qualified general contributions from governments and nonprofits through the Treasury Department do not count towards the
$5,000 annual contribution limit.
Section 128 sets rules for certain
employer contributions to Trump accounts.
Employers may contribute to the Trump
account of an employee or an employee’s
dependent. Section 128 employer contributions to a Trump account are excluded
from the employee’s income, up to an
annual limit of $2,500, adjusted for inflation. Section 128 employer contributions
count towards the $5,000 annual contribution limit.
Section 6434 describes the Trump
accounts contribution pilot program. In
the pilot program, the Secretary will pay
$1,000 to the Trump accounts of eligible children. A U.S. citizen born in 2025,
2026, 2027, or 2028 who has been issued
a social security number and for whom no
request for a pilot program contribution
has previously been processed is eligible
for a pilot program contribution. Pilot program contributions do not count towards
the $5,000 annual contribution limit.
September 14, 2026
All other contributions to a Trump
account, including contributions from
friends or family members, are non-deductible contributions (they create investment in the contract) and count towards
the $5,000 annual contribution limit.
The proposed regulations (§ 1.530A-3)
are just one piece of the implementation
of section 530A; prior guidance addressed
the election to open an initial Trump
account (§ 1.530A-1), and future guidance will address other issues (§§ 1.530A2, 1.530A-4, 1.530A-5, 1.530A-6, and
1.530A-7). The proposed regulations
would define the following terms for the
purposes of implementing section 530A:
ETF, mutual fund, and investment fund.
For implementing section 530A, the definition of ETF is taken from 17 C.F.R.
§270.6c 11(a)(1), modified to include entities that operate in substantially the same
manner. For implementing section 530A,
the definition of mutual fund is taken
from 15 U.S.C. § 80a-5(a)(1), modified to
exclude ETFs. An investment fund is an
ETF or a mutual fund.
The proposed regulations would provide rules for determining whether an
investment fund is an eligible investment. The rules would clarify that an
investment fund (1) tracks the returns
of an index if it seeks to provide investment results that replicate the performance of the index and the fund
holds investments that are reasonably
expected to accomplish that objective,
(2) uses leverage if it uses borrowings,
derivatives, or other strategies that are
economically equivalent to borrowings
in a way that materially increases the
risk of loss associated with an investment in the fund, and (3) is not an eligible investment if it charges annual
fees and annual expenses of more than
0.1% of the net value of its assets. The
rules would clarify that an investment
fund is not an eligible investment if it
corresponds to the returns of an ESG
index. The rules would clarify that, to
be a qualified index, an index (1) must
have a publicly available index methodology, (2) must not include a stock or
similar ownership interest based on the
industry of the issuing company, and (3)
must be comprised of stocks and interests in companies that are primarily
domestic under section 7701(a)(4). The
September 14, 2026
rules would provide a safe harbor that
an index with at least 90 percent U.S.
companies by index weight is considered to be primarily U.S. companies.
The proposed regulations would provide procedures for a trustee of a Trump
account to ensure that funds are invested
in an eligible investment. A trustee would
be required to ensure that investment
funds available for a Trump account are
eligible investments and that contributions to a Trump account are invested
in an eligible investment by default.
A trustee would generally be required
to ensure that an investment fund held
by a Trump account that ceases to be
an eligible investment is disposed and
the proceeds reinvested in an eligible
investment within 30 days of ceasing to
be an eligible investment. However, if a
trustee makes periodic determinations of
whether an investment fund is an eligible
investment based on public documents
at least once every 12 months, then the
trustee would generally be permitted to
rely on the periodic determinations, and
the trustee would be required to ensure
that an investment fund that ceases to be
an eligible investment is disposed and the
proceeds reinvested within 30 days of the
periodic determination.
Baseline
The Treasury Department and the
IRS have assessed the benefits and costs
of the proposed regulations relative to a
no-action baseline reflecting anticipated
Federal income tax-related behavior in
the absence of these proposed regulations.
Affected Entities and Taxpayers
The proposed regulations are expected
to affect 85 million children in 44 million
families.
Economic Effects of the Proposed
Regulations
Share of U.S. equities
The proposed regulations would clarify how to apply the statutory requirement
that investment funds held by Trump
accounts track the returns of an index of
326
equities in “primarily” U.S. companies.
The proposed regulations would provide a safe harbor that an index with at
least 90 percent U.S. companies by index
weight is considered to be “primarily”
U.S. companies. Alternatives would be to
provide a safe harbor with a different percentage or no safe harbor. The 90 percent
threshold is low enough to accommodate
temporary changes in indexes that are
generally designed to track the returns
of U.S. companies and high enough to
clearly align with the statutory language.
A safe harbor gives trustees the legal certainty they need to provide appropriate
investment fund alternatives in Trump
accounts.
The statute explicitly allows investment funds to track the Standard & Poor’s
500 (S&P 500) stock market index. The
companies in the S&P 500 ended 2025
with a market capitalization of $58 trillion.
There are many other indexes that satisfy
the safe harbor. For example, the Center
for Research in Security Prices (CRSP)
U.S. total market index, which includes
companies that ended 2025 with a market capitalization of $65 trillion, and the
Nasdaq Composite index, which includes
companies that ended 2025 with a market capitalization of $35 trillion. Trustees
are likely to act cautiously by choosing
indexes that do not approach the safe harbor, so the impact of the safe harbor relative to a slightly different percentage or no
safe harbor is likely small.
Assessment frequency
The proposed regulations would clarify how often a trustee must determine
whether an investment fund held by
Trump accounts is an eligible investment. The proposed regulations would
allow a trustee to rely on periodic determinations of whether an investment fund
is an eligible investment based on public documents if the trustee makes the
periodic determinations at least once
every 12 months. Alternatives would be
to require assessment more frequently,
such as quarterly, or to require continuous monitoring. An annual determination
is frequent enough to identify changes in
fund or index eligibility, while avoiding a
continuous-monitoring requirement that
could discourage trustees from offering
Bulletin No. 2026–38
otherwise appropriate investment fund
alternatives. A safe harbor gives trustees
the legal certainty they need to administer Trump accounts without unnecessary
compliance costs.
Annual assessment is consistent with
other significant financial reporting
cycles. Public companies generally file
one annual report on Form 10-K each
year. Public companies also generally
file quarterly reports on Form 10-Q for
the first three fiscal quarters. Requiring
trustees to reassess fund eligibility more
often than annually could impose recurring review obligations that exceed what
is necessary to confirm that funds remain
aligned with statutory requirements.
Trustees are likely to act cautiously by
selecting funds and indexes that clearly
satisfy the requirements, so the impact of
allowing annual determinations relative
to a more frequent requirement is likely
small.
Disposal of ineligible investments
The proposed regulations would clarify how quickly a trustee must ensure
disposal of an investment fund held by
Trump accounts after the fund no longer satisfies the statutory requirements
(or after a periodic determination to that
effect). The proposed regulations would
allow a Trump account not to lose its
status as a Trump account if the disposal
occurs within 30 days. Alternatives would
be to allow shorter or longer remediation
periods or not to allow any remediation.
A 30-day period is short enough to ensure
that Trump accounts are not maintained
in ineligible investments for an extended
period and long enough to permit orderly
trading and operational processing. A reasonable remediation period gives trustees
the legal certainty they need to correct
eligibility issues without forcing rushed
transactions that may be impractical or
disadvantageous.
Correction periods in other retirement
and tax contexts commonly allow time
for orderly correction rather than requiring immediate action. For example, under
IRS self-correction rules, many significant retirement plan operational failures
may be corrected before the end of the
third plan year after the year of the failure.
The excise tax rules for prohibited transactions also distinguish between an initial
tax of 15 percent of the amount involved
and an additional 100 percent tax if the
transaction is not corrected within the taxable period. Compared with these longer
correction frameworks, a 30-day disposal
period is relatively prompt. Trustees are
likely to act cautiously by selecting funds
that clearly satisfy the requirements and
by disposing of ineligible investments
soon after an issue is identified, so the
impact of the 30-day remediation period
is likely small.
Prohibition on ESG criteria
The proposed regulations would specify that an investment fund is not an eligible investment for Trump accounts if
it corresponds to the returns of an ESG
index. An alternative would be to permit
funds that track ESG indexes. Whether
funds that track ESG indexes are available or not in Trump accounts has very
little economic impact. A meta-analysis
of ESG studies found that “ESG investing returns were generally indistinguishable from conventional investing
returns”.2 Demand for ESG indexes is a
small share of the market for passively
managed funds. At the end of 2025, U.S.
passively managed mutual funds and
ETFs held $19.4 trillion in net assets
while sustainable funds, including funds
that track ESG indexes, held $368 billion
in net assets, according to Morningstar.3,4
Given the small percentage of assets
invested in funds that track ESG indexes,
it is reasonable to believe that most adults
managing Trump accounts on behalf of
children would not have chosen investment funds that track ESG indexes even
if they were available.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) generally requires
that a Federal agency obtain the approval
of the OMB before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
The collections of information in these
proposed regulations contain third-party disclosure and recordkeeping requirements that
are necessary to ensure that no part of the
account funds will be invested in any asset
other than an eligible investment during
the growth period as required under section 530A(b)(1)(C)(iii). These collections
of information generally would be used by
the IRS for tax compliance purposes and by
account beneficiaries and trustees to ensure
the account qualifies as a Trump account.
