Bulletin No. 2026–37

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2026–37

September 8, 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.

INCOME TAX

REG-101355-26, page 247.

These proposed regulations provide guidance on employer contributions to Trump accounts under section 128 of the Internal

Revenue Code. They also provide guidance on nondiscrimination requirements for purposes of both section 128 Trump

account contribution programs and section 129 dependent

care assistance programs.

REG-103844-26, page 272.

The Notice of Proposed Rulemaking provides an election

under which controlled foreign corporations (CFCs) would not

compute or recognize foreign currency gain or loss under section 987(3), except in connection with certain inbound transactions. The proposed regulations would provide that a CFC

generally does not compute or recognize section 987 gain or

Finding Lists begin on page ii.

loss for taxable years in which the CFC exemption election is

in effect. However, a CFC would be required to recognize section 987 gain or loss arising before the election is made, and

would be required to recognize section 987 gain in connection

with certain inbound transactions.

REG-115145-25, page 298.

These proposed regulations provide for the allocation of foreign taxes of foreign corporations affected by the repeal of

the one-month deferral election. These proposed regulations

also provide for the disallowance of foreign tax credits on

certain distributions of previously taxed earnings and profits.

Rev. Rul. 2026-17, page 247.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes

of sections 382, 1274, 1288, 7872 and other sections of

the Code, tables set forth the rates for September 2026.

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 8, 2026 

Bulletin No. 2026–37

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7702, 7872.)

Rev. Rul. 2026-17

This revenue ruling provides various prescribed rates for federal income

AFR

110% AFR

120% AFR

130% AFR

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

AFR

110% AFR

120% AFR

130% AFR

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2026–37

tax purposes for September 2026 (the

current month). Table 1 contains the

short-term, mid-term, and long-term

applicable federal rates (AFR) for the

current month for purposes of section

1274(d) of the Internal Revenue Code.

Table 2 contains the short-term, midterm, and long-term adjusted applicable federal rates (adjusted AFR) for the

current month for purposes of section

1288(b). Table 3 sets forth the adjusted

federal long-term rate and the longterm tax-exempt rate described in section 382(f). Table 4 contains the appro-

priate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service

after July 30, 2008, shall not be less

than 9%. Finally, Table 5 contains the

federal rate for determining the present

value of an annuity, an interest for life

or for a term of years, or a remainder or

a reversionary interest for purposes of

section 7520.

REV. RUL. 2026-17 TABLE 1

Applicable Federal Rates (AFR) for September 2026

Period for Compounding

Annual

Semiannual

Quarterly

Short-term

4.18%

4.14%

4.12%

4.60%

4.55%

4.52%

5.03%

4.97%

4.94%

5.45%

5.38%

5.34%

Mid-term

4.49%

4.44%

4.42%

4.94%

4.88%

4.85%

5.40%

5.33%

5.29%

5.85%

5.77%

5.73%

6.77%

6.66%

6.61%

7.92%

7.77%

7.70%

Long-term

5.12%

5.06%

5.03%

5.65%

5.57%

5.53%

6.16%

6.07%

6.02%

6.69%

6.58%

6.53%

Annual

3.16%

3.40%

3.88%

REV. RUL. 2026-17 TABLE 2

Adjusted AFR for September 2026

Period for Compounding

Semiannual

3.14%

3.37%

3.84%

247

Quarterly

3.13%

3.36%

3.82%

Monthly

4.10%

4.51%

4.92%

5.32%

4.40%

4.83%

5.27%

5.70%

6.57%

7.65%

5.01%

5.51%

5.99%

6.49%

Monthly

3.12%

3.35%

3.81%

September 8, 2026

REV. RUL. 2026-17 TABLE 3

Rates Under Section 382 for September 2026

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

3.88%

3.88%

REV. RUL. 2026-17 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for September 2026

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after

July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

8.12%

Appropriate percentage for the 30% present value low-income housing credit

3.48%

REV. RUL. 2026-17 TABLE 5

Rate Under Section 7520 for September 2026

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,

or a remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of September 2026. See

Rev. Rul. 2026-17, page 247.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of September 2026. See Rev.

Rul. 2026-17, page 247.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

5.40%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of September 2026. See Rev. Rul. 2026-17, page 247.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of September 2026. See Rev.

Rul. 2026-17, page 247.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

September 2026. See Rev. Rul. 2026-17, page 247.

September 8, 2026

248

Bulletin No. 2026–37

Part IV

Notice of Proposed

Rulemaking

Employer Contributions

to Trump Accounts and

Nondiscrimination Rules for

Dependent Care Assistance

Programs

REG-101355-26

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations that would provide

guidance with respect to employer contributions to Trump accounts, including

applicable nondiscrimination rules, and

the nondiscrimination rules for dependent

care assistance programs. This document

also provides a notice of a public hearing

on the proposed regulations. The proposed

regulations would affect employers maintaining a Trump account contribution program or a dependent care assistance program and employees participating in those

programs.

DATES: Comments: Electronic or written

comments must be received by September

25, 2026. Public Hearing: The public hearing is scheduled to be held on October 15,

2026 at 10 a.m. ET. Requests to speak and

outlines of topics to be discussed at the

public hearing must be received by September 25, 2026. If no requests to speak

or outlines are received by September 25,

2026, the public hearing will be cancelled.

Requests to attend the public hearing must

be received by 5 p.m. ET on October 13,

2026.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically. Submit electronic submissions via the Federal eRulemaking Portal

at www.regulations.gov (indicate IRS and

REG-101355-26) by following the online

instructions for submitting comments.

Requests for the public hearing must be

submitted as prescribed in Comments and

Public Hearing in Part V of this preamble.

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

(REG-101355-26), room 5503, Internal

Revenue Service, P.O. Box 7604, Ben

Franklin Station, Washington, DC 20044.

FOR FURTHER INFORMATION

CONTACT: Concerning the proposed

regulations, Jennifer Friedman at (202)

317-5500; concerning submissions of

comments and the public hearing, the

Publications and Regulations Section at

(202) 317-6901 (not toll-free numbers) or

by email at publichearings@irs.gov (preferred).

SUPPLEMENTARY INFORMATION:

I. Authority

This document contains proposed additions to the Income Tax Regulations (26

CFR part 1) to implement sections 128

and 129 of the Internal Revenue Code

(Code).

These proposed regulations are promulgated under section 7805(a) of the

Code, which provides that “the Secretary1

shall 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.”

II. Background

A. In General

1. Section 128 Contributions to Trump

Accounts

Section 70204 of Public Law 119-21,

139 Stat. 72 (July 4, 2025), commonly

known as the One, Big, Beautiful Bill Act

(OBBBA), added section 530A regarding Trump accounts to the Code. Section 70204 of the OBBBA also added

section 128 to the Code providing an

exclusion from gross income for employer

contributions to the Trump account of

an employee or of any dependent of an

employee pursuant to a Trump account

contribution program. The provisions

apply to taxable years beginning after

December 31, 2025.

A Trump account is a type of traditional

individual retirement account (IRA) that is

established for the exclusive benefit of an

eligible individual and that is designated

at its establishment as a Trump account.

When a Trump account is opened, the eligible individual is the owner of the Trump

account and is referred to as the account

beneficiary.

A Trump account is subject to certain

special rules inapplicable to other individual retirement arrangements under

section 408.2 The special rules apply only

during the period that begins when the

account beneficiary’s initial Trump account

is established and ends on December 31

of the calendar year in which the account

beneficiary attains age 17 (growth period).

The special rules that apply only during the

growth period include rules regarding contributions, investments, distributions, and

reporting. After the growth period, most of

these special rules cease to apply and the

rules under section 408(a) governing traditional IRAs generally apply.

Section 128(a) provides that an amount

paid by an employer as a contribution to

Section 7701(a)(11)(B) provides that the term “Secretary” means the Secretary of the Treasury or his delegate. Section 7701(a)(12)(A)(i) defines delegate to include any agency of the

Treasury Department, which includes the IRS.

2

Individual retirement arrangements are individual retirement accounts under section 408(a) or individual retirement annuities under section 408(b). The term “individual retirement arrangements” refers to both individual retirement accounts and individual retirement annuities, while the term “IRAs” refers only to individual retirement accounts under section 408(a).

1

Bulletin No. 2026–37

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September 8, 2026

the Trump account of an employee or of

any dependent of an employee pursuant

to a Trump account contribution program

is excludable from gross income of the

employee.

Section 128(b) provides that the

amount excludable under section 128(a)

with respect to any employee shall not

exceed $2,500 (subject to inflation adjustments after 2027).

Section 128(c) provides that the term

“Trump account contribution program”

means a separate written plan of an

employer for the exclusive benefit of its

employees to provide contributions to the

Trump accounts of such employees or

dependents of such employees that meets

requirements similar to the requirements

of section 129(d)(2), (3), (6), (7), and (8).

2. Section 129 Dependent Care

Assistance Programs

Section 1293 provides that amounts

paid or incurred by an employer for

dependent care assistance provided to

an employee are excludable from the

employee’s gross income if the amounts

are furnished pursuant to a dependent

care assistance program. A dependent

care assistance program is a separate written plan of an employer for the exclusive

benefit of its employees that provides

dependent care assistance and meets certain other requirements under the Code,

including requirements relating to nondiscriminatory benefits, limits on principal

shareholders’ benefits, and information to

be provided to eligible employees.

Dependent care assistance means the

payment or provision of services that

would be considered employment-related

expenses under section 21(b)(2) (relating

to expenses for household and dependent care services necessary for gainful

employment) if paid for by the employee.

Such

employment-related

expenses

include expenses for the care of a qualifying individual. The term “qualifying

individual” is defined as (i) a dependent

of the taxpayer who has not attained age

13 or (ii) a dependent or spouse of the taxpayer who is physically or mentally inca-

pable of caring for himself or herself and

who has the same principal place of abode

as the taxpayer for more than one-half of

the taxable year. The amount that may

be excluded annually from an employee’s gross income under a dependent care

assistance program is limited to $7,500

($3,750 in the case of a married individual

filing a separate return).

A dependent care assistance program

must satisfy four nondiscrimination rules:

(1) the contributions and benefits rule in

section 129(d)(2), (2) the eligibility rule

in section 129(d)(3), (3) the owner concentration rule in section 129(d)(4), and

(4) the average benefits rule in section

129(d)(8). The contributions and benefits rule is satisfied if the contributions

and benefits provided under the plan do

not discriminate in favor of highly compensated employees (HCEs) within the

meaning of section 414(q). The eligibility rule is satisfied if a plan must benefit

employees who qualify under a classification set up by the employer and found

by the Secretary not to be discriminatory

in favor of HCEs or their dependents. The

owner concentration rule is satisfied if no

more than 25 percent of the amounts paid

or incurred by the employer for dependent

care assistance during the year are provided for the class of individuals who are

shareholders or owners (or their spouses

or dependents), each of whom (on any day

of the year) owns more than 5 percent of

the stock or of the capital or profits interest in the employer. The requirements of

the average benefits rule are satisfied if the

average benefits provided to employees

who are not HCEs under all plans of the

employer is at least 55 percent of the average benefits provided to the HCEs under

all plans of the employer. A special rule

applies with respect to benefits provided

through a salary reduction agreement that

allows the plan to disregard employees

whose compensation is less than $25,000.