This proposed regulation provides
that beneficiaries can direct trustees how
to allocate funds among eligible investments. Clients being able to allocate funds
within their accounts is a usual and customary business practice. Usual and customary business records are incurred as a
normal course of business activities and
are excluded from the definition of burden
under 5 CFR 1320.3(b)(2).
The proposed regulation includes thirdparty disclosures and associated recordkeeping requirements from trustees to
account beneficiaries (or “legally responsible parties”). IRS is soliciting feedback
on these collection requirements and their
associated burdens. IRS anticipates that
the likely respondents are businesses and
for-profit organizations. Table 1 provides
a high-level description of the collection
requirements and the regulatory section
that include additional details. Table 2
provides the estimated burden placed on
trustees for each collection requirement.
Whelan, Tensie, et al. ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015–2020. NYU Stern Center
for Sustainable Business and Rockefeller Asset Management, 2021. https://www.stern.nyu.edu/sites/default/files/assets/documents/ESG%20Paper%20Aug%202021.pdf
3
Carter, David, and Jack Bullard. U.S. Fund Flows: December 2025. Morningstar, 2026. https://assets.contentstack.io/v3/assets/blt9415ea4cc4157833/bltb441ce3c78f39445/2025_US_
Fund_Flows.pdf
4
Bioy, Hortense, et al. Global Sustainable Fund Flows: Q4 and Full-Year 2025 in Review. Morningstar Sustainalytics, 2026. https://assets.contentstack.io/v3/assets/blt9415ea4cc4157833/
blt1d54e64f88b82b3b/Global_ESG_Flows_Q4_2025_Report.pdf
2
Bulletin No. 2026–38
327
September 14, 2026
Table 1: Description of Collections
OMB Control
Number
1545-NEW
1545-NEW
1545-NEW
1545-NEW
1545-NEW
1545-NEW
Collection Type
Third-party Disclosure
and Recordkeeping
Third-party Disclosure
and Recordkeeping
Third-party Disclosure
and Recordkeeping
Third-party Disclosure
and Recordkeeping
Third-party Disclosure
and Recordkeeping
Recordkeeping
New or Revised
Collection
New
New
New
New
New
New
Description
Written governing instruments
Disclosure of a default eligible
investment
Disclosure of how dividends
are invested
Disclosure of a reinvestment
due to investment ineligibility
Disclosure of a reinvestment
due to administrative error
Periodic determinations of
account eligibility
Regulatory Section with
Additional Details
26 CFR 1.530A-3(g)(2)
26 CFR 1.530A-3(g)(4)(ii)
26 CFR 1.530A-3(g)(4)(iii)
26 CFR 1.530A-3(g)(5)(ii)
26 CFR 1.530A-3(g)(7)
26 CFR 1.530A-3(g)(6)
Table 2: Estimated Burden
Collection
26 CFR 1.530A-3(g)(2), (g)(4)(ii),
(g)(4)(iii) Draft the written governing
instruments and related disclosures
(start-up/one time burden)
26 CFR 1.530A-3(g)(2) - Obtaining
consent on written governing
instruments
26 CFR 1.530A-3(g)(6) - Periodic
determination of eligible investments
26 CFR 1.530A-3(g)(4)(ii) - Sending
disclosure notice
26 CFR 1.530A-3(g)(4)(iii) Sending disclosure notice
26 CFR 1.530A-3(g)(5)(ii) - Sending
disclosure notice5
26 CFR 1.530A-3(g)(7) - Sending
disclosure notice5
The collections contained in this notice
of proposed rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the
Paperwork Reduction Act under OMB
Control Number 1545-NEW. Commenters are strongly encouraged to submit
Estimated
number of
respondents
Estimated
frequency of
responses
Estimated average
annual burden per
response
Estimated total
annual burden
hours
4,600
1
40 hours
184,000
4,600
27,717
1 minute
2,124,970
4,600
3
8 hours
110,400
4,600
27,717
1 minute
2,124,970
4,600
27,717
1 minute
2,124,970
1
27,717
1 minute
462
1
27,717
1 minute
462
public comments electronically. Written
comments and recommendations for the
proposed information collection should be
sent to www.reginfo.gov/public/do/PRAMain, with copies to the Internal Revenue
Service. Find this particular information
collection by selecting “Currently under
Review - Open for Public Comments”
then by using the search function. Submit
electronic submissions for the proposed
information collection to the IRS via
email at pra.comments@irs.gov (indicate
CC-00349938-26 on the Subject line).
Comments on the collection of informa-
Disclosure events for ineligible investments are expected to occur extremely infrequently. In any given year, it’s anticipated that less than 1% of trustees will need to issue a particular
disclosure. Sending the disclosures is anticipated to be done electronically and be minimal burden on the trustee.
5
September 14, 2026
328
Bulletin No. 2026–38
tion should be received by October 20,
2026.
Comments are specifically requested
concerning: (a) Whether the proposed
collection of information is necessary for
the proper performance of the functions
of the IRS, including whether the information will have practical utility; (b) the
accuracy of the estimated burden associated with the proposed collection of information; (c) how the quality, utility, and
clarity of the information to be collected
may be enhanced; (d) how the burden of
complying with the proposed collection
of information may be minimized, including through the application of automated
collection techniques or other forms of
information technology; and (e) estimates
of capital or start-up costs and costs of
operation, maintenance, and purchase of
services to provide information.
comments on the impacts these proposed
regulations may have on small entities.
III. Regulatory Flexibility Act
V. Executive Order 13132: Federalism
The Secretary hereby certifies that
these proposed regulations would not
have a significant economic impact on a
substantial number of small entities pursuant to the Regulatory Flexibility Act
(5 U.S.C. chapter 6). The proposed rules
would not impose a significant economic
impact on any regulated entities because
the regulation’s economic impact on
entities is generally limited to requiring
procedures to be set up by the trustee to
ensure compliance with the statute and the
regulation, language in the written governing instrument, requiring disclosure of
the default eligible investment and how
dividends will be invested (or any changes
thereto), making periodic (likely annual)
determinations that investments are still
eligible investments, and rare disclosures
if a reinvestment has occurred because of
an ineligible investment. Because these
requirements are either one-time, rare,
or limited to internal determinations, any
economic impact is expected not to be
significant. Additionally, the proposed
regulations affect only trustees of Trump
accounts, which generally should not
include small entities and therefore should
not affect a substantial number of small
entities. Therefore, a Regulatory Flexibility Act analysis is not required.
Notwithstanding this certification, the
Treasury Department and the IRS invite
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local governments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive order. These proposed regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Bulletin No. 2026–38
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a State, local, or Tribal government,
in the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. These proposed
regulations do not include any Federal
mandate that may result in expenditures
by State, local, or Tribal governments,
or by the private sector in excess of that
threshold.
VI. Small Business Administration
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
will be submitted to the Chief Counsel for
the Office of Advocacy of the Small Business Administration for comment on its
impact on small business.
Comments and Request for a Public
Hearing
Before these proposed regulations
are adopted as final regulations, consideration will be given to any comments
that are submitted timely to the IRS as
prescribed in this preamble under the
329
ADDRESSES heading. The Treasury
Department and the IRS request comments on all aspects of the proposed
regulations. Any comments submitted
will be made available at https://www.
regulations.gov or upon request. A public
hearing will be scheduled if requested in
writing by any person who submits electronic or written comments. Requests for
a public hearing are also encouraged to be
made electronically. If a public hearing is
scheduled, notice of the date and time for
the public hearing will be published in the
Federal Register.
Statement of Availability of IRS
Documents
IRS Revenue Rulings, Revenue Procedures, Notices, and other guidance cited
in this document are published in the
Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the
Superintendent of Documents, U.S. Government Publishing Office, Washington,
DC 20402, or by visiting the IRS website
at https://www.irs.gov.
Drafting Information
The principal author of these proposed
regulations is Justin R. Karlin of the
Office of Associate Chief Counsel (Financial Institutions and Products). However,
other personnel from the Treasury Department and the IRS also participated in its
development. For further information
about these proposed regulations, contact
Mr. Karlin at (202) 317-6842 (not a tollfree number).
Lists of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry
September 14, 2026
for § 1.530A-3 in numerical order to read
as follows:
Authority: 26 U.S.C. 7805 * * *
*****
Section 1.530A-3 also issued under 26
U.S.C. 530A(b)(3)(A)(iv) and (g)(3).
*****
Par. 2. Section 1.530A-3 is added to
read as follows:
§ 1.530A-3 Trump accounts – Eligible
investments.