In applying the eligibility test and

the average benefits test, employees are

excluded if they have not attained age 21

and completed one year of service; or if

they were not included in a dependent care

assistance program and were included in a

unit of employees covered by a collective

bargaining agreement under which dependent care benefits were the subject of good

faith bargaining.

If a dependent care assistance program fails the nondiscrimination rules, the

benefits are not excludable from income

by HCEs, but the benefits are excludable

from income by employees who are not

HCEs.

B. Published Guidance

Notice 2025-68, 2025-52 IRB 856,

informed taxpayers that the Treasury

Department and the IRS intend to propose regulations providing guidance

with respect to 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 employer contributions under a Trump account contribution program.

Notice 2025-68, Q&A I-1 states

that section 128 permits an employee

to exclude up to $2,500 per calendar

year, indexed for inflation after 2027,

for employer contributions made under

a Trump account contribution program.

This limit is applied per employee rather

than per dependent, so an employee with

multiple children still has only one aggregate $2,500 exclusion. Q&A I-2 of Notice

2025-68 states that when an employer

makes a section 128 contribution to a

Trump account, it must affirmatively

identify the payment to the trustee of the

Trump account as a section 128 contribution that is excludable from the employee’s income, and the trustee may rely

on that employer-provided information

unless it has contrary knowledge.1 Finally,

Q&A I-3 of Notice 2025-68 states that a

Trump account contribution program may

be offered through salary reduction under

a section 125 cafeteria plan only when the

contribution is made to the Trump account

of the employee’s dependent, not to the

employee’s own Trump account.

Notice 2025-68 included a request for

comments. These proposed regulations

under sections 128 and 129 are informed

Section 129 was originally added to the Code by the Economic Recovery Tax Act of 1981 (Pub. L. 97-34) and has been amended several times.

Note that section 408(h) provides, “For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be

treated as the trustee thereof.”

3

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September 8, 2026

250

Bulletin No. 2026–37

by the comments received in response to

the notice. The issues raised in the comments are discussed in the Explanation of

Provisions in Part III of this preamble.

III. Explanation of Provisions

A. Section 128 Contributions to Trump

Accounts

Proposed § 1.128-1(h) would define

a section 128 contribution as an amount

paid by an employer to a Trump account

under a Trump account contribution program.

1. Trump account contribution program

Proposed § 1.128-1(j) would define the

term Trump account contribution program

to mean a program governed by a separate

written plan of an employer for the exclusive benefit of its employees to provide

contributions to the Trump accounts of the

employees or their dependents that meets

the requirements of proposed § 1.128-2(b)

through (h), including following the terms

of the written plan, satisfying the nondiscrimination requirements (see Part III.B.

of this preamble), and providing various

notices and certifications. For these purposes, the term Trump account has the

meaning set forth in section 530A(b)(1).

Generally, an arrangement that fails to

satisfy a requirement for a Trump account

contribution program would not be a

Trump account contribution program and,

for this reason, contributions to Trump

accounts under such an arrangement

would not be excludable from employee

income under section 128. However, with

respect to the nondiscrimination requirements at proposed § 1.128-3, a failure to

satisfy the rules would cause the arrangement to fail to be a Trump account contribution program only with respect to

HCEs.

a. Written plan

Proposed § 1.128-2(b) would provide that a Trump account contribution

program must be set forth in a separate

written plan. The written plan must specify—(i) the classes of employees eligible

to participate; (ii) the rules governing

employer contributions, including the

Bulletin No. 2026–37

amount of contributions and whether contributions may be made via a section 125

cafeteria plan salary reduction arrangement; (iii) the procedures under which

an employee must designate the Trump

account of the employee or of a dependent

of the employee to receive contributions;

(iv) the certification, notice, and reporting procedures required under proposed §

1.128-2(d), (f) and (g); (v) the plan year;

and (vi) the procedures for correcting

administrative failures and for furnishing

notices to employees and trustees when

amounts previously designated as section 128 contributions are subsequently

determined not to be excludable from an

employee’s gross income under section

128(a). Proposed § 1.128-2(c) would

provide that an arrangement is a Trump

account contribution program only if the

employer follows the terms of the written

plan.

b. Reasonable notification

Under section 128(c), a Trump account

contribution program must meet requirements similar to the requirements of section 129(d)(6), which requires reasonable

notification of the availability and terms

of the program to be provided to eligible employees. Accordingly, proposed

§ 1.128-2(f) would provide that all eligible employees must be given reasonable

notification of the availability and terms

of the Trump account contribution program. This rule is intended to ensure that

employees who are eligible to participate

are adequately informed by the employer

about the existence of the program and

the terms governing participation. Providing reasonable notification is also relevant to the operation of the eligibility

rules, because employees cannot have a

meaningful opportunity to receive benefits under the program unless they are

informed by the employer that the program is available and understand its basic

terms. Proposed § 1.128-2(f) does not prescribe content requirements or a particular

method of furnishing the notice.

c. Written statement

Under section 128(c), a Trump account

contribution program must meet requirements similar to the requirements of

251

section 129(d)(7), which requires a plan

to furnish to an employee, on or before

January 31, a written statement showing

the amounts paid or expenses incurred

by the employer in providing dependent

care assistance to the employee during

the previous calendar year. Accordingly,

proposed § 1.128-2(g) would provide that

a written statement showing the amount

of section 128 contributions made for

an employee during the previous calendar year under the employer’s Trump

account contribution program must be

furnished to that employee. This requirement may be satisfied by including the

amount of Trump account contributions

on the employee’s Form W-2, Wage and

Tax Statement, in the manner specified in

the form’s instructions for reporting section 128 contributions. The 2026 General Instructions for Forms W-2 and W-3

provide that the employer must report the

amount of section 128 contributions made

to the Trump account of an employee or

dependent of an employee in box 12 of the

Form W-2 with code TA.

d. Certification

Proposed § 1.128-2(d)(1) would provide that a Trump account contribution

program may make contributions only to

a Trump account whose account beneficiary is in his or her growth period, and is

an employee or an employee’s dependent.

Proposed § 1.128-2(d)(2) would provide

that the aggregate amount contributed

with respect to any employee under a

Trump account contribution program may

not exceed the permitted annual limit

specified in proposed § 1.128-2(d)(5).

Proposed § 1.128-2(d)(3) would provide

that contributions that are not permitted

under proposed § 1.128-2(d)(1) or (d)(2)

are not made pursuant to a Trump account

contribution program and thus are not

excludable from income under proposed

§ 1.128-2(a).

Proposed § 1.128-2(d)(4) would allow,

but not require, an employer to rely on

certain employee certifications. The

employee certification must be in writing, in paper or electronic form, and must

include the following representations: (i)

the account beneficiary is the employee

or anticipated to be the dependent of the

employee for that employee’s taxable year

September 8, 2026

during which the contribution is made;

(ii) the beneficiary’s date of birth, which

would allow the employer to determine

whether the beneficiary is in his or her

growth period for the calendar year in

which the contribution is made; and (iii)

no facts are known to the employee that

would make the account beneficiary ineligible to receive a contribution to his or her

Trump account for that calendar year. The

employer may rely on this certification

unless the employer has actual knowledge

that the certification is incorrect.

Proposed § 1.128-2(d)(4) would further provide that an employer may not

rely solely on an employee certification

to establish that the recipient account is a

valid Trump account. The employer must

use a method reasonably designed to verify, through information provided by the

trustee, payroll processor, or other service

provider, that the contribution is made to

a valid Trump account. For example, the

method may be that the employee provides the employer with a unique identifying number that corresponds to a particular Trump account, which the employer

(or service provider) could then use to verify that the account to which the contribution will be transferred is a valid Trump

account. The Treasury Department and

the IRS are exploring ways in which this

information can be validated in a secure,

electronic way.

e. Employer communication

Proposed § 1.128-2(h) would prescribe

rules regarding employer communications

with a Trump account trustee to which the

employer is making contributions. Proposed § 1.128-2(h)(1) would require an

employer at the time it makes a contribution to a trustee to advise the trustee that

the amount is a section 128 contribution.

If the employer subsequently determines a section 128 contribution not to

be a section 128 contribution, in whole or

in part, proposed § 1.128-2(h)(4) would

require an employer to so notify the trustee

and provide the trustee with the affected

Trump account information, the calendar

year in which the contribution was made,

and the amount determined not to be a

section 128 contribution. The employer

must provide this notice within a reasonable period of time following the date the

September 8, 2026

employer determines that an amount is

not a section 128 contribution. Proposed

§ 1.128-2(h)(4) would deem 21 calendar

days after the determination to be a reasonable period of time as a safe harbor.

The Treasury Department and the IRS

request comments on whether any additional information is needed for this corrective notice requirement.

Proposed § 1.128-2(h)(2) would

require an employer to adopt procedures

to ensure that section 128 contributions

are properly identified and to notify the

trustee when a contribution is a section

128 contribution and when a contribution

previously identified as a section 128 contribution is not a section 128 contribution.

Proposed § 1.128-2(h)(3) would allow

a Trump account trustee to rely on an

employer’s notice that an amount is a section 128 contribution until such time that

the trustee receives a corrective notice or

has contrary knowledge.

The Treasury Department and the IRS

propose this rule to ensure that contributions intended to qualify as section 128

contributions are specifically identified

as section 128 contributions when made

and are corrected as necessary, so that the

trustee may properly administer the contribution under the applicable rules governing Trump accounts, including properly

accounting for whether the account beneficiary has basis in such contributions. The

Treasury Department and the IRS recognize that the corrective notice requirement

may be operationally challenging. For this

reason, comments are requested on what

elements in particular will be difficult to

effectuate, and alternative ways to ensure

that basis in Trump accounts may be properly accounted for where section 128 contributions are recharacterized. For example, the Treasury Department and the IRS

ask commenters to consider whether it

would be viable for the employer to furnish a notice to the affected employee that

could be submitted to, and relied upon by,

the trustee of the affected account.

f. Trustee selection

Comments received in response to

Notice 2025-68 requested guidance on

whether an employer may limit the number of trustees of Trump accounts to whom

they will send contributions under a Trump

252

account contribution program. Some commenters explained that allowing such limitations could minimize employer burden

associated with directing contributions to

multiple trustees as Trump accounts are

established or rolled over.

Proposed § 1.128-2(d)(6) would provide that an arrangement is not a Trump

account contribution program if an

employer limits contributions to Trump

accounts held by a particular trustee or

trustees. Allowing for a Trump account

contribution program to restrict the trustee

or trustees would frustrate the purposes

of section 128 and section 530A because,

unlike analogous circumstances involving

health savings accounts, only one Trump

account may exist for a particular beneficiary. If the employer were permitted

to select the trustees into which a section 128 contribution would be made, an

employee whose dependent has a Trump

account with a different trustee would be

precluded from receiving contributions to

the dependent’s Trump account. In addition, in the case of parents working for

different employers, each of whom limits

section 128 contributions to particular, but

different trustees, at least one parent would

be precluded from receiving tax-favored

employer contributions to the dependent’s Trump account. Section 530A(b)

(1)(A)(i), which contemplates the Treasury Department’s role in organizing initial Trump accounts, supports the need

for a rule that addresses systemic account

structure problems that arise because only

one Trump account may exist for a beneficiary. Trump accounts are a distinct statutory arrangement, not merely ordinary

IRAs by another name, and the Treasury

Department’s general rulemaking authority under section 7805 supports issuance

of administrable rules implementing

sections 128 and 530A where the statute

leaves operational gaps. Accordingly, the

proposed regulations would provide that a

Trump account contribution program may

not restrict contributions to a particular

trustee or trustees.