(a) Overview. Under section 530A(b)
(1)(C)(iii), for an account to qualify as
a Trump account, the written governing
instrument creating the account may not
permit any part of the account funds to
be invested in any asset other than an eligible investment during the period that
begins when the initial Trump account is
established and ends on December 31 of
the calendar year in which the account
beneficiary attains age 17 (the growth
period). Paragraph (b) of this section
provides definitions related to eligible
investments. Paragraph (c) of this section provides rules regarding whether
an investment fund tracks the returns
of an index. Paragraph (d) of this section provides rules regarding whether
an investment fund uses leverage. Paragraph (e) of this section provides rules
related to qualified indices. Paragraph
(f) of this section provides rules for
determining whether an investment fund
has annual fees and expenses within the
0.1 percent limit. Paragraph (g) of this
section provides procedures for a trustee
of a Trump account (trustee) to ensure
that no part of the account funds will be
invested in any asset other than an eligible investment. Paragraph (h) of this
section provides the applicability date of
this section.
(b) Definitions. The following definitions apply for purposes of section 530A
and this section:
(1) Eligible investment. The term eligible investment means any mutual fund
or exchange traded fund that tracks the
returns of a qualified index, does not use
leverage, does not have annual fees and
expenses of more than 0.1 percent of the
balance of the investment in the fund, and
meets such other criteria as the Secretary
of the Treasury or the Secretary’s delegate
September 14, 2026
(Secretary) determines appropriate for
purposes of section 530A.
(2) Exchange traded fund (ETF). The
term exchange traded fund (ETF) means
a domestic corporation (including a regulated investment company (RIC)) that is
registered under the Investment Company
Act of 1940, Public Law 76-768, 54 Stat.
789 (the 1940 Act), as amended, and that
is either-(i) An “exchange-traded fund” as
defined for purposes of the 1940 Act in 17
C.F.R. § 270.6c-11(a)(1); or
(ii) An entity that operates in substantially the same manner as an exchangetraded fund but that is not described in 17
C.F.R. § 270.6c-11(a)(1), such as a unit
investment trust or ETF share class of a
mutual fund operating as an ETF under
exemptive relief granted by the Securities
and Exchange Commission.
(3) Investment fund. The term investment fund means a mutual fund or an ETF.
(4) Mutual fund. The term mutual fund
means a domestic corporation (including
a RIC) that is registered under the 1940
Act as an open-end company (as defined
in 15 U.S.C. § 80a-5(a)(1)) and that is not
an ETF.
(5) Qualified index. The term qualified
index means the Standard and Poor’s 500
stock market index, or any other index
that is comprised of equity investments
in primarily United States companies and
for which regulated futures contracts (as
defined in section 1256(g)(1)) are traded
on a qualified board or exchange (as
defined in section 1256(g)(7)). A qualified index does not include any industry
or sector-specific index but may include
an index based on market capitalization.
Paragraph (e) of this section provides
rules for determining whether an index is
a qualified index.
(6) Regulated investment company
(RIC). The term regulated investment
company (RIC) means a regulated investment company within the meaning of section 851(a).
(c) Tracking the returns of an index-(1) In general. For purposes of section
530A(b)(3)(A)(i) and this section, an
investment fund tracks the returns of an
index if the fund’s investment objective is
to seek to provide investment results that,
before fees and expenses, replicate the performance of the index, and the fund holds
330
investments that are reasonably expected
to accomplish that objective. For example,
a fund may track the returns of an index by
holding shares of most or all of the stocks
that are constituents of the index in proportion to the stocks’ weightings in the index.
An investment fund does not fail to track
the returns of an index merely because the
returns from the fund are affected by fees,
expenses, trading costs, variations arising
from buying and selling securities when
the index changes, and similar variations
incidental to operating a fund that seeks
to replicate the performance of an index.
(2) Investment funds that do not track
the returns of an index. Except as provided in paragraph (c)(3) of this section,
an investment fund does not track the
returns of an index if the fund uses one
or more strategies to outperform or otherwise perform differently from the index.
Thus, an investment fund that, in some or
all market conditions, uses any strategy to
decrease or increase the volatility, risk, or
current income associated with the index
does not track the returns of the index. For
example, an investment fund that owns
shares of each stock that is a component of
an index and sells covered calls on some
or all of those shares does not track the
returns of the index, because the fund’s
strategy diminishes the fund’s participation in the potential appreciation in the
shares and increases the fund’s current
income. An investment fund that seeks to
provide investment results consistent with
the return on several different indices does
not track the returns of an index.
(3) Securities lending. An investment
fund does not fail to track the returns of
an index because the investment fund
engages in securities lending transactions
so long as the investment fund retains full
economic exposure to the securities.
(d) Does not use leverage--(1) In general. For purposes of section 530A(b)(3)
(A)(ii) and this section, an investment
fund that references an index is considered to use leverage if the fund uses borrowings, derivatives, or other strategies
that are economically equivalent to borrowings in a way that materially increases
the risk of loss associated with an investment in the investment fund (as compared
to an investment in a fund that holds the
index components physically and that
does not borrow or use derivatives). Thus,
Bulletin No. 2026–38
an investment fund uses leverage if, as
a result of borrowings or derivatives or
another economic equivalent, a change in
the level of the index the returns of which
the fund seeks to replicate tends to cause a
materially greater proportional change in
the net value of the fund’s portfolio. For
example, an investment fund is considered to use leverage if the fund provides
investment results that correspond to the
performance of an index multiplied by a
number greater than one (regardless of
whether the fund uses borrowings, derivatives, or another economic equivalent to
provide such results).
(2) Permitted borrowings and derivatives. An investment fund is not considered to use leverage merely because
it borrows or uses derivatives as part of
its strategy to replicate the performance
of an index, so long as the borrowings
or derivatives do not materially increase
the risk of loss associated with an investment in the investment fund. Thus, an
investment fund is not considered to use
leverage merely because the fund incurs
short-term borrowings to provide liquidity
for redemptions or to purchase portfolio
securities in connection with investment
flows into the fund or because the fund
uses derivatives to gain synthetic exposure to certain index components. An
investment fund’s obligation to return
collateral received for securities lending
transactions described in paragraph (c)(3)
of this section is not treated as leverage so
long as the investment fund takes appropriate steps to limit the risk of loss with
respect to the collateral. To limit the risk
of loss with respect to cash collateral, the
investment fund must hold the collateral
in cash or in highly liquid, conservative
positions (like money market funds). To
limit the risk of loss with respect to noncash collateral, the investment fund must
not sell the collateral or otherwise use
the collateral (for example, by pledging
it as collateral in another transaction) to
increase the fund’s exposure to the index
or other assets.
(e) Qualified index--(1) In general.
This paragraph (e) provides rules to determine whether an index is a qualified index
within the meaning of section 530A(b)(3)
(B) and paragraph (b)(5) of this section. To
be a qualified index, an index must have a
publicly available index methodology that
Bulletin No. 2026–38
describes the criteria for inclusion in the
index and the construction of the index.
Whether an index meets the requirements
in this paragraph (e) is generally determined by reference to the index methodology for the index.
(2) Industry-specific and sector-specific indices. For purposes of section
530A(b)(3)(B) and paragraph (b)(5) of
this section, an index is industry-specific
or sector-specific if inclusion of a stock
or interest in the index depends on the
business or industry in which the issuing
company is engaged. Thus, any index that
depends on industry classification codes
for inclusion of a company in the index
is an industry-specific or sector-specific
index. Similarly, an index that includes
stocks of companies operating in several related industries or sectors (such as
hotels, air travel, and outdoor recreation)
is an industry-specific or sector-specific
index.
(3) Other index-related criteria for eligible investments. Any investment fund
that corresponds to the returns of an environmental, social, and governance (ESG)
index is not an eligible investment. An
ESG index includes any index that has,
or is marketed as having, a focus on environmental, social, or governance factors.
Any investment fund that is marketed or
sold as having an investment objective
to track an ESG index is not an eligible
investment.
(4) Market capitalization. For purposes
of section 530A(b)(3)(B) and paragraph
(b)(5) of this section, an index is based on
market capitalization if a condition for the
inclusion of a company’s stock (or other
ownership interests) in the index is that
the company has a market capitalization
that is within a specified range or over or
under a specified threshold, or that meets
specified ranking criteria. Therefore, an
index that meets the requirements to be a
qualified index in section 530A(b)(3)(B)
and this paragraph (e) does not fail to be a
qualified index as a result of such a condition for inclusion.
(5) Equity investments. For purposes of
section 530A(b)(3)(B) and paragraph (b)
(5) of this section, an index is considered
to be comprised of equity investments if
the index is comprised entirely of stocks
and similar ownership interests in the
form of partnership or membership inter-
331
ests. An index is not comprised of equity
investments if it includes debt instruments, derivatives, or any other asset that
is not an ownership interest in a company.
(6) United States companies. For purposes of section 530A(b)(3)(B) and paragraph (b)(5) of this section, United States
companies (U.S. companies) are companies that are domestic under section
7701(a)(4).
(7) Safe harbor for indices that include
interests in foreign companies. For purposes of section 530A(b)(3)(B) and paragraph (b)(5) of this section, an index is
comprised primarily of U.S. companies if
U.S. companies represent at least 90 percent of the index based on their weightings in the index.
(f) Limit on annual fees and
expenses--(1) In general. For purposes of
section 530A(b)(3)(A)(iii) and this section, an investment fund is not an eligible
investment if the sum of its annual fees (as
described in paragraph (f)(2) of this section) and annual expenses (as described
in paragraph (f)(3) of this section) is more
than 0.1 percent of the net value of its
assets.