2. Salary reduction

Consistent with Notice 2025-68, proposed § 1.128-2(d)(7) would provide

that a Trump account contribution program may allow an employee to make a

Bulletin No. 2026–37

contribution via salary reduction under a

section 125 cafeteria plan if the contribution is made to the Trump account of the

employee’s dependent but not if the contribution is made to the Trump account of

the employee. Although a Trump account

contribution program would be a qualified benefit under section 125(f)(1), a

contribution under the Trump account

contribution program to a Trump account

of the employee would provide deferred

compensation that is prohibited under section 125(d)(2)(A), because the employee

would have a vested right to compensation that may be payable to that individual

in a later year. In contrast, in the case of

a contribution to the Trump account of a

dependent, the employee cedes dominion

and control over the contributed amount

after the contribution is made, retaining no

future right to receive or assign later distributions from the account. In the case of

a contribution to the account of a dependent, the amount is not a deferral of a right

to compensation because there is no such

future right.

Comments received in response to

Notice 2025-68 that addressed salary

reduction through a section 125 cafeteria

plan generally described it as an important feature because it would let employees

make pre-tax contributions to a dependent’s Trump account, something they

otherwise could not do. Several commenters treated this as a potentially meaningful path to employer adoption. One commenter asked for clarification regarding

whether the elections would be required

before the start of the program year or if

employees could change or revoke their

elections mid-year.

Proposed § 1.128-2(d)(7) would provide that a section 125 cafeteria plan may

permit employees to make prospective

salary reduction elections, or to change or

revoke those elections, at any time during

the plan year, provided the election change

is effective before the salary becomes currently available. Proposed § 1.128-2(d)

(7) would also require that the section 125

cafeteria plan specifically describe the

Trump account program contribution

benefit and permit participants to prospectively change or revoke elections at

least monthly before salary becomes currently available. The Treasury Department

and the IRS propose these regulations to

Bulletin No. 2026–37

facilitate administration of section 128

contributions through section 125 cafeteria plans while ensuring that any election to reduce salary remains prospective

in operation. The Treasury Department

and the IRS intend to amend Treas. Reg.

§ 1.125-4 to incorporate these proposed

rules concerning election changes with

respect to salary reduction for section 128

contributions.

3. Annual limitation

Proposed § 1.128-2(d)(5) would provide that, with respect to any employee,

the total contributions under a Trump

account contribution program for a calendar year may not exceed the lesser of

the amount specified in section 128(b), as

adjusted for inflation under section 128(b)

(2), or the amount specified in the terms of

the program’s written plan.

An individual employee may not

exclude employer contributions under section 128 for that individual’s taxable year

to the extent the aggregate amount of such

contributions from all employers exceeds

the annual limitation under section 128(b).

Specifically, proposed § 1.128-2(d)(5)

would provide that the amount which may

be excluded by an individual with respect

to all Trump account contribution programs for that individual’s taxable year

may not exceed the amount specified in

section 128(b), which is $2,500 for 2026

and 2027 and is adjusted for taxable years

after 2027 as provided in section 128(b)

(2). An employee’s receipt of excess contributions due to participation in Trump

account contribution programs sponsored

by more than one employer will not cause

those programs to fail to be Trump account

contribution programs, provided that each

program prohibits the payment of contributions under that plan with respect to an

employee in excess of the annual limitation.

Several comments received in response

to Notice 2025-68 requested that the Treasury Department and the IRS clarify how

the annual limit for employer contributions

applies in certain scenarios where multiple

employers might make contributions to

the same Trump account or an employee

has multiple children who could receive

contributions to their Trump accounts

under an employer’s Trump account con-

253

tribution program. In response to these

comments, proposed § 1.128-2(d)(5)(ii)

would clarify that the annual limit applies

with respect to each employee so that if an

employee has more than one employer in

a year, the maximum that an employee can

receive from all employers is the amount

specified in section 128(b). Further, as to

employment for a single employer, the

limit applies to the employee rather than

on a dependent-by-dependent basis. If an

employee has more than one dependent

with a Trump account, a program may permit the contribution to be allocated among

those accounts, provided that the aggregate amount an employer contributes with

respect to the employee for the calendar

year does not exceed the annual limit. The

proposed regulations provide examples

clarifying the application of these rules.

A number of major employers have

announced their intention to match the

government’s $1,000 contributions pursuant to the section 6434 Trump accounts

contribution pilot program for eligible

children born in the years 2025 through

2028. Provided that the arrangement otherwise qualifies as a Trump account contribution program under section 128, these

employer contributions would be excludable from employee gross income. Like

other section 128 contributions, the match

contributions would count toward the program’s limit under proposed § 1.128-2(d)

(5) and toward the individual employee’s aggregate limit under section 128(b)

for the taxable year. See Part B.7 of this

Explanation of Provisions for a safe harbor for such match contributions under the

otherwise applicable nondiscrimination

rules that would apply under proposed §

1.128-3.

Proposed § 1.128-2(d)(5)(v) would

provide that an employer has no obligation with respect to compliance with the

section 530A(c)(2) limit. The Treasury

Department and the IRS intend to provide

in a separate notice of proposed rulemaking addressing contributions to a Trump

account that, to the extent that section 128

contributions and other source contributions (such as from the parent, child, relative, etc. but not including pilot program

contributions, qualified general contributions, or qualified rollover contributions)

are made to a Trump account and exceed

the section 530A(c)(2) annual limit,

September 8, 2026

excess contributions will be considered

first to be attributable to the other source

contributions before being attributable to

section 128 contributions. The Treasury

Department and the IRS request comments on specific circumstances in which

the section 128 contributions in addition

to other contributions to a Trump account

may exceed the applicable limit under

section 530A and how such situations can

best be addressed.

The Treasury Department and the IRS

note that an employer may make contributions to a Trump account that are not

section 128 contributions because, for

example, the contribution exceeds the

annual limit for contributions that are

excludable from gross income under a

Trump account contribution program.

Pursuant to section 219(f)(5), amounts

paid by an employer on behalf of an

employee to a Trump account that are not

made under a Trump account contribution

program, including by reason of exceeding the annual limit, are not excludable

from income by virtue of section 128,

and absent some other basis for exclusion, are payments of compensation to

the employee that are includible in his or

her gross income and wages in the taxable

year for which the amounts were contributed and are subject to applicable employment tax reporting and withholding. For

example, if an employer contributes an

additional amount outside of the Trump

account contribution program to a Trump

account, it must treat that amount as gross

income and wages to the employee rather

than as a section 128 contribution. Proposed § 1.128-2(d)(5)(vi)(E) (Example 5)

illustrates this rule.

4. Employer and employee

For an amount to be excludable from

gross income under section 128, it must be

contributed by an employer to the Trump

account of an employee or an employee’s dependent. One comment received in

response to Notice 2025-68 asked Treasury and the IRS to address whether section 128 contributions may be made for

an “owner-employee,” specifically in the

case of partners in a partnership and S corporation shareholders.

5

To address this comment proposed

§ 1.128-1(b) would provide that the

term employee means an individual who

is an employee under the common-law

standard described in § 31.3401(c)1. Therefore, the term employee does

not include a self-employed individual

within the meaning of section 401(c)(1),

such as a partner in a partnership, a sole

proprietor, a director solely by reason

of service as a director, or a 2-percent

shareholder of an S corporation within

the meaning of section 1372(b). A

self-employed individual is not disqualified from maintaining a Trump account

contribution program covering employees of the self-employed individual’s

trade or business, but the self-employed

individual would not be eligible to participate in the program.

This definition is narrower than the definition of employee in section 129 and is

based on differences in the statutory structures of the two provisions. Section 128

does not define the term “employee.”

Accordingly, in the absence of a contrary

statutory indication, that term is interpreted under common-law principles. See

Nationwide Mut. Ins. Co. v. Darden, 503

U.S. 318, 322-24 (1992). Section 129 similarly does not provide a general definition

of employee and thus would also rely on

common law principles. In contrast to section 128, however, section 129(e)(3) states

the term employee includes “an individual

who is an employee within the meaning

of section 401(c)(1) (relating to self-employed individuals).” Section 129(e)(3) is

not among the paragraphs of section 129

that are incorporated into section 128.

Moreover, section 128 does incorporate

three of the four nondiscrimination provisions of section 129(d), omitting only

section 129(d)(4), which tests owner concentration, a rule that is generally unnecessary when self-employed individuals,

including owners in that capacity, are not

eligible for the benefit. Accordingly, the

statutory structure indicates that self-employed individuals were intentionally

excluded from section 128.

Likewise, consistent with the proposed definition of employee, proposed

§ 1.128-1(c) would define employer by

reference to the common-law standard.

The proposed regulations would further

provide that all persons treated as a single

employer under section 414(b), (c), (m),

or (o) are treated as a single employer for

purposes of section 128. Although these

rules are not referenced expressly in section 128, they are implicitly incorporated

into section 128 because the section 129

rules referenced in section 128(c) are subject to them by virtue of section 414(t). As

a result, in adopting rules similar to the

referenced section 129 rules, as section

128(c) directs, it is appropriate to incorporate the same aggregation rules. Accordingly, the proposed regulations would

treat related entities that are members of a

controlled group of corporations, trades or

businesses under common control, or an

affiliated service group, or that otherwise

are required to be aggregated under section 414(o), as one employer in applying

section 128(c). The rules are intended to

function under section 128 in the same

manner as they would under section 129,

including the application of special rules

for separate lines of business under section 414(r).

5. Dependent

Proposed § 1.128-1(a) would define

dependent for purposes of section 128 by

cross-reference to the definition of dependent in section 152.5 Consequently, in the

case of divorced or separated parents, or

married taxpayers filing separately, a child

cannot qualify as a dependent of both parents and only one of the parents can claim

the child as a dependent. See section

152(c)(4) and (e). In the case of a married

couple filing jointly, a child may qualify

as a dependent of both parents for purposes of the exclusion under section 128.

6. Exclusion from gross income

Proposed § 1.128-2(a) would provide

that gross income of an employee does not

include an amount paid by the employer

as a contribution to the Trump account of

the employee or of any dependent of the

employee pursuant to a Trump account

contribution program. Such a contribution may be made via salary reduction, as

explained in Part A.2 of this Explanation

As provided in section 152(a), the definition of dependent in section 152 applies for purposes of subtitle A of the Code, which includes section 128.

September 8, 2026

254

Bulletin No. 2026–37

of Provisions.6 Amounts contributed by

an employer in excess of the section 128

exclusion, or otherwise not meeting the

requirements for exclusion under section 128, would not be excludable from

the employee’s gross income under section 128.

Several comments received in response

to Notice 2025-68 asked for clarification

regarding whether employer contributions under a Trump account contribution

program are wages subject to the Federal Insurance Contributions Act (FICA),

Railroad Retirement Tax Act (RRTA), and

Federal Unemployment Tax Act (FUTA),

as well as Federal income tax withholding requirements. Although section 128

excludes certain employer contributions

from an employee’s gross income for

Federal income tax purposes, that exclusion does not extend to amounts that are

taxed as wages under subtitle C of the

Code. Thus, employer contributions that

are excludable from gross income under

section 128 have no corresponding exclusion from the definitions of wages under

section 3121 (FICA) and section 3306

(FUTA), or compensation under section

3231 (RRTA), and are treated as wages or

compensation for these purposes unless

some other exclusion applies. Although

there is also no express exclusion from the

definition of wages under section 3401 for

section 128 contributions, Federal income

tax withholding generally is intended

to be commensurate with an employee’s income tax liability. Therefore, section 128 contributions that are excludable

from an employee’s income will not be

treated as subject to Federal income tax

withholding. See, e.g., Notice 2001-14,

2001-6 IRB 516.

B. Nondiscrimination Rules

As discussed previously, section 128

provides that Trump account contribution

programs must, among other things, satisfy “requirements similar to the requirements” of certain of the nondiscrimination rules under section 129. In general,

the nondiscrimination rules under proposed §§ 1.128-3 and 1.129-2 are identi-

cal. However, these proposed regulations

would differ with respect to the nondiscrimination rules in situations in which

modifications would better effectuate the

purposes of section 128.

Proposed § 1.129-1 would provide certain definitions related to dependent care

assistance programs. Proposed §§ 1.128-3

and 1.129-2 would clarify the application

of the nondiscrimination rules to Trump

account contribution programs and dependent care assistance programs, respectively.

Comments received in response to

Notice 2025-68 expressed support for

comprehensive section 129 guidance that

provides clear and administrable rules.

Some commenters requested that safe harbors or other interim relief be provided in

order to ensure that uncertainty does not

discourage employers from implementing

Trump account contribution programs.

Commenters also raised unresolved questions about the definition of an HCE, what

it means for “benefits or contributions”

not to discriminate in favor of HCEs, and

how the section 129(d)(3) classification

test should work. They also emphasized

that the 55-percent average benefits test

under section 129(d)(8) has been the subject of confusion for many years and has

been challenging for taxpayers to apply.

Commenters also requested that the Treasury Department and the IRS provide

guidance on opportunities for remediation

and self-correction of contributions that

would otherwise cause a nondiscrimination failure.

1. Definition of HCEs

For purposes of both sections 128 and

129, HCE is defined by cross-reference

to section 414(q). Proposed §§ 1.1281(f) and 1.129-1(a)(7) would define nonhighly compensated employee (NHCE)

to mean an employee who is not an HCE.

These definitions would provide the basic

employee groupings used throughout the

proposed nondiscrimination rules under

both sections 128 and 129. The Treasury

Department and the IRS propose these

regulations to provide an administrable

framework for applying the statutory

requirement that eligibility classifications

not discriminate in favor of HCEs, while

aligning the analysis under sections 128

and 129 with established nondiscrimination principles used in other employee

benefit contexts.

2. Contributions and benefits

Proposed §§ 1.128-3(a) and 1.129-2(a)

would provide parallel rules requiring

that contributions and benefits provided

under the Trump account contribution

program and dependent care assistance

plan, respectively, must not discriminate

in favor of HCEs or their dependents.

These proposed regulations would implement section 129(d)(2) (applied to Trump

account contributions via section 128(c))

through qualitative rules governing the

terms on which contributions are made

available under the program. More specifically, proposed §§ 1.128-3(a) and

1.129-2(a) would provide that a Trump

account contribution program or dependent care assistance program does not

satisfy the nondiscrimination rule for

contributions and benefits if the program

provides more favorable terms for HCEs

than for other employees. These proposed regulations would further provide

that a program satisfies this requirement

if it is designed to provide contributions

and benefits on the same terms for all

employees who are eligible to participate, even if eligible employees receive

different amounts of contributions and

benefits as a result of differing elections

or differing utilization of the contributions and benefits.

3. Eligibility

Proposed §§ 1.128-3(b) and 1.129-2(b)

would address the requirement in sections 128(c) and 129(d)(3), respectively,

that the program benefit employees who

qualify under a classification established

by the employer and found by the Secretary not to be discriminatory in favor

of HCEs or their dependents. Proposed

§§ 1.128-3(b) and 1.129-2(b) would inter-

The Treasury Department and the IRS note that employers may not provide section 128 contributions directly to the employee or employee’s dependent; rather, the contributions must be

made to Trump accounts.

6

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255

September 8, 2026

pret these provisions as requiring both that

the employer’s eligibility classification be

reasonable and that the classification be

nondiscriminatory in operation.

Accordingly, proposed §§ 1.128-3(b)

(2) and 1.129-2(b)(2) would provide

that an eligibility classification must be,

based on all facts and circumstances,

reasonable and established under objective business criteria that identify the

category of employees who are eligible

under the program. Proposed §§ 1.1283(b)(2) and 1.129-2(b)(2) would clarify

that reasonable classifications generally

include specified job categories, nature of

compensation (salaried or hourly), geographic location, and similar bona fide

business criteria, but that an enumeration of employees by name, or by criteria having substantially the same effect,

is not a reasonable classification. This is

the same standard that is applied under

§ 1.410(b)-4(b).

Proposed §§ 1.128-3(b)(3) and 1.1292(b)(3) would further provide rules for

determining whether an employer’s eligibility classification is nondiscriminatory.

Under the proposed regulations, a classification would be nondiscriminatory for

a plan year only if the group of employees eligible under the program satisfies

either a facts-and-circumstances test or a

numerical safe harbor, both of which are

similar to the nondiscriminatory classification test for qualified plans described in

§ 1.410(b)-4.

Proposed §§ 1.128-3(b)(3)(ii) and

1.129-2(b)(3)(ii) would provide a

facts-and-circumstances test for determining whether an employer’s eligibility

classification is nondiscriminatory. Under

proposed §§ 1.128-3(b)(3) and 1.129-2(b)

(3), a classification would satisfy the eligibility requirement if and only if, based on

all the relevant facts and circumstances,

the Secretary finds that the classification

is nondiscriminatory. Proposed §§ 1.1283(b)(3)(ii) and 1.129-2(b)(3)(ii) would

clarify that no one factor is determinative

and would identify relevant considerations

including the underlying business reason

for the classification, the percentage of

the employer’s employees who are eligible under the plan, whether the eligible

employees under the plan are representative of the employer’s workforce across

salary ranges, and the extent to which the

September 8, 2026

plan’s ratio percentage differs from the

employer’s safe harbor percentage (as

described in the following paragraph). In

general, the greater the business justification for the classification, the broader the

coverage under the plan, the more representative the classification is across salary ranges, and the smaller the difference

between the plan’s ratio percentage and

the employer’s safe harbor percentage, the

more likely the classification is to be nondiscriminatory. The Treasury Department

and the IRS propose these regulations to

provide a flexible but administrable standard for evaluating classifications that

do not satisfy the numerical safe harbor

while ensuring that the classification does

not discriminate in favor of HCEs or their

dependents.

Proposed §§ 1.128-3(b)(3)(iii) and

1.129-2(b)(3)(iii) would provide a safe

harbor under which the classification

would be treated as nondiscriminatory

if the plan’s ratio percentage is greater

than or equal to the safe harbor percentage of the employer. Proposed §§

1.128-3(b)(3)(iii) and 1.129-2(b)(3)(iii)

would define the plan’s ratio percentage

by comparing the percentage of NHCEs

who are eligible under the program to

the percentage of HCEs who are eligible under the program. The proposed

regulations would define the safe harbor percentage of an employer as 90

percent, reduced by 3/4 of a percentage

point for each whole percentage point

by which the NHCE concentration percentage exceeds 60 percent. The NHCE

concentration percentage is the percentage of all the employer’s employees

who are NHCEs. Under this approach,

a classification that satisfies the safe

harbor is treated as nondiscriminatory

without the need to establish, based on

all the relevant facts and circumstances,

that the classification is nondiscriminatory. The Treasury Department and the

IRS propose this safe harbor to provide

employers with certainty and to align the

testing of eligibility classifications with

established nondiscrimination concepts

used in other employee benefit contexts.

See, e.g., § 1.410(b)-4(c)(2) (safe harbor

for nondiscriminatory classification test

under section 410(b)).

As discussed in Part B.6 of this Explanation of Provisions, excluded employees

256

are not taken into account under the eligibility rules in proposed §§ 1.128-3(b) and

1.129-2(b).

4. Owner concentration

Proposed § 1.129-2(c) would provide

rules for applying the owner concentration

limitation in section 129(d)(4). Under that

statutory rule, not more than 25 percent

of the amounts paid or incurred by the

employer for dependent care assistance

during the year may be provided for the

class of individuals who are shareholders

or owners (or their spouses or dependents)

each of whom owns more than 5 percent

of the stock or of the capital or profits

interest in the employer on any day of the

year. Proposed § 1.129-2(c) would restate

this statutory requirement, which imposes

a separate limitation based on ownership

rather than compensation. No similar

owner concentration limitation applies

under section 128, and accordingly the

proposed regulations under section 128

do not include a corresponding rule. However, as discussed in Part A of this Explanation of Provisions, the income exclusion under section 128 is not available to

self-employed individuals. Accordingly,

self-employed individuals in their capacity as such may not participate in a section 128 Trump account contribution program.

5. Average benefits

Proposed §§ 1.128-3(c) and 1.1292(d) would provide rules for applying the

average benefits test under sections 128(c)

and 129(d)(8), respectively. A program

satisfies this statutory test if the average

benefits provided to NHCEs under all

Trump account contribution programs and

dependent care assistance programs of the

employer, respectively, are at least 55 percent of the average benefits provided to

HCEs.

Proposed §§ 1.128-3(c) and 1.1292(d) would provide a framework for

applying this test. In general, the average contributions and benefits provided

to a group of HCEs or NHCEs under all

Trump account contribution programs

or dependent care assistance programs

of the employer, respectively, for a plan

year would equal the total dollar amount

Bulletin No. 2026–37

of such contributions and benefits provided during the plan year to employees

in that group, divided by the number of

employees in that group to whom such

contributions and benefits in a dollar

amount greater than zero are provided

during the plan year, via salary reduction or otherwise. Proposed §§ 1.1283(c) and 1.129-2(d) would further clarify

that, solely for purposes of this calculation, an employee is taken into account

in the denominator only if the employee

is provided contributions and benefits

under a Trump account contribution

program or a dependent care assistance

program of the employer, respectively,

in an amount greater than zero during

the plan year, and that these rules apply

only for purposes of determining compliance with the average benefits test.