(2) Annual fees--(i) In general. Except
as provided in the following sentence, the
amount of an investment fund’s annual
fees for purposes of section 530A(b)(3)
(A)(iii) and this section is the aggregate
amount of fees of the investment fund (as
described in paragraph (f)(2)(ii) of this
section) imposed during the most recent
fiscal year (within the meaning of 17
C.F.R. § 210.1-02(k)) of the investment
fund the financial data from which has
appeared in the investment fund’s prospectus, expressed as a percentage of the
investment fund’s average net asset value
during that fiscal year (or a reasonable
estimate). If an investment fund’s most
recent prospectus discloses a change in
the investment fund’s fee structure that
increases the investment fund’s aggregate
annual fees, the computation described
in the preceding sentence must take into
account the effect of such increase (or a
reasonable estimate). If an investment
fund has multiple share classes, annual
fees are computed separately for each
class, based on the fees that apply to that
class and the assets allocable to that class.
(ii) Fees of an investment fund. For purposes of section 530A(b)(3)(A)(iii) and
September 14, 2026
this section, an investment fund’s fees are
all of the amounts that the fund charges
its investment fund holders directly, without regard to how such amounts are computed, when they are imposed, or how
such amounts are referred to in securities
filings or marketing materials. Thus, fees
include annual, periodic, transactional,
and other recurring amounts charged by
an investment fund. Fees also include
amounts charged by an investment fund
a single time, such as upon a purchase or
redemption of interests in the investment
fund. Fees include amounts expressed as a
fixed dollar amount, as a percentage of the
amount invested, or on another basis. An
investment fund’s fees are disclosed in the
fund’s prospectus, often under the heading
“Shareholder Fees” or “Unitholder Fees”
in a fee table.
(iii) Fees not associated with an investment fund. The 0.1 percent limit on fees
and expenses in section 530A(b)(3)(A)(iii)
is a requirement for an eligible investment
and not for a Trump account. Fees charged
by a trustee for providing an account are
not treated as part of any investment
fund’s annual fees but as trustee fees. A
fee charged by a financial intermediary
for a service, such as carrying out a purchase or sale of an investment fund is not
considered a part of the investment fund’s
fees if the fee is not charged on behalf of
or at the direction of the investment fund,
is not paid (directly or indirectly) to the
investment fund, and is not attributable to
any cost of offering the investment fund.
A fee charged by a trustee for such a service would also not be considered a part
of the investment fund’s fees under this
paragraph.
(3) Annual expenses. For purposes of
section 530A(b)(3)(A)(iii) and this section, the amount of an investment fund’s
annual expenses is the amount set forth
as the investment fund’s total annual
operating expenses in its prospectus.
The amount may be stated as a percentage of the value of the investment fund
holder’s investment, or as a percentage
of the net value of the fund’s net assets.
If an investment fund’s prospectus lists
total operating expenses reduced by fee
waivers or expense reimbursements, the
reduced amount applies for purposes of
section 530A(b)(3)(A)(iii) and this section. If an investment fund has multiple
September 14, 2026
share classes, annual expenses are computed separately for each class, based on
the expenses and assets allocable to each
class.
(g) Trustee’s procedures regarding eligible investments--(1) In general. To meet
the requirement of section 530A(b)(1)
(C)(iii), a trustee must ensure that Trump
account funds are invested only in one
or more eligible investments during the
growth period. The trustee satisfies that
requirement by following the procedures
provided in this paragraph (g).
(2) Written governing instrument. The
written governing instrument creating a
Trump account must include the procedures provided in paragraphs (g)(4), (5),
and (7) of this section.
(3) Consequences of failure. Except as
otherwise provided in this paragraph (g),
if any funds of an account are invested in
an asset other than an eligible investment
(ineligible investment) during the growth
period, then the account will cease to be a
Trump account (and thus will also cease
to be an individual retirement account
(IRA) under section 408(a)) as of the
first day the account holds the ineligible
investment. However, if any funds of an
account are invested in an asset that is an
eligible investment at the time the asset is
acquired but that becomes an ineligible
asset during the growth period, then the
account will cease to be a Trump account
(and an IRA) as of the 30th day after the
day that the asset ceased to be an eligible
investment (taking into account paragraph
(g)(5)(ii) of this section). If this paragraph
(g)(3) applies to cause an account to cease
to be a Trump account (and an IRA), then
the account will be treated as if there were
a distribution on that day of an amount
equal to the fair market value of all of the
assets in the account on that day. The preceding sentence applies even if part of the
fair market value of the account as of that
day is attributable to excess contributions
that may otherwise be returned tax-free
under section 530A(d)(5).
(4) Selection of eligible investment
and default eligible investment--(i) Selection of eligible investments. A trustee
must limit the investment or investments
available for a Trump account during the
growth period to investment funds that the
trustee has determined are eligible investments.
332
(ii) Default eligible investment. The
trustee must establish for each Trump
account under the trustee’s administration
a default eligible investment in which,
during the growth period, all contributions, proceeds from sales or other dispositions, and any other amounts for investment (other than amounts addressed by
paragraph (g)(4)(iii) of this section) will
be invested unless the account beneficiary
(as defined in section 530A(b)(4)) (or
any person authorized to act on behalf of
the account beneficiary under the Trump
account’s written governing instrument
(the responsible party)) specifies a different eligible investment for the contribution or other amount. The default eligible
investment for a Trump account can be a
single eligible investment or a combination of eligible investments in specified
proportions and may be changed by the
trustee from time to time. The trustee
must clearly disclose to each account
beneficiary the default eligible investment in effect upon the establishment
of the account and upon any subsequent
change to the default eligible investment.
The requirement to establish a default
eligible investment does not preclude
arrangements between the trustee and
the account beneficiary that give effect
to different instructions on an ongoing
basis. For example, the trustee may follow
instructions of an account beneficiary (or
responsible party) to invest all contributions or other amounts for investment in
that account beneficiary’s account (or all
such amounts for which another instruction is not provided) in a specified eligible
investment other than the trustee’s default
eligible investment.
(iii) Dividends and other investment
fund distributions. The trustee of a Trump
account must disclose to the account beneficiary how amounts received as dividends or other distributions from eligible
investments will be invested unless the
account beneficiary (or responsible party)
gives different instructions regarding the
dividends and distributions. For example,
amounts received as dividends and distributions might be reinvested in the same
eligible investments that paid the dividends or other distributions or invested
in the Trump account’s default eligible
investment. The trustee may give effect
to directions from the account beneficiary
Bulletin No. 2026–38
(or responsible party) that a specific distribution, or distributions generally, be
invested in a different way that complies
with section 530A(b)(1)(C)(iii).
(5) Situations in which funds need not
be invested in an eligible investment--(i)
Certain cash holdings. During the growth
period, the trustee may permit an amount
received in a Trump account as cash, such
as an amount received as a contribution,
proceeds of a sale or other disposition, or
a distribution, to be held in cash for the
time reasonably necessary to complete a
transaction permitted under section 530A,
including an investment, reinvestment,
distribution of excess contribution, qualified rollover contribution, or qualified
ABLE rollover contribution.
(ii) Ceasing to be an eligible investment--(A) In general. In the event an
investment fund that was an eligible
investment (as determined by the trustee
as of the trustee’s last determination date
described in paragraph (g)(6) of this section) then ceases to be an eligible investment during the growth period, in order for
the account to remain a Trump account,
the trustee must ensure the prompt sale
or disposition of shares in the investment
fund and the reinvestment of the proceeds
consistent with paragraph (g)(4)(ii) of this
section and disclose how the proceeds
were reinvested to the account beneficiary. A sale or disposition of shares in the
investment fund and the reinvestment of
the proceeds will be considered prompt if
the sale or disposition and reinvestment
of the proceeds occur within 30 calendar
days of the investment fund ceasing to be
an eligible investment.
(B) Time when a fund is treated as
ceasing to be an eligible investment. For
purposes of this paragraph (g)(5)(ii), the
time when the investment fund is treated
as ceasing to be an eligible investment is
determined based on whether the trustee
is in compliance with the monitoring and
periodic determination requirements in
paragraph (g)(6) of this section.
(1) If the trustee is not in compliance
with the monitoring and periodic determination requirements of paragraph (g)
(6) of this section, the investment fund
ceases to be an eligible investment on the
first day that the investment fund does
not meet the requirements to be an eligible investment;
Bulletin No. 2026–38
(2) If the trustee is in compliance with
the monitoring and periodic determination
requirements of paragraph (g)(6) of this
section, the investment fund is treated as
ceasing to be an eligible investment on
the earlier of the date of the next periodic
determination conducted by the trustee
or the date on which the trustee acquires
actual knowledge that the investment is no
longer an eligible investment.