Proposed §§ 1.128-3(c) and 1.129-2(d)

would also reflect the statutory rule permitting a program, in the case of contributions and benefits provided through a

salary reduction agreement, to disregard

employees whose compensation is less

than $25,000. Additionally, as discussed

in Part B.6 of this Explanation of Provisions, excluded employees are not taken

into account in the average benefits test.

Proposed §§ 1.128-3(c)(3) and 1.1292(d)(3) would provide parallel timing

rules for applying the average benefits

test. Under proposed §§ 1.128-3(c)(3)

and 1.129-2(d)(3), compliance with the

average benefits test is determined as of

the last day of the plan year, taking into

account any individual employed on

any day of the plan year who is not an

excluded employee and who was provided section 128 contributions or dependent care assistance program benefits, as

applicable, via salary reduction or otherwise, on any day during the plan year.

The Treasury Department and the IRS are

proposing these rules to provide a uniform

testing date and to ensure that the test

takes into account all relevant employees,

rather than only employees employed or

participating at a particular time during

the plan year. The Treasury Department

and the IRS request comments on whether

any additional information would be helpful in applying the average benefits test.

7

6. Excluded employees

Proposed §§ 1.128-3(e) and 1.129-2(f)

would provide rules identifying employees who are excluded from consideration

for purposes of applying specified nondiscrimination requirements. Consistent with

section 129(d)(9),7 proposed §§ 1.1283(e) and 1.129-2(f) would provide that,

for purposes of the eligibility and average

benefits tests, an employer shall exclude

employees who have not attained age 21

and completed one year of service, subject to rules similar to the rules of section 410(b)(4). An employer shall also

exclude employees not included in the

Trump account contribution program or

the dependent care assistance program

who were covered by a collective bargaining agreement if there is evidence that the

relevant benefits were the subject of good

faith bargaining between employee representatives and the employer or employers.

The Treasury Department and the IRS

are proposing these rules to reflect the

statutory exclusions from nondiscrimination testing and to clarify the circumstances in which those employees are

disregarded in applying the eligibility and

average benefits rules. Proposed §§ 1.1283(e) and 1.129-2(f) are generally parallel

in this respect.

7. Pilot match contribution arrangement

safe harbor

Employers have expressed concern that

their announced intentions to match payments made to Trump accounts of dependents of employees pursuant to the section

6434 Trump accounts contribution pilot

program available to account beneficiaries

born in calendar years 2025 through 2028

may cause a plan to fail applicable nondiscrimination requirements. To address

these concerns, proposed § 1.128-3(d)

would provide a safe harbor disregarding these contributions for purposes of

the contribution and benefits requirement

of proposed § 1.128-3(a), and the average benefits percentage requirement of

proposed § 1.128-3(c). The safe harbor

does not apply for purposes of proposed

§ 1.128-3(b).

To be eligible for the safe harbor, an

employer must make contributions under

a pilot match contribution arrangement

designed to provide contributions on

behalf of employees with dependents who

are eligible to receive section 6434 pilot

program contributions to their Trump

accounts. These contributions must be

made available on the same terms and

conditions to all employees who are not

excluded employees. An arrangement will

not fail to be a pilot match contribution

arrangement because the employer adopts

reasonable measures to establish eligibility. Thus, for example, an employer might

determine eligibility based on the age of a

dependent or might alternatively base eligibility on validation of receipt of the pilot

program contribution into an employee’s

dependent’s Trump account. In either

case, the arrangement uses a reasonable

measure to determine eligibility.

If an employer makes pilot match

contributions and also makes other section 128 contributions, via salary reduction or otherwise, the other contributions

must separately satisfy the contribution

and benefits requirement and the average

benefits percentage requirement. In determining whether these requirements are

separately satisfied, the employer may,

but is not required to, disregard the pilot

match contributions.

8. Failure and remediation

Proposed §§ 1.128-3(c)(5) and (g)

and 1.129-2(h) and (j) would provide rules

addressing the effect of a failure to satisfy

the nondiscrimination requirements and

the circumstances in which a program

may take remedial action. In general,

these proposed rules would provide that,

if a program would qualify as a Trump

account contribution program or dependent care assistance program but for a

failure to satisfy one or more of the applicable nondiscrimination requirements, the

program would continue to be treated as

satisfying those requirements with respect

to employees who are NHCEs.

The proposed rules would also provide

a remedial rule for failures of the average

benefits test and, in the case of depen-

Section 129(d)(9) applies for purposes of section 129(d)(3) and (8), which are incorporated by reference into section 128(c).

Bulletin No. 2026–37

257

September 8, 2026

dent care assistance programs, the owner

concentration test. Under proposed §§

1.128-3(c)(5) and 1.129-2(j), if the program fails the average benefits test as of

the last day of the plan year, the program

may nonetheless be treated as satisfying

that requirement if, on or before the deadline for furnishing Form W-2 for the year

in which the benefits were provided, the

employer includes in the gross income of

affected HCEs the amount of excess benefits determined under the proposed regulations. In the case of dependent care assistance programs, proposed § 1.129-2(j)(3)

would provide a similar remedial rule for

excess ownership concentration.

In general, if all HCEs have benefits in

excess of the amount that would satisfy

the 55-percent average benefits threshold,

the excess benefit amount for each HCE is

determined by reference to that threshold.

If not all HCEs have benefits in excess

of that amount, proposed §§ 1.128-3(c)

(5)(ii)(B)(2) and 1.129-2(j)(2)(ii) would

permit the employer to allocate the excess

benefit and required reduction among

HCEs in any reasonable manner, including methods similar to those used under

§ 1.401(k)-2(b)(2)(iii).

A similar allocation of an excess ownership concentration is permitted in the

case of failures to satisfy the ownership

concentration test. In that case, the permitted concentration amount is subtracted

from the benefit provided to participating

principal shareholders or owners (defined

to include their spouses and dependents)

to determine the amount to be included

in income. The permitted concentration

amount is 25 percent of the total dependent

care benefits provided by the employer to

all participants during the year divided

by the number of participating principal

shareholders or owners.

The Treasury Department and the IRS

are proposing these regulations to provide

a practical correction mechanism for failures, while preserving the statutory focus

on preventing HCEs from receiving the

benefit of discriminatory arrangements.

Proposed §§ 1.128-3(c)(5) and 1.129-2(j)

are intended to allow employers to correct

certain failures through income inclusion,

rather than by requiring adjustment of

benefits that have already been provided.

The proposed regulations regarding nondiscrimination remediation rules

September 8, 2026

under sections 128 and 129 are generally

parallel, but there are certain substantive differences between the two. First,

because there is no corresponding ownership concentration test under section 128,

no remediation rule for an ownership

concentration failure is needed under section 128. In contrast, proposed § 1.1292(j) would permit remediation for failures

of either the ownership concentration test

in section 129(d)(4) or the average benefits test in section 129(d)(8). Second, proposed § 1.128-3(c)(5)(ii)(A), through its

cross-reference to § 1.128-2(h)(4), would

require that the Trump account contribution program provide a corrective notice

to advise the trustee that the contribution

is not a section 128 contribution.

C. Applicability Date

These proposed regulations are proposed to apply to plan years beginning on

or after the date final regulations are published in the Federal Register. Taxpayers

may rely on these proposed regulations

for plan years beginning before the date

final regulations are published in the Federal Register.

IV. Special Analyses

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 a significant reg-

258

ulatory action under section 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 clarify the rules for employer contributions

to Trump accounts under section 128 of

the Internal Revenue Code (Code) and the

rules for nondiscrimination testing under

sections 128 and 129 of the Code.

The Statute and the Proposed Regulations

Public Law 119-21, commonly

referred to as the One, Big, Beautiful

Bill Act (OBBBA), 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 employer

contributions to Trump accounts under

section 128.

Section 530A defines a Trump

account as a traditional individual retirement account (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 a

direct trustee-to-trustee transfer to a new

Trump account of the account beneficiary.

Bulletin No. 2026–37

The entire balance of a Trump account

may be rolled over in a direct trustee-totrustee transfer to an ABLE account of the

account beneficiary in the calendar year

the account beneficiary attains age 17.

Investments in a Trump account must

track the returns of a broad index of equities in primarily U.S. companies for which

regulated futures contracts are traded,

avoid the use of leverage, and avoid

annual fees and expenses above 0.1 percent. 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

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 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.

All other contributions to a Trump

account, including contributions from

friends or family members, create investment in the contract and count towards the

$5,000 annual contribution limit.

Section 129 describes dependent care

assistance programs. Under section 129,

Bulletin No. 2026–37

an employee may exclude from gross

income employer-provided dependent

care assistance furnished under a qualifying program. To qualify, the program must

satisfy nondiscrimination rules for eligibility and benefits, limit benefits for morethan-5-percent shareholders or owners to

no more than 25 percent of total program

benefits and provide average benefits to

non-highly compensated employees equal

to at least 55 percent of those provided

to highly compensated employees. The

exclusion is generally limited to $7,500,

or $3,750 for married individuals filing

separately, for taxable years beginning

after December 31, 2025.

The proposed regulations are just

one piece of the implementation of section 70204 of OBBBA; prior guidance

addressed the election to open an initial

Trump account and the election to receive

a pilot contribution, and future guidance

will address other Trump account issues.

In addition to addressing issues specific to

Trump accounts, the proposed regulations

also address nondiscrimination testing in

the context of both section 128 Trump

account contribution programs and section

129 dependent care assistance programs.

The proposed regulations would

define various terms for the purposes of

section 128. The proposed regulations

would adopt the common law definitions

of employee and employer for section

128. An implication of these definitions

of employee and employer is that a section 128 contribution cannot be made by

a self-employed individual; a section 128

contribution must be made by an employer

to the Trump account of an employee or

an employee’s dependent. The proposed

regulations define dependent by cross referencing section 152. Other definitions in

the proposed regulations generally adhere

closely to definitions from section 128,

other statutes, or prior regulations.

The proposed regulations would provide rules for Trump account contribution

programs. Trump account contribution

programs would be required to notify eligible employees of the terms of the program, report annually to an employee on

Form W-2 or other written document the

section 128 contributions made for that

employee during the prior calendar year,

verify that the destination of a section 128

contribution is a Trump account, identify

259

a section 128 contribution as such to the

trustee when it is made, and notify the

trustee within a reasonable period (generally, within 21 calendar days) if a contribution previously identified as a section 128

contribution is later determined not to be

a section 128 contribution. Trump account

contribution programs would be permitted to rely on an employee’s certification

of the age of the account beneficiary and

the employee’s relationship to the account

beneficiary. Trump account contribution

programs would not be permitted to limit

contributions to accounts held by one or

more particular trustees.

The proposed regulations would provide rules for the use of section 125 cafeteria plans by Trump account contribution

programs. A Trump account contribution

program would be permitted to allow an

employee to fund a section 128 contribution to a dependent’s Trump account via

salary reduction under a section 125 cafeteria plan. A cafeteria plan that includes

section 128 contributions would be

required to allow an employee to prospectively change or revoke elections at least

monthly.

The proposed regulations would clarify

the statutory limit on section 128 contributions. Section 128 contributions are

generally excludable from the income of

the employee and limited to $2,500 per

year. The $2,500 section 128 contribution limit would apply to each employee,

regardless of how many employers the

employee has and regardless of how many

dependents the employee has. Employer

contributions in excess of $2,500 would

not be excludable from the gross income

of the employee.