(6) Trustee monitoring of investment
funds. During the growth period, the
trustee must monitor each investment
fund that the trustee makes available to
Trump account beneficiaries. After making an initial determination that an investment fund is an eligible investment at the
time the trustee first offers the investment
fund to any Trump account for which it
is the trustee, the trustee must then make
subsequent periodic determinations at
least once every 12 months whether the
investment fund continues to be an eligible investment. These determinations
must include verifying that the annual
fees and expenses of the investment fund
continue to meet the requirements of section 530A(b)(3)(A)(iii) and paragraph (f)
of this section. The trustee may rely on an
investment fund’s prospectus and other
public documents required by Federal
securities laws in making determinations
pursuant to this paragraph (g)(6).
(7) Correction of administrative error.
If a trustee has procedures in place in
accordance with this paragraph (g) but a
portion of the assets of a Trump account
are not invested in an eligible investment during the growth period due to an
administrative error by the trustee (for
example, due to an oversight or mistake
in applying the procedures), the account
will not cease to be a Trump account
under paragraph (g)(3) of this section if
the trustee sells or disposes of the assets
that are not invested in an eligible investment and reinvests the proceeds in an
eligible investment consistent with paragraph (g)(4)(ii) of this section within
30 calendar days from the first day that
the portion was not invested in an eligible investment. Furthermore, the trustee
must disclose to the account beneficiary
the duration of the error, the assets that
were held during the error period, and the
amount reinvested in an eligible investment at the end of the error period.
333
(h) Applicability dates. This section
applies to taxable years beginning on or
after January 1, 2026, except for paragraph (g) of this section, which applies for
taxable years beginning on or after [DATE
OF PUBLICATION OF FINAL RULE].
Frank J. Bisignano,
Chief Executive Officer.
(Filed by the Office of the Federal Register August
20, 2026, 8:45 a.m., and published in the issue of the
Federal Register for August 21, 2026, 91 FR 54280)
Notice of Proposed
Rulemaking
Determination of Target
Normal Cost and Funding
target for Single-Employer
Defined Benefit Plans
REG-107855-25
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations that would modify
rules in the existing regulations relating
to the minimum funding requirement
applicable to single-employer defined
benefit pension plans. The modifications
include changes to the rules relating to
the determination of a plan’s target normal cost and funding target and would
implement certain statutory amendments
that have not yet been reflected in the
regulations. These proposed regulations
would affect participants in, beneficiaries
of, employers maintaining, and administrators of single-employer defined benefit
plans.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 19, 2026.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
September 14, 2026
electronically. Submit electronic submissions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-107855-25) by following
the online instructions for submitting comments. Requests for a public hearing must
be submitted as prescribed in the “Comments and Requests for a Public Hearing”
section. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish for public availability
any comment received to its public docket.
Send paper submissions to: CC:PA:01:PR
(REG-107855-25), room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Tom Morgan at (202) 3176700; concerning submissions of comments and requests for a public hearing,
contact the Publications and Regulations
Section at (202) 317-6901 (not a toll-free
number) or by email to publichearings@
irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
The proposed regulations are issued
under the delegation of authority in section 430(g)(3)(B) of the Internal Revenue
Code (Code), which provides that a plan
may determine the value of plan assets on
the basis of the averaging of fair market
values, but only if that method is permitted under regulations prescribed by the
Secretary of the Treasury or the Secretary’s delegate (Secretary); and section
430(h)(3), which provides that, generally,
the Secretary shall prescribe by regulation
mortality tables to be used in determining
any present value or making any computation under section 430.
In addition, the proposed regulations
are issued under the delegation of authority in section 7805. Section 7805(a)
directs the Secretary of the Treasury or his
delegate to prescribe all needful rules and
regulations for the enforcement of that
1
section and other provisions of the Code,
including such rules and regulations as
may be necessary by reason of any alteration of law relating to internal revenue.
Background
This document contains proposed
amendments to the Income Tax Regulations (26 CFR part 1) under section 430 of
the Code, which was added by the Pension
Protection Act of 2006, Public Law 109280, 120 Stat. 780 (2006). The proposed
amendments to the regulations primarily
reflect changes to section 430 of the Code
made by: (1) the Worker, Retiree, and
Employer Recovery Act of 2008 (WRERA
‘08), Public Law 110-458, 122 Stat. 5092
(2008); (2) the Setting Every Community
Up for Retirement Enhancement Act of
2019 (SECURE Act), Division O of the
Further Consolidated Appropriations Act,
2020, Public Law 116-94, 133 Stat. 2534
(2019); and (3) the SECURE 2.0 Act of
2022 (SECURE 2.0 Act), Division T of
the Consolidated Appropriations Act,
2023, Public Law 117-328, 136 Stat. 4459
(2022).
A. Plan qualification timing rules under
section 401(b)
Section 401(b)(1), as amended by section 201 of the SECURE Act, provides
that a plan is considered as satisfying
the qualification requirements of section
401(a) for the period beginning with the
date on which it was put into effect, or for
the period beginning with the earlier of the
date on which there was adopted or put
into effect any amendment that caused the
plan to fail to satisfy those requirements,
and ending with the time prescribed by
law for filing the return of the employer
for his taxable year in which the plan or
amendment was adopted (including extensions) or any later time as the Secretary
may designate, if all provisions of the plan
that are necessary to satisfy those requirements are in effect by the end of that
period and have been made effective for
all purposes for the whole of that period.
Section 401(b)(2), as added by section
201 of the SECURE Act and amended
by Section 317 of the SECURE 2.0 Act,
provides that if an employer adopts a plan
after the close of a taxable year but before
the time prescribed by law for filing the
return of the employer for the taxable year
(including extensions), then the employer
may elect to treat the plan as having been
adopted as of the last day of the taxable
year.
Section 401(b)(3), as added by Section
316 of the SECURE 2.0 Act, provides
that if (A) an employer amends a plan
to increase benefits accrued under the
plan effective as of any date during the
immediately preceding plan year (other
than increasing the amount of matching contributions), (B) that amendment
would not otherwise cause the plan to fail
to meet any of the requirements of sections 401 through 436 of the Code, and
(C) that amendment is adopted before
the time prescribed by law for filing the
return of the employer for the taxable year
(including extensions) which includes the
effective date of the amendment, then the
employer may elect to treat that amendment as having been adopted as of the last
day of the plan year in which the amendment is effective.
Section 1.401(b)-1 provides rules
regarding remedial amendments under
section 401(b). Under § 1.401(b)-1(a),
a plan that does not satisfy the requirements of section 401(a) on any date solely
as a result of a disqualifying provision
(as determined under § 1.401(b)-1(b)) is
considered to have satisfied those requirements on that date if, on or before the end
of the remedial amendment period (as
defined in § 1.401(b)-1(d) through (f) with
respect to the disqualifying provision), all
provisions of the plan that are necessary
to satisfy all requirements under section
401(a) are in effect and have been made
effective for all purposes for the entire
remedial amendment period. The second
sentence of § 1.401(b)-1(a) notes that
under some facts and circumstances, it
may not be possible to amend a plan retroactively so that all provisions of the plan
which are necessary to satisfy the requirements of section 401(a) are in fact made
effective for the whole remedial amendment period.1
In these circumstances, the plan would have to be operated in accordance with the expected future amendment prior to when the amendment is adopted.
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Pursuant to § 1.401(b)-1(d)(2), the
remedial amendment period generally ends with the time prescribed by
law, including extensions, for filing the
income tax return (or partnership return of
income) of the employer for the employer’s taxable year in which falls the latest
of: (1) the date on which the remedial
amendment period begins, (2) the date
on which the disqualifying provision is
adopted, or (3) the date on which the disqualifying provision is made effective.
However, under § 1.401(b)-1(d)(2), the
Commissioner may extend the remedial
amendment period.
Revenue Procedure 2022-40, 2022-47
I.R.B. 487, extended the expiration of the
remedial amendment period for a disqualifying provision with respect to a provision
of a new plan or the absence of a provision
from a new plan to the last day of the second calendar year following the calendar
year in which the plan is put into effect. In
addition, many deadlines for plan amendments made pursuant to specific legislative changes have been further extended
in the corresponding legislation. See, for
example, section 501 of the SECURE 2.0
Act.
B. Minimum funding requirements and
related provisions for single-employer
defined benefit plans
Statutory provisions
Section 412 provides minimum funding requirements that generally apply for
pension plans (including both defined
benefit pension plans and money purchase
pension plans). Pursuant to section 412(a)
(2)(A), section 430 specifies the minimum funding requirements that apply to
single-employer defined benefit pension
plans (including multiple-employer plans)
other than CSEC plans described in section 414(y).
Section 412(d)(1) provides that if the
funding method or a plan year for a plan
is changed, the change will take effect
only if approved by the Secretary.2 Section 412(d)(2) provides that, for purposes
of section 412, any amendment applying
to a plan year which is adopted no later
than 2½ months after the close of the plan
year (or, in the case of a multiemployer
plan, no later than 2 years after the close
of such plan year), does not reduce the
accrued benefit of any participant determined as of the beginning of the first plan
year to which the amendment applies, and
does not reduce the accrued benefit of any
participant determined as of the time of
adoption except to the extent required by
the circumstances, will, at the election of
the plan administrator, be deemed to have
been made on the first day of the plan year.