The proposed regulations would define

various terms for the purposes of section 129. In contrast to section 128, the

definition of employee for section 129

would include both common law employees and self-employed individuals. For

both section 128 and section 129, the proposed regulations would adopt the definition of HCE in section 414(q).

The proposed regulations would provide nondiscrimination rules for Trump

account contribution programs under section 128 and dependent care assistance

programs under section 129. The proposed regulations would require section

128 and section 129 benefits to be made

September 8, 2026

available on terms that do not discriminate in favor of HCEs or their dependents.

The proposed regulations would require

eligibility classifications to be reasonable, based on objective business criteria, and nondiscriminatory under either a

facts-and-circumstances test or a numerical safe harbor. The facts-and-circumstances test would include consideration

of the business reason for the classification, the percentage of eligible HCEs, and

the percentage of eligible non-HCEs. The

numerical safe harbor would be satisfied

if the percent of non-HCEs eligible is at

least 90 percent as large as the percent of

HCEs eligible, and the 90 percent threshold would be reduced by 3/4 of a percentage point for each whole percentage point

by which the percent of an employer’s

employees who are non-HCEs exceeds 60

percent.

The proposed regulations would clarify that the average benefits test, which

requires that average benefits of nonHCEs be at least 55 percent as large as

average benefits of HCEs, is based exclusively on employees who receive more

than zero benefits during the plan year.

The proposed regulations would exclude

employees under age 21, employees who

have not completed one year of service,

and certain collectively bargained employees from the eligibility and average benefits tests. The proposed regulations would

provide a nondiscrimination testing safe

harbor for section 128 contributions tied

to section 6434 pilot program contributions, if those section 128 contributions

are made available on the same terms and

conditions to all non-excluded employees.

The proposed regulations would generally preserve favorable treatment for nonHCEs after a nondiscrimination failure

and would allow certain average benefits

failures, and section 129 owner concentration failures, to be remediated no later

than the general deadline for W-2 reporting through income inclusion for affected

individuals.

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 73 million children in 44 million

families and 3 million employers.

Economic Effects of the Proposed

Regulations

The proposed regulations generally

minimize compliance burdens on employers, subject to the access requirements of

taxpayers, operational requirements of

Trump account trustees, and applicable

law. Some employers have announced

intentions to “match” the $1,000 pilot

payments from the U.S. Treasury. The

proposed regulations facilitate the prompt

implementation of that structure by giving

employers a safe harbor from nondiscrimination testing.

In the long run, the most important

aspect of section 128 is likely to be the ability of employers to facilitate pre-tax contributions by their employees. The proposed

regulations clarify how section 128 contributions can be made via salary reduction

through a cafeteria plan. Pre-tax contributions to a Trump account are on par with

pre-tax contributions to other traditional

IRAs, and they are even competitive with

section 529 accounts in the context of family savings for higher education expenses.

Comparisons with other savings vehicles for children are challenging in practice because they involve long time horizons and uncertainty about future income

and tax rates. Nevertheless, an apples-toapples comparison is possible with a clear

question and clear assumptions. If a family saves one dollar of after-tax income

now, how many after-tax dollars will the

child have in 20 years? Table 1 shows

the answers when the after-tax dollar is

saved in a section 529 account, a Trump

account through a pre-tax contribution,

and a Trump account through an aftertax contribution, assuming a 10 percent

annual nominal rate of return, a 27 percent

present marginal tax rate (including a 22

percent federal marginal tax rate and a 5

percent state marginal tax rate), and a 17

percent future marginal tax rate (including

a 12 percent federal marginal tax rate and

a 5 percent state marginal tax rate).

September

8, 2026 do not incorporate the “kiddie

260

Bulletin

These comparisons

tax” in section 1(g) of the Code

or how No. 2026–37

These comparisons do not incorporate

the “kiddie tax” in section 1(g) of the Code

or how financial aid might be impacted

by taking distributions while a child is in

college. Pre-tax contributions to Trump

accounts will not be universally better for

families than contributions to section 529

accounts, but they are competitive.

By minimizing compliance burdens for

employers, the proposed regulations make

widespread adoption of Trump account

contribution programs, including programs that permit pre-tax contributions

through a cafeteria plan, more likely.

Pilot program safe harbor

The proposed regulations would clarify

how to apply the nondiscrimination rules

to section 128 contributions. The proposed

regulations would provide a safe harbor

under which section 128 contributions are

disregarded for purposes of the contributions and benefits rule and average benefits test, but not for purposes of the eligibility rule, if the contributions are tied to

section 6434 pilot program contributions

and made available on the same terms and

conditions to all non-excluded employees.

An alternative would be to provide no

safe harbor, such that employers would be

required to do ordinary nondiscrimination

testing. The same-terms safe harbor gives

employers the legal certainty they need to

implement a match for section 6434 pilot

contributions and is narrow enough to prevent employers from targeting the benefit

to HCEs. Employers will be more likely to

match the pilot contribution as a result of

the safe harbor, which could benefit up to

15 million children expected to be born in

2025 through 2028. With median historical returns, an additional $100 in contributions made by an employer to a newborn

would result in an additional $620 dollars

in the account when the child turns 18.

Many employers offer benefits to support families with children. As of March

2025, 13 percent of civilian employees

had access to childcare, 46 percent had

access to a dependent care flexible spending account, and 85 percent had access to

personal leave, sick leave, or paid family

leave. Using the same-terms safe harbor

makes it more likely that employers will

offer broadly available matches for section 6434 pilot contributions through a

Bulletin No. 2026–37

Trump account contribution program.

However, section 128 contributions that

are tied to section 6434 pilot contributions will be more costly to employers

than section 128 contributions that are

structured as a salary reduction through

a cafeteria plan. Section 128 contributions structured as salary reductions shift

employer costs from one purpose (salaries) to a different purpose (benefits)

without increasing total costs. Section

128 contributions structured as a “match”

to the pilot contribution do not shift costs

from one purpose to another, they simply

increase the employer’s cost of providing

benefits. The extent of adoption will be

limited to employers who are willing to

bear the incremental marginal cost of a

new benefit for employees.

Eligibility classification safe harbor

The proposed regulations would clarify how to apply the eligibility component

of the nondiscrimination rules for section

128 and section 129 benefits. The proposed regulations would provide a safe

harbor under which benefits satisfy the

eligibility test if the percentage of nonhighly compensated employees eligible

for the benefit is at least 90 percent as large

as the percentage of highly compensated

employees eligible for the benefit. The

90 percent threshold would be reduced

by three-fourths of a percentage point for

each whole percentage point by which the

percentage of the employer’s employees

who are non-highly compensated employees exceeds 60 percent. Alternatives

would be to provide a safe harbor with a

different percentage, use a fixed threshold

that does not vary with workforce composition, or provide no safe harbor. The 90

percent threshold is high enough to ensure

that eligibility is broadly available to nonhighly compensated employees and flexible enough to account for employers with

workforces that are heavily composed of

non-highly compensated employees. A

safe harbor gives employers more certainty in designing section 128 and section

129 benefits and reduces the compliance

burden of applying a facts-and-circumstances eligibility test. Facts-and-circumstances tests are generally more costly to

comply with because they are more complicated. Evaluating a multi-pronged test

261

is harder than checking a simple numerical threshold.

The eligibility classification safe harbor makes it more likely that employers

will offer section 128 and section 129

benefits. However, the safe harbor is narrow enough, starting at a threshold of 90

percent, such that employers meeting the

safe harbor would in any case have some

confidence of satisfying the facts-and-circumstances test. The eligibility classification safe harbor is more of a relief from

compliance burdens than a relaxation of

the eligibility component of nondiscrimination testing. The relief from compliance

burdens makes it more likely that employers will offer Trump account contribution

programs and dependent care assistance

programs and reduces the compliance

costs of administering those programs.

Remediation deadline

The proposed regulations would clarify when employers may correct certain

nondiscrimination failures for section 128

and section 129 benefits through income

inclusion for affected individuals. The proposed regulations would provide that certain average benefits failures, and section

129 owner concentration failures, may be

remediated no later than the general deadline for W-2 reporting. Alternatives would

be to require remediation by the end of

the plan year, allow remediation through a

later amended return process, or provide no

remediation deadline. The W-2 reporting

deadline is late enough to give employers

time to identify nondiscrimination failures after year-end and early enough to

ensure that affected amounts are included

in income through the regular annual wage

reporting system. A clear remediation deadline gives employers certainty, preserves

administrability for payroll reporting, and

helps ensure that failed benefits are taxed

to the affected individuals.

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

September 8, 2026

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 correction

frameworks, a remediation deadline tied

to the deadline for Form W-2 is relatively

prompt. However, the remedy of including benefits in the income of affected individuals is also relatively straightforward,

so the impact of the remediation deadline

is likely small.

Corrective notice timing

The proposed regulations would clarify

the timing and information reporting obligations for Trump account contribution

programs that make section 128 contributions. The proposed regulations would

require a program to identify a section 128

contribution as such to the trustee when

the contribution is made and to notify the

trustee within a reasonable period (within

21 calendar days is deemed a reasonable

period) if a contribution previously identified as a section 128 contribution is later

determined not to be a section 128 contribution. Alternatives would be to require

immediate notice, provide a longer correction period, or provide no specific deadline. The 21-day deadline is long enough

to give contribution programs time to

identify and process errors and short

enough to allow trustees to maintain accurate account records before errors become

difficult to correct. A clear 21-day deadline

gives trustees timely information, reduces

uncertainty about the tax character of contributions, and supports consistent administration of Trump accounts.

As noted in the previous section, correction periods in other retirement and tax

contexts commonly allow time for orderly

correction rather than requiring immediate

action. Compared with other retirement

and tax correction frameworks, the 21-day

corrective notice requirement is relatively

prompt. However, the circumstances leading to a corrective notice are expected to be

rare, so the impact of the 21-day corrective

notice deadline is expected to be small.

Salary reduction election change

frequency

The proposed regulations would clarify

how cafeteria plan election rules apply to

September 8, 2026

section 128 contributions. The proposed

regulations would require a cafeteria

plan that includes section 128 contributions to allow an employee to prospectively change or revoke elections at least

monthly. Alternatives would be to require

more frequent election changes, allow

less frequent election changes, or provide

no specific frequency rule. The monthly

frequency is frequent enough to give

employees flexibility to adjust section 128

contributions as household budgets and

savings needs change and limited enough

to avoid imposing excessive administrative burdens on employers and payroll

systems. A clear monthly election-change

rule gives employers a workable standard

for plan administration and gives employees meaningful access to adjust section

128 contributions during the plan year.

The impact of requiring a cafeteria plan to

allow changes at least monthly is expected

to be small. The marginal cost to employers of building the capacity for employees

to change elections at least monthly is

likely to be a one-time cost. Most cafeteria

plans already have this capacity for HSA

and section 401(k) contributions because

the proposed timing rule is similar to the

timing rules for HSA and section 401(k)

contributions, and Treasury and the IRS

expect most employees to rarely change

their contributions within a plan year.