Under section 430, the minimum
required contribution for a plan year is a
function of the target normal cost under
section 430(b)(1), shortfall amortization
charge under section 430(c)(1), funding
target under section 430(d)(1), waiver
amortization charge under section 430(e)
(1), and value of plan assets under section
430(g)(3). If the value of plan assets (less
the sum of the plan’s prefunding balance
and funding standard carryover balance
determined under section 430(f)) is less
than the funding target, section 430(a)
(1) defines the minimum required contribution as the sum of the plan’s target
normal cost and the shortfall and waiver
amortization charges for the plan year. If
the value of plan assets (less the sum of
the plan’s prefunding balance and funding standard carryover balance) equals or
exceeds the funding target, section 430(a)
(2) defines the minimum required contribution as the plan’s target normal cost for
the plan year reduced (but not below zero)
by the amount of any such excess.
Section 430(b)(1) as amended by
WRERA ‘08, provides that, except as
otherwise provided in section 430(i)(2)
(regarding a plan that is in at-risk status), a plan’s target normal cost for a plan
year is the sum of the present value of all
benefits expected to accrue or be earned
under the plan during the plan year (with
any increase in any benefit attributable to
services performed in a preceding plan
year by reason of a compensation increase
during the current plan year treated as
having accrued during the current plan
year) and the amount of plan-related
expenses expected to be paid from plan
assets during the plan year, reduced by the
amount of mandatory employee contributions expected to be made during the plan
year.
Section 430(d)(1) provides that, except
as otherwise provided in section 430(i)(1)
(regarding a plan that is in at-risk status),
a plan’s funding target for a plan year is
the present value of all benefits accrued or
earned under the plan as of the beginning
of the plan year.
Under section 430(h)(5), if, with
respect to a single-employer defined benefit plan, the aggregate unfunded vested
benefits as of the close of the preceding
plan year (combined with the unfunded
vested benefits for all other plans maintained by the contributing sponsors and
members of such sponsors’ controlled
groups) exceeded $50 million, then certain changes in actuarial assumptions
must be approved by the Secretary. The
changes in actuarial assumptions that
require approval are changes that result in
a decrease in the funding shortfall of the
plan for the current plan year (determined
after taking into account any changes
in interest rate and mortality table) that
exceeds $50 million (or that exceeds $5
million and that is 5 percent or more of
the funding target of the plan before that
change).
Section 404(o)(6) provides that any
computations under section 404(o), which
relates to the deduction for contributions
to a single-employer defined benefit plan,
must use the same actuarial assumptions
that are used for the plan year under section 430, except that the interest rate corridor under section 430(h)(2)(C)(iv) does
not apply, and section 404(o)(7) provides
that any term used in section 404(o) which
is also used in section 430 has the same
meaning given to that term by section 430.
Thus, except for the difference in interest
rates, the funding target and target normal
cost under section 430 (determined taking into account plan provisions that are
recognized under the rules of section 430)
are also used to determine the maximum
deductible contributions under section
404(o).
The Secretary has prescribed procedures allowing plans subject to section 412 to receive automatic approval to change their funding method in limited circumstances. See Rev. Proc. 2017-56,
2017-44 IRB 465 (applicable to single-employer plans), and Rev. Proc. 2000-40, 2000-42 IRB 357 (applicable to multiemployer plans). The Secretary has also prescribed procedures allowing
plans to receive automatic approval to change their plan year if certain conditions are met. See Rev. Proc. 87-27, 1987-1 CB 769, as amended by Ann. 88-97, 1988-26 IRB 47.
2
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September 14, 2026
Section 436(c)(1) provides that, generally, no amendment to a defined benefit plan which is a single-employer plan
which has the effect of increasing liabilities of the plan by reason of increases in
benefits, establishment of new benefits,
changing the rate of benefit accrual, or
changing the rate at which benefits become
nonforfeitable may take effect during any
plan year if the adjusted funding target
attainment percentage (AFTAP) for such
plan year is less than 80 percent, or would
be less than 80 percent taking into account
the amendment.3 However, section 436(c)
(2) provides that such an amendment can
take effect if the plan sponsor makes a
contribution (in addition to the minimum
required contribution) equal to the amount
of the increase in the funding target of the
plan for the plan year attributable to the
amendment (if the AFTAP is less than 80
percent) or (in other cases) the amount
necessary to result in an AFTAP of 80 percent.
Regulatory provisions
On October 15, 2009, final regulations
regarding the determination of the target
normal cost under section 430(b) and the
funding target under section 430(d) were
published in the Federal Register (TD
9467, 74 FR 53004). Those regulations
apply to plan years beginning on or after
January 1, 2010.
Section
1.430(d)-1(b)(1)(i)
provides that, subject to the adjustments in
§ 1.430(d)-1(b)(1)(iii), the target normal
cost of a defined benefit plan that is not
in at-risk status under section 430(i) for a
plan year is the present value (determined
as of the valuation date) of all benefits
under the plan that accrue during, are
earned during, or are otherwise allocated
to service for the plan year.
Section 1.430(d)-1(b)(1)(iii)(A) provides that the target normal cost of the
plan for the plan year is adjusted (not
below zero) by adding the amount of
plan-related expenses expected to be paid
from plan assets during the plan year and
subtracting the amount of mandatory
employee contributions that are expected
to be made during the plan year. Section
3
1.430(d)-1(b)(1)(iii)(B) is reserved for a
definition of plan-related expenses.
Under § 1.430(d)-1(d)(1)(i), a plan’s
funding target and target normal cost for a
plan year generally are determined based
on plan provisions that are adopted no
later than the valuation date for the plan
year and that take effect on or before the
last day of the plan year.
Section 1.430(d)-1(d)(1)(ii) provides
rules regarding the impact of an election
under section 412(d)(2), which is available
with respect to a plan amendment adopted
no later than 2½ months after the close of
the plan year (including an amendment
adopted during the plan year). Under
§ 1.430(d)-1(d)(1)(ii), if a plan administrator makes the election described in
section 412(d)(2) with respect to a plan
amendment, then the plan amendment
is treated as having been adopted on the
first day of the plan year for purposes of
§ 1.430(d)-1(d). However, because a section 412(d)(2) election merely deems the
amendment to have been made on the first
day of the plan year, it does not determine
when the plan amendment takes effect.
Accordingly, regardless of whether a section 412(d)(2) election is made, an amendment is taken into account for the plan
year only if it takes effect by the last day
of the plan year.
Section 1.430(d)-1(d)(1)(iii) provides
that, for purposes of § 1.430(d)-1(d)(1),
the determination of whether an amendment that increases benefits takes effect
and when it takes effect is determined
in accordance with the rules of section
436(c) and § 1.436-1(c)(5). Section 1.4361(c)(5) provides that, for purposes of section 436(c) and § 1.436-1(c), in the case
of an amendment that increases benefits,
the amendment takes effect under a plan
on the first date on which any individual
who is or could be a participant or beneficiary under the plan would obtain a legal
right to the increased benefit if the individual were on that date to satisfy the applicable requirements for entitlement to the
benefit (such as the attainment of any age,
performance of any service, receipt or derivation of any compensation, or the occurrence of death, disability, or severance
from employment). Section 1.430(d)-1(d)
(1)(iii) similarly provides that in the case
of an amendment that decreases benefits,
the amendment takes effect under a plan
on the first date on which the benefits of
any individual who is or could be a participant or beneficiary under the plan would
be less valuable than those benefits would
be under the pre-amendment plan provisions if the individual were on that date
to satisfy the applicable conditions for the
benefits.
Section 1.430(d)-1(d)(2) provides that,
in the case of a plan amendment that is not
required to be taken into account under
the rules of § 1.430(d)-1(d)(1) because it
is adopted after the valuation date for the
plan year, the plan amendment must be
taken into account in determining a plan’s
funding target and target normal cost for
the plan year if the amendment (i) takes
effect by the last day of the plan year;
(ii) increases the liabilities of the plan by
reason of increases in current benefits,
establishment of new benefits, changing
the rate of benefit accrual, or changing the
rate at which benefits become nonforfeitable; and (iii) would not be permitted to
take effect under a modified version of the
rules of section 436(c). The modified version of the section 436(c) rules is set forth
in § 1.430(d)-1(d)(2)(iii), which provides
that those rules are applied by treating the
increase in the target normal cost for the
plan year attributable to the amendment
(and all other amendments that must be
taken into account solely because of the
application of the rules in § 1.430(d)-1(d)
(2)) as if the increase were an increase in
the funding target for the plan year, and by
taking into account all unpredictable contingent event benefits permitted to be paid
for unpredictable contingent events that
occurred during the current plan year and
all plan amendments that took effect in the
current plan year (including all amendments to which § 1.430(d)-1(d)(2) applies
for the plan year).
C. Actuarial assumptions
Section 1.430(d)-1(f)(1)(i) provides
that the determination of any present
value or other computation under section
430 and this section must be made on
Section 436(c)(3) provides for a limited exception for certain benefit increases under a formula which is not based on a participant’s compensation.
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the basis of actuarial assumptions and a
funding method. Section 1.430(d)-1(f)(1)
(ii) provides that actuarial assumptions
established for a plan year cannot subsequently be changed for that plan year
unless the Commissioner determines that
the assumptions that were initially used
are unreasonable. Similarly, a funding
method established for a plan year cannot subsequently be changed for that plan
year unless the Commissioner determines
that the initial use of that funding method
for that plan year is impermissible. Section 1.430(d)-1(f)(1)(iii) provides that
generally, the actuarial assumptions and
funding method for a plan year are established by the filing of an actuarial report
under section 6059 (Schedule SB of Form
5500, Annual Return/Report of Employee
Benefit Plan).
Section 1.430(d)-1(f)(3) provides that,
in the case of actuarial assumptions other
than those specified in sections 430(h)(2),
430(h)(3), and 430(i), each of those actuarial assumptions must be reasonable (taking into account the experience of the plan
and reasonable expectations). In addition,
the actuarial assumptions (other than those
specified in sections 430(h)(2), 430(h)(3),
and 430(i)) must, in combination, offer
the plan’s enrolled actuary’s best estimate
of anticipated experience under the plan
based on information determined as of the
valuation date.
Section 1.430(d)-1(f)(4)(ii) provides
that any determination of present value or
any other computation under that section
must take into account the probability that
future benefit payments under the plan will
be made in the form of any optional form
of benefit provided under the plan (including single-sum distributions), determined
on the basis of the plan’s experience and
other related assumptions, in accordance
with § 1.430(d)-1(f)(3); and must take into
account any difference in the present value
of future benefit payments that results
from the use of actuarial assumptions in
determining the amount of benefit payments in any such optional form of benefit
that are different from those prescribed by
section 430(h).
Section 1.430(d)-1(f)(4)(iii)(A) provides that, in the case of a distribution that
is subject to section 417(e)(3) and that is
determined using the applicable interest
rates and applicable mortality table under
section 417(e)(3), for purposes of applying § 1.430(d)-1(f)(4)(ii), the computation
of the present value of that distribution is
treated as having taken into account any
difference in present value that results
from the use of actuarial assumptions
that are different from those prescribed
by section 430(h) (as required under
§ 1.430(d)-1(f)(4)(ii)(B)) if and only if the
present value of the distribution is determined in accordance with § 1.430(d)-1(f)
(4)(iii).
Section 1.430(d)-1(f)(4)(iii)(B) provides that, generally, the present value of
a distribution is determined in accordance
with § 1.430(d)-1(f)(4)(iii) if that present
value is determined as the present value,
using special actuarial assumptions, of the
annuity (either the deferred or immediate
annuity) which is used under the plan to
determine the amount of the distribution.
Under these special assumptions, for the
period beginning with the expected annuity starting date for the distribution, the
current applicable mortality table under
section 417(e)(3) that would apply to a
distribution with an annuity starting date
occurring on the valuation date is substituted for the mortality table under section
430(h)(3) that would otherwise be used. In
addition, under these special assumptions,
the valuation interest rates under section
430(h)(2) are used for purposes of discounting the projected annuity payments
from their expected payment dates to the
valuation date (as opposed to the interest
rates under section 417(e)(3), which the
plan uses to determine the amount of the
benefit).
Section 1.430(d)-1(f)(4)(iii)(C) provides some alternative assumptions
that may be used in determining the
present value of a distribution under
§ 1.430(d)-1(f)(4)(iii). In the case of a
plan for which the generational mortality tables are generally used to determine
present values under section 430(d),
§ 1.430(d)-1(f)(4)(iii)(C) allows for the
use of a 50-50 male-female blend of
the annuitant mortality rates under the
§ 1.430(h)(3)-1(a)(4) generational mortality tables in lieu of the applicable mortality table under section 417(e)(3).4 Section
1.430(d)-1(f)(4)(iii)(C) also provides that
adjustments to interest rates are permitted to take into account the differences
between the phase-in of the section 430(h)
(2) segment rates under section 430(h)(2)
(G) and the adjustments to the segment
rates under section 417(e)(3)(D)(iii).
Section 1.430(d)-1(f)(5)(i) provides
that, in the case of an applicable defined
benefit plan described in section 411(a)
(13)(C), if the amount of a future distribution is based on an interest adjustment
applied to the current accumulated benefit, then the amount of that distribution is
determined by projecting the future interest credits or equivalent amount under the
plan’s interest crediting rules using actuarial assumptions that satisfy the requirements of § 1.430(d)-1(f)(3).
Section 1.430(d)-1(f)(5)(ii)(A) provides that, in the case of an applicable
defined benefit plan described in section
411(a)(13)(C), if the amount of an annuity
distribution is based on either the balance
of a hypothetical account maintained for
a participant or the accumulated percentage of a participant’s final average compensation, then the amount of that annuity
distribution is calculated by converting
the projected account balance (or accumulated percentage of final average compensation), in accordance with § 1.430(d)-1(f)
(5)(i), to an annuity by applying the plan’s
annuity conversion provisions using the
rules of § 1.430(d)-1(f)(5)(ii).
Section 1.430(d)-1(f)(5)(ii)(B) provides that generally, if the plan bases the
conversion of the projected account balance (or accumulated percentage of final
average compensation) to an annuity using
the applicable interest rates and applicable mortality table under section 417(e)
(3), then the amount of the annuity distribution is determined by dividing the projected account balance (or accumulated
percentage of final average compensation)
The applicable mortality table under section 417(e)(3) is a projected static mortality table, based on the mortality table specified for the plan year under section 430(h)(3)(A) (without regard
to section 430(h)(3)(C) or (D)), modified as appropriate by the Secretary.
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September 14, 2026
by an annuity factor corresponding to the
assumed form of payment using, for the
period beginning with the annuity starting
date, the current applicable mortality table
under section 417(e)(3) that would apply to
a distribution with an annuity starting date
occurring on the valuation date (in lieu of
the mortality table under section 430(h)(3)
that would otherwise be used) and the valuation interest rates under section 430(h)
(2) (as opposed to the interest rates under
section 417(e)(3) which the plan uses to
determine the amount of the annuity).
Section 1.430(d)-1(f)(5)(ii)(C) provides that, in determining the amount of an
annuity distribution under § 1.430(d)-1(f)
(5)(ii)(B), a plan is permitted to apply
the optional applications of generational
mortality and phase-in of interest rates
described in § 1.430(d)-1(f)(4)(iii)(C).
Explanation of Provisions
These proposed regulations would
facilitate the adoption of amendments that
increase benefits. Under these proposed
regulations, such amendments adopted
after the end of the plan year can be taken
into account in determining the actuarial results for a plan year which, in turn,
will result in an increased deductible limit
for the taxable year for the plan sponsor.
These proposed regulations would also:
(1) clarify the plan-related expenses that
are includable in target normal cost; (2)
provide rules for plans that are adopted
after the end of a plan year; (3) provide
rules for when certain plan amendments
must be taken into account in the actuarial results for a plan year; (4) extend the
deadline for making certain changes in
actuarial assumptions or funding methods;
and (5) make minor changes to the rules
for actuarial assumptions to eliminate references to statutory provisions that are no
longer applicable and to conform them to
other regulatory provisions.
A. Investment-Related Expenses Not
Included in Target Normal Cost
Proposed § 1.430(d)-1(b)(1)(iii)(B)
would provide that plan-related expenses
consist of all amounts that are expected to
be paid from plan assets that are neither
benefits paid to participants and beneficiaries (treating the purchase of an annuity
as the payment of benefits), nor investment-related expenses described in proposed § 1.430(d)-1(b)(1)(iii)(C).
Proposed § 1.430(d)-1(b)(1)(iii)(C)
would provide that investment-related
expenses consist of investment manager
fees and other expenses directly related to
the investment of the plan’s assets. However, if the total payments from plan assets
to a service provider are expected to be
$5,000 or more for a plan year and consist of both investment-related expenses
and expenses for other services (such
as recordkeeping services), only those
amounts that the service provider itemizes
as investment management fees or other
expenses directly related to the investment
of the plan’s assets are treated as investment-related expenses. Amounts itemized
as expenses for other services are not
treated as investment-related expenses.5
An example of other services would be if
the assets of the pension fund are held by
a bank or trust company affiliated with the
fund’s investment manager and the plan
assets are used to pay custodial or trustee
fees for the safekeeping of the investment
assets, such as holding securities, settling
trades, or collecting income. This exclusion means that if the total payments
from plan assets to a service provider are
expected to be less than $5,000, all payments are treated as investment-related
expenses and the service provider does
not need to itemize the expenses in order
for the plan to exclude these payments
from target normal cost.
B. Plans or Plan Amendments That Are
Adopted after the End of the Plan Year
Proposed § 1.430(d)-1(d)(1) would
provide rules for which plan provisions
are used to determine a plan’s funding target and target normal cost for a plan year
based on when the plan provisions were
adopted and, if applicable, what election
the plan administrator made. For plan
provisions adopted by the plan’s valua-
tion date, proposed § 1.430(d)-1(d)(1)(i)
would provide that, except as otherwise
provided in proposed § 1.430(d)-1(d)(1)
(ii) and (iii), a plan’s funding target and
target normal cost for a plan year are
determined based on plan provisions that
are adopted no later than the valuation date
for the plan year and that take effect on or
before the last day of the plan year. For
example, in the case of a plan amendment
adopted on or before the valuation date for
the current plan year that has an effective
date occurring in the current plan year, the
plan amendment is taken into account in
determining the funding target and the target normal cost for the current plan year
if it is permitted to take effect under the
rules of section 436(c) for the current plan
year, but the amendment is not taken into
account for the current plan year if it does
not take effect until a future plan year.