Statement of contributions by W-2

The proposed regulations would clarify how Trump account contribution programs must notify employees of section

128 contributions made for them during

the prior calendar year. The proposed regulations would allow the annual notice

requirement to be satisfied on Form W-2

or another written document. Alternatives

would be to require a separate stand-alone

notice, prescribe a specific Treasury or

IRS form, or require reporting only on

Form W-2. Allowing Form W-2 reporting

is flexible enough to let employers use

an existing wage reporting process and

specific enough to ensure that employees

receive annual information about section

128 contributions in a familiar year-end

document. A Form W-2 option reduces

compliance costs for employers, limits

duplicative reporting, and helps employees identify section 128 contributions

262

when preparing their tax returns. Allowing

the statement of contributions requirement

to be satisfied by Form W-2 is expected to

minimize compliance burdens.

Summary

Based on the available models and

data, the Treasury Department and the

IRS estimate that the proposed regulations would minimize compliance burdens and make employers more likely

to create Trump account contribution

programs, including programs that allow

employees to fund pre-tax contributions

to Trump accounts. The Treasury Department and the IRS invite public comments

and additional data on the economic

effects that would result from these proposed regulations.

Paperwork Reduction Act

The collection of information contained in this notice of proposed rulemaking will be submitted, under approval

number 1545-NEW, to the Office of Management and Budget in accordance with

the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the collection of information should be sent to the

Office of Management and Budget, Attn:

Desk Officer for the Department of the

Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503,

with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer,

C:DC:TS:CAR:MP:T:M:S, Washington,

DC 20224. Comments on the collection of

information should be received by October 13, 2026. Comments are specifically

requested concerning:

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;

The accuracy of the estimated burden

associated with the proposed collection of

information;

How the quality, utility, and clarity of

the information to be collected may be

enhanced;

How the burden of complying with

the proposed collection of information

may be minimized, including through the

application of automated collection tech-

Bulletin No. 2026–37

niques or other forms of information technology; and

Estimates of capital or start-up costs

and costs of operation, maintenance, and

purchase of services to provide information.

The collection of information in this

proposed regulation is in §§ 1.128-2,

1.128-3, 1.129-1, and 1.129-2. This information is necessary to provide guidance

with respect to employer contributions to

Trump accounts and the nondiscrimination rules for dependent care assistance

programs. The collection of information

is required to comply with the provisions

of section 70204 of the OBBBA. The

likely respondents are employers maintaining a Trump account contribution

program or a dependent care assistance

program.

The estimated number of respondents

is 217,000.

The estimated average annual burden

per respondent varies from 2 to 14 hours,

depending on individual circumstances,

with an estimated average of 8 hours.

The estimated total annual reporting

burden is 1,736,000 hours.

The estimated frequency of responses

is annually.

An agency may not conduct or sponsor,

and a person is not required to respond to

a collection of information unless it displays a valid control number assigned by

the Office of Management and Budget.

Regulatory Flexibility Act

The Secretary of the Treasury certifies that these proposed regulations will

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). This certification is based on the fact that these proposed regulations would not impose significant reporting requirements on small

entities.

These proposed regulations would

apply to employers maintaining a Trump

account contribution program under

section 128 or a dependent care assistance program under section 129. For

purposes of section 128, these proposed

regulations would include requirements

related to a written plan, employee certifications, section 125 cafeteria plan

Bulletin No. 2026–37

elections (if applicable), notifications

to employees, statements of contributions, employer-to-trustee communications, corrective notices (if applicable),

and nondiscrimination requirements.

It is estimated that the written plan

requirement would take no more than

three hours to complete, the nondiscrimination requirements would take

no more than two hours to complete,

and the other requirements would take

no more than one hour to complete. For

purposes of section 129, these proposed

regulations would not impose any new

requirements on small entities but rather

provide clarifications to assist employers in satisfying existing requirements

under the statute, including requirements for a written plan and nondiscrimination requirements. It is estimated

that the written plan requirement would

take no more than three hours to complete, if a written plan has not already

been adopted, and the nondiscrimination

requirements would take no more than

two hours to complete and are largely

already performed by employers with

dependent care assistance programs.

The Treasury Department and the IRS

also expect that Trump account contribution programs and dependent care assistance programs are primarily maintained

by large employers, given that small

employers are less likely to adopt these

programs. Small employers that do adopt

these programs may be more likely to use

third-party administrators to satisfy any

reporting requirements.

For these reasons, these proposed regulations are unlikely to impact a substantial

number of small entities and any economic

impact to small entities is expected to be

insignificant. Therefore, a Regulatory

Flexibility Act analysis is not required.

Notwithstanding this certification, the

Treasury Department and the IRS invite

comments on the impacts these proposed

regulations may have on small entities.

Section 7805(f)

Pursuant to section 7805(f) of the

Code, this notice of proposed rulemaking

will be submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on its impact on small

business.

263

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 (updated annually for inflation).

This proposed rule does 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.

Executive Order 13132: Federalism

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.

V. Comments and Public Hearing

Before these proposed amendments to

the regulations are adopted as final regulations, consideration will be given to any

comments that are submitted timely to the

IRS as prescribed in the preamble under

the ADDRESSES section. The Treasury

Department and the IRS request comments on all aspects of the proposed regulations. Any comments submitted will be

made available at www.regulations.gov or

upon request. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn.

A public hearing is being held on October 15, 2026, beginning at 10 a.m. ET, in

the Auditorium at the Internal Revenue

Building, 1111 Constitution Avenue, N.W.,

Washington, DC. Due to building security

procedures, visitors must enter at the Con-

September 8, 2026

stitution Avenue entrance. In addition, all

visitors must present photo identification

to enter the building. Because of access

restrictions, visitors will not be admitted

beyond the immediate entrance area more

than 30 minutes before the hearing starts.

Participants may alternatively attend the

public hearing by telephone.

The public hearing will be conducted

according to the procedures set out in

26 CFR 601.601(a)(2) and (3). Persons

who wish to testify at the hearing must

submit written or electronic comments

and an outline of the topics to be discussed

as well as the time to be devoted to each

topic by September 25, 2026. A period

of ten minutes will be allocated to each

person for making comments. After the

deadline for receiving outlines has passed,

the IRS will prepare an agenda containing

the schedule of speakers. Copies of the

agenda will be made available at www.

regulations.gov, search IRS and REG101355-26. Copies of the agenda will

also be available by emailing a request

to publichearings@irs.gov. Please put

“REG-101355-26 Agenda Request” in

the subject line of the email. Copies of the

agenda will be available free of charge at

the hearing. If no outlines of the topics to

be discussed at the hearing are received

by September 25, 2026, the public hearing

will be cancelled. If the public hearing is

cancelled, a notice of cancellation of the

hearing will be published in the Federal

Register.

Individuals who want to testify in person at the public hearing must send an

email to publichearings@irs.gov to have

their name added to the building access

list. The subject line of the email must

contain the regulation number (REG101355-26) and the language TESTIFY

In Person. For example, the subject line

may say: Request to TESTIFY in Person

at Hearing for REG-101355-26.

Individuals who want to testify by

telephone at the public hearing must send

an email to publichearings@irs.gov to

receive the telephone number and access

code for the hearing. The subject line

of the email must contain the regulation

number REG-101355-26 and the language

TESTIFY Telephonically. For example,

the subject line may say: Request to TESTIFY Telephonically at Hearing for REG101355-26.

September 8, 2026

Individuals who want to attend the

public hearing in person without testifying must also send an email to publichearings@irs.gov to have the individual’s

name added to the building access list.

The subject line of the email must contain the regulation number REG-10135526 and the language ATTEND In Person.

For example, the subject line may say:

Request to ATTEND Hearing In Person

for REG-101355-26. Requests to attend

the public hearing must be received by 5

p.m. ET on October 13, 2026.

Individuals who want to attend the

public hearing by telephone without testifying must also send an email to publichearings@irs.gov to receive the telephone number and access code for the

hearing. The subject line of the email

must contain the regulation number REG101355-26 and the language ATTEND

Telephonically. For example, the subject

line may say: Request to ATTEND Hearing Telephonically for REG-101355-26.

Requests to attend the public hearing must

be received by 5 p.m. ET on October 13,

2026.

Any questions regarding speaking at

or attending the public hearing may also

be emailed to publichearings@irs.gov.

Hearings will be made accessible to people with disabilities. To request special

assistance during a hearing please contact

the Publications and Regulations Section

of the Office of Associate Chief Counsel

(Procedure and Administration) by sending an email to publichearings@irs.gov

(preferred) or by telephone at (202) 3176901 (not a toll-free number) by October

9, 2026.

VI. Statement of Availability of IRS

Documents

Guidance cited in this preamble is published in the Internal Revenue Bulletin

and is 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.

VII. Drafting Information

The principal author of these proposed regulations is the Office of Associate Chief Counsel (Employee Benefits,

264

Exempt Organizations, and Employment

Taxes). Personnel from the Treasury

Department and the IRS also participated

in their development.

List 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 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

*****

Par. 2. Sections 1.128-1 through

1.129-2 are added to read as follows:

*****

Sec.

1.128-1 Trump account contribution program; definitions.

1.128-2 Trump account contribution program; in general.

1.128-3 Nondiscrimination requirements.

1.129-1 Dependent care assistance programs.

1.129-2 Nondiscrimination requirements.

*****

§ 1.128-1 Trump account contribution

program; definitions.

Definitions. For purposes of section 128 and this section and §§ 1.128-2

and 1.128-3—

(a) Dependent. The term dependent

means an individual who, for the calendar

year in which the contribution is made,

the employee anticipates will be a dependent of the employee under section 152.

In the case of a married couple filing a

joint return, an individual is treated as the

dependent of both individuals filing the

joint return.

(b) Employee—(1) In general. The

term employee means an individual who

is an employee under the common-law

Bulletin No. 2026–37

standard described in § 31.3401(c)-1 of

this chapter.

(2) Self-employed individuals not

treated as employees. The term employee

does not include a self-employed individual within the meaning of section 401(c)

(1). A self-employed individual may

maintain a Trump account contribution

program covering the employees of the

self-employed individual’s trade or business, but the self-employed individual

may not participate in the program.

(c) Employer. The term employer

means the person that is the employer

of an employee under the common-law

standard described in § 31.3401(c)-1 of

this chapter. If the employer is a member

of a group of employers that are treated

as a single employer under the rules of

section 414(b), (c), (m), or (o), then all

employers in that group will be treated as

a single employer for purposes of section

128. The rules of section 414 shall apply

with respect to a Trump account contribution program in the same manner as

they would with respect to a dependent

care assistance program under section

129.

(d) Growth period. The term growth

period means, with respect to an account

beneficiary, 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. For example, a child born

on October 1, 2025, would attain age 17

on October 1, 2042, and the last day of

the growth period with respect to the child

would be December 31, 2042.

(e) Highly compensated employee.

The term highly compensated employee

or HCE has the meaning set forth in section 414(q).

(f) Non-highly compensated employee.

The term non-highly compensated

employee or NHCE means an employee

who is not a highly compensated

employee.