For plan provisions adopted after
the plan’s valuation date, the rules that
apply are determined by the election
made by the plan administrator. Proposed § 1.430(d)-1(d)(1)(ii)(A) would
provide that if the plan administrator
makes an election under section 412(d)(2)
with respect to a plan amendment that is
adopted no later than 2½ months after the
end of the plan year, then the plan amendment will be taken into account in determining the plan’s funding target and target
normal cost for that plan year, provided
that the plan amendment takes effect no
later than the date it is adopted. This rule
would apply even if the plan amendment
were adopted during the plan year, consistent with prior revenue rulings.6
Proposed § 1.430(d)-1(d)(1)(ii)(B)
would provide that if an employer adopts
a plan after the last day of the employer’s taxable year and before the due date
for the employer’s income tax return for
that taxable year (including extensions)
and makes an election under the first sentence of section 401(b)(2), then the plan is
treated as adopted on the last day of that
taxable year. In such a case, the target normal cost and funding target for the plan’s
first plan year are determined based on the
adopted plan provisions, provided that (1)
the plan takes effect no later than the date
This $5,000 threshold is consistent with the reporting requirement on Form 5500, Schedule C for service providers who have rendered services to, or who had transactions with, the plan
during the reporting year if the service provider received, directly or indirectly, $5,000 or more in reportable compensation in connection with services rendered or their position with the plan.
6
See, for example, Rev. Rul. 79-325, 1979-2 C.B. 190.
5
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338
Bulletin No. 2026–38
the plan is adopted; and (2) if the plan’s
valuation date is before the date the plan is
treated as being adopted, a section 412(d)
(2) election is made.
Proposed § 1.430(d)-1(d)(1)(ii)(C)
would provide that if, before the due date
(including extensions) for an employer’s
income tax return for a taxable year, the
employer adopts an amendment increasing benefits accrued under a plan effective
as of any date during the plan year that
immediately precedes the date of adoption, and makes an election under section
401(b)(3) with respect to the plan amendment, then the plan amendment is treated
as having been adopted as of the last day
of that preceding plan year. In such a
case, the target normal cost and funding
target for that preceding plan year are
determined taking the plan amendment
into account, provided that (1) the amendment takes effect no later than the date it
is adopted, and (2) if the plan’s valuation
date is before the date the amendment is
treated as being adopted, a section 412(d)
(2) election is made.
Employers that make an election under
either section 401(b)(2) or section 401(b)
(3) should note that the deadline for minimum required contributions under section
430(j)(1) is 8½ months after the end of the
plan year, while the deadline for adopting a section 401(b)(2) or section 401(b)
(3) amendment under either proposed
§ 1.430(d)-1(d)(1)(ii)(B) or (C) can be
after that deadline, depending on the timing of the plan year and the employer’s
taxable year.
C. Remedial Amendments
Proposed § 1.430(d)-1(d)(1)(iii) would
provide rules under which certain planned
amendments are taken into account once
plan operations are changed pursuant to
those planned amendments. The existing rule in § 1.430(d)-1(d)(1)(iii) would
be revised as § 1.430(d)-1(d)(1)(iv) and
is discussed later in part C of this Explanation of Provisions. Under proposed
§ 1.430(d)-1(d)(1)(iii)(A), if plan operations are changed during a remedial
amendment period (within the meaning of
§ 1.401(b)-1(d)) to make effective a future
remedial amendment, then the provisions
of the future remedial amendment would
be treated as adopted on the date that the
plan operations are changed. To the extent
the actual remedial amendment that is
adopted is different from the way the plan
has been operated, the actual remedial
amendment is treated as adopted when
plan operations are changed to reflect
the actual remedial amendment (if that
change in plan operations occurs before
the adoption date of the amendment). For
example, this could happen in the case of a
plan that is operated in accordance with a
statutory change and then plan operations
are updated to reflect published guidance
interpreting that statutory change.
Proposed § 1.430(d)-1(d)(1)(iii)(B)
would provide that a plan makes effective a future remedial amendment when
(1) it is required to be amended to address
a disqualifying provision that has been
designated as such by the Commissioner
pursuant to § 1.401(b)-1(b)(3), (2) the
remedial amendment period with respect
to that required amendment has not ended,
and (3) plan operations are changed in
anticipation of a proposed amendment to
the plan relating to the disqualifying provision.
Proposed § 1.430(d)-1(d)(1)(iv) would
provide substantially the same rule as
existing § 1.430(d)-1(d)(1)(iii). However,
proposed § 1.430(d)-1(d)(1)(iv) would
not include the existing language regarding the effect of an election made under
section 412(d)(2), as that issue would
be separately addressed in proposed
§ 1.430(d)-1(d)(1)(ii)(A).
taken into account in determining a plan’s
funding target and target normal cost for
the plan year. A plan amendment would
be subject to this rule if it (1) increases
the liabilities of the plan by reason of
increases in current benefits, establishment of new benefits, changing the rate
of benefit accrual, or changing the rate
at which benefits become nonforfeitable;
(2) would not be permitted to take effect
under the rules of section 436 as described
in proposed § 1.430(d)-1(d)(2)(ii); and
(3) would increase the target normal
cost disproportionately, as described in
§ 1.430(d)-1(d)(2)(iii).
Under proposed § 1.430(d)-1(d)(2)(i)
(C), the anti-abuse rule in § 1.430(d)-1(d)
(2) would apply only if the plan amendment increases the target normal cost
disproportionately. For this purpose, proposed § 1.430(d)-1(d)(2)(iii) would provide that a plan amendment increases the
target normal cost disproportionately if
the percentage increase in target normal
cost as the result of the amendment is
more than twice the percentage increase in
the funding target as a result of the amendment (taking into account only the benefits of participants currently employed in
the service of the employer). Comments
are requested regarding other appropriate methods of measuring whether a plan
amendment is considered to increase the
target normal cost disproportionately,
such as by comparing the present value
of current year accruals with the present
value of accruals in succeeding plan years.
D. Anti-Abuse Rule for Mid-Year
Amendments that Increase Target Normal
Cost Disproportionately
Proposed § 1.430(d)-1(f)(1)(ii) would
revise the existing rule in § 1.430(d)-1(f)
(1)(ii) to address the situation in which an
application to change actuarial assumptions or funding method has been submitted to the Secretary,7 but the Secretary has
not yet approved the application when the
assumptions or method are established
for the plan year. In these situations, the
proposed regulations would be amended
to provide that the assumptions or funding method can be changed for that plan
Proposed § 1.430(d)-1(d)(2)(i) would
modify the special rule in existing
§ 1.430(d)-1(d)(2) under which certain
plan amendments that are not required to
be taken into account under the rules of
§ 1.430(d)-1(d)(1), because the amendment is adopted after the valuation date
for the plan year, must nonetheless be
E. Change in Actuarial Assumptions or
Funding Method
Rev. Proc. 2017-57, 2017-44 I.R.B. 474, sets forth the procedure for obtaining approval by the IRS for a change in the funding method or actuarial assumptions used for a single-employer
defined benefit plan.
7
Bulletin No. 2026–38
339
September 14, 2026
year in accordance with the Secretary’s
approval of that application.
F. Other Rules Regarding Actuarial
Assumptions
Proposed
§
1.430(d)-1(f)(4)(iii)
(C) would provide rules for determining the present value of a distribution
under § 1.430(d)-1(f)(4)(iii) that are substantially the same as a rule in existing
§ 1.430(d)-1(f)(4)(iii)(C). However, the
proposed rule would not include the existing reference to the phase-in of the section
430(h)(2) segment rates that applied under
section 430(h)(2)(G) for plan years beginning in 2008 or 2009.
Proposed § 1.430(d)-1(f)(5)(i) and (f)
(5)(ii)(A) are substantially the same as the
corresponding provisions in the existing
regulations but would make conforming
edits to update the terminology used in
those provisions to conform to the terminology used in § 1.411(a)(13)-1.
Proposed § 1.430(d)-1(f)(5)(ii)(C)
would provide that the option under
§ 1.430(d)-1(f)(4)(iii)(C) to substitute
the generational mortality table may be
used for purposes of determining the
amount of an annuity distribution under
§ 1.430(d)-1(f)(5)(ii)(B). This provision is substantially the same as existing
§ 1.430(d)-1(f)(5)(ii)(C), except that the
heading would be revised to reflect that
the option to adjust the present values to
take into account the phase-in of segment
rates under section 430(h)(2)(G) is no longer applicable.
of Executive Order 12866, as amended.
This proposed rule is expected to be an
Executive Order 14192 deregulatory
action.
II. Paperwork Reduction Act
This proposed rulemaking does not
impose or revise any information collections subject to 44 U.S.C.
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