(g) Plan year. The term plan year

means the 12-month period on the basis

of which the Trump account contribution

program is administered or, if shorter, the

period for which the program is maintained.

(h) Section 128 contribution. The term

section 128 contribution means a contribution made by an employer to a Trump

Bulletin No. 2026–37

account under a Trump account contribution program.

(i) Trump account. The term Trump

account has the meaning set forth in section 530A(b)(1).

(j) Trump account contribution program. The term Trump account contribution program means a separate written

plan of an employer for the exclusive

benefit of its employees to provide contributions to the Trump accounts of the

employees or their dependents that meets

the requirements of § 1.128-2(b) through

(h).

(k) Applicability date. This section

applies to plan years beginning on or after

the date of publication of the final rule in

the Federal Register.

§ 1.128-2 Trump account contribution

program; in general.

(a) Exclusion from gross income

for contributions. Gross income of an

employee does not include an amount

paid by the employer as a contribution,

including by salary reduction to the

extent permitted under paragraph (d)(7)

of this section, to the Trump account of

the employee or of any dependent of the

employee pursuant to a Trump account

contribution program.

(b) Requirement of separate written

plan.

(1) A Trump account contribution program must be set forth in a separate written plan that includes the items specified

in paragraph (b)(2) of this section.

(2) The written plan must specify—

(i) The classes of employees eligible to

participate;

(ii) The rules governing employer contributions, including the amount of contributions and whether contributions may

be made via a section 125 cafeteria plan

salary reduction arrangement;

(iii) The procedures under which an

employee must designate the Trump

account of the employee or of a dependent

of the employee to receive contributions;

(iv) The certification, notice, and

reporting procedures required under paragraphs (d), (f), and (g) of this section;

(v) The plan year; and

(vi) The procedures for correcting

administrative failures and for furnishing notices to employees and trustees

265

when amounts previously designated

as section 128 contributions are subsequently determined not to be excludable

from an employee’s gross income under

section 128(a) (for example, due to the

nondiscrimination requirements of paragraph (e) of this section).

(c) Operational compliance. The

employer must follow the terms of the

Trump account contribution program’s

written plan.

(d) Permitted contributions—(1) Permitted recipients. A Trump account contribution program may make contributions

only to a Trump account whose account

beneficiary—

(i) Is in his or her growth period; and

(ii) Is an employee or an employee’s

dependent.

(2) Permitted amounts. The aggregate

amount contributed with respect to any

employee under a Trump account contribution program may not exceed the

annual limit specified in paragraph (d)(5)

of this section.

(3) Treatment of impermissible

amounts. Amounts contributed by an

employer that are not permitted under

paragraph (d)(1) or (d)(2) of this section are not made pursuant to a Trump

account contribution program (and thus

are not section 128 contributions and are

not excludable from income under paragraph (a) of this section).

(4) Certification and employer reliance—(i) In general. Except as provided

in paragraph (d)(4)(iii) of this section, an

employer may rely on an employee certification meeting the requirements of paragraph (d)(4)(ii) of this section for purposes

of determining whether a contribution satisfies the requirements of paragraph (d)(1)

of this section, unless the employer has

actual knowledge that the certification is

incorrect.

(ii) Content of employee certification.

An employee certification relied on under

paragraph (d)(4)(i) of this section must

be made in writing, in paper or electronic

form, and must include the following representations:

(A) The beneficiary of the account

designated for the employer contribution is the employee or anticipated to be

the dependent of the employee for the

employee’s taxable year in which the contribution is to be made;

September 8, 2026

(B) Such account beneficiary’s date of

birth; and

(C) No facts known to the employee

would make such account beneficiary

ineligible to receive a contribution to his

or her Trump account for that calendar

year.

(iii) No reliance on an employee certification that a Trump account is valid.

An employer may not rely solely on an

employee certification to establish that

the recipient account is a valid Trump

account. The employer must use a method

reasonably designed to verify, through

information provided by the trustee, payroll processor, or other service provider,

that the contribution is made to a valid

Trump account.

(5) Annual limits—(i) In general. With

respect to an employee, total contributions

under a Trump account contribution program for a calendar year may not exceed

the lesser of—

(A) The amount specified in section 128(b), as adjusted for inflation under

section 128(b)(2); or

(B) The amount specified under the

terms of the Trump account contribution

program’s written plan.

(ii) Limit by employee. The annual

limit applies with respect to the employee

as an individual, taking into account section 128 contributions made with respect

to the employee by all employers for the

employee’s taxable year. The excess of

any section 128 contributions received by

an individual over the amount specified

in section 128(b), as adjusted for inflation

under section 128(b)(2) for the taxable

year, (for example, due to contributions

being received from Trump account contribution programs of two employers of

an employee), may not be excluded from

the individual’s gross income under section 128(a). Thus, an individual’s section

128 contributions in excess of the section

128(b) limit must be included in gross

income for the employee’s taxable year.

See paragraph (d)(5)(iii) of this section for

the effect of such contributions in excess

of the limit under section 128(b) on the

Trump account contribution program.

(iii) Effect on plan. Notwithstanding

the provisions of paragraph (d)(5)(ii) of

this section, an arrangement does not fail

to be a Trump account contribution program by reason of an individual being in

September 8, 2026

receipt of excess contributions for the taxable year, provided that the plan prohibits

contributions under that plan with respect

to an employee in excess of the amount

specified in paragraph (d)(5)(i) of this section.

(iv) Allocation. A program may permit

the contribution to be allocated (either by

the terms of the program or by election by

the employee) among the Trump account

of the employee and the Trump account of

one or more dependents of the employee,

provided that the aggregate amount an

employer contributes with respect to an

employee for the calendar year does not

exceed the limit specified in this paragraph (d)(5).

(v) Section 530A(c)(2) limit. The

employer does not have any obligation

with respect to compliance with the section 530A(c)(2) limit.

(vi) Examples. The rules of this paragraph (d)(5) are illustrated by the following examples. The examples assume that

the Trump account contribution program

written plan allows for contributions up to

$2,500, via salary reduction or otherwise;

that there are no nondiscrimination failures; that there are no other contributions

to the Trump account(s) for the year; and

that the Trump account contribution program has a calendar year plan year.

(A) Example 1. For 2027, Employee has two

dependents and works for an employer that offers a

Trump account contribution program under which

the employer provides a section 128 contribution in

the amount of $2,500 with respect to each employee.

The program allows Employee to allocate the section 128 contribution among the Trump accounts of

the two dependents, but the total amount allocated

by Employee may not exceed $2,500 for 2027. The

program complies with the annual limit requirement

of this paragraph (d)(5). The conclusion would not

change if the section 128 contributions were made

via salary reduction.

(B) Example 2. For 2027, Employee and

Employee’s spouse, who are married and file jointly,

have one dependent. The employers of Employee

and Employee’s spouse each offer Trump account

contribution programs under which each employer

provides a section 128 contribution in the amount

of $2,500 with respect to each employee. Employee

and Employee’s spouse each allocate the $2,500 section 128 contribution to the Trump account of their

dependent through their respective Trump account

contribution programs. The programs comply with

the annual limit requirement of this paragraph (d)(5).

The conclusion would not change if the section 128

contributions were made via salary reduction.

(C) Example 3. The facts are the same as in

paragraph (d)(5)(vi)(B) of this section (Example 2),

except Employee and Employee’s spouse both work

266

for the same employer. Employee and Employee’s

spouse each allocate the $2,500 section 128 contribution to the Trump account of their dependent

through the employer’s Trump account contribution

program. The program complies with the annual

limit requirement of this paragraph (d)(5). The conclusion would not change if the section 128 contributions were made via salary reduction.

(D) Example 4. For 2027, Individual has one

dependent. Individual is employed by two unrelated

employers, each of which offers a Trump account

contribution program under which the employer

provides a section 128 contribution in the amount

of $2,500 with respect to each employee. Each plan

prohibits contributions under that plan with respect

to an employee in excess of the amount specified

in section 128(b), as adjusted for inflation under

section 128(b)(2). Individual allocates the $2,500

section 128 contribution under each program

with respect to a Trump account for Individual’s

dependent. The programs comply with the annual

limit requirement of this paragraph (d)(5). Neither employer is required to provide a corrective

notice described in paragraph (h)(4) of this section

solely because of the other employer’s contribution. However, Individual must include the excess

contribution of $2,500 in Individual’s gross income

on Individual’s Federal income tax return for that

taxable year. The conclusion would not change if

the section 128 contributions were made via salary

reduction.

(E) Example 5. For 2027, Employee has one

dependent and works for Employer, which offers a

Trump account contribution program under which

Employer provides a section 128 contribution in the

amount of $2,500 with respect to each employee.

Employee allocates the $2,500 section 128 contribution to the Trump account of Employee’s dependent

through Employer’s Trump account contribution

program. In addition to the section 128 contribution

made under the Trump account contribution program,

Employer contributes an additional $1,000 to the

Trump account that is not a section 128 contribution

made under the Trump account contribution program

to Employee’s dependent’s Trump account. No other

exclusion from gross income or wages applies to the

$1,000 contribution. In accordance with the requirements of paragraph (h)(1) of this section, Employer

identifies the $2,500 to the trustee as a section 128

contribution and does not identify the $1,000 as a

section 128 contribution. On Employee’s Form W-2,

Employer reports the $2,500 to Employee as a section 128 contribution, and the $1,000 to Employee as

gross income and wages. The program complies with

the annual limit requirement of this paragraph (d)(5).

(6) Selection of trustee. An arrangement is not a Trump account contribution

program if an employer limits contributions to Trump accounts held by a particular trustee or trustees.

(7) Section 125 salary reduction

arrangements—(i) In general. A Trump

account contribution program may be

offered via salary reduction under a section 125 cafeteria plan but only if the contribution is made to a Trump account of

Bulletin No. 2026–37

the dependent of an employee. A contribution to a Trump account of an employee

may not be offered via salary reduction

under a section 125 cafeteria plan.

(ii) Elections. A section 125 cafeteria

plan providing for section 128 contributions through salary reduction may permit

employees to make a prospective salary

reduction election or change or revoke a

salary reduction election for section 128

contributions (for example, to increase

or decrease a salary reduction election) at

any time during the plan year, provided

that the election is effective only as to

salary that is not yet currently available.

The section 125 cafeteria plan must specifically describe the Trump account contribution benefit and permit participants to

prospectively change or revoke elections

at least monthly, before salary becomes

currently available.

(e) No discrimination in favor of

HCEs. A Trump account contribution

program must satisfy the nondiscrimination requirements of § 1.128-3(a) through

(c). An arrangement that fails to satisfy

such requirements will not be considered

a Trump account contribution program

with respect to HCEs participating in the

program, but will not affect the program’s

status as a Trump account contribution

program with respect to the NHCE participants.

(f) Notification to eligible employees.

Reasonable notification of the availability

and terms of the Trump account contribution program must be provided to all eligible employees.

(g) Statement of contributions. A written statement showing the amount of section 128 contributions that were made for

an employee during the previous calendar

year under the employer’s Trump account

contribution program must be furnished

to that employee. This requirement is satisfied by including the amount of Trump

account contributions on the employee’s

Form W-2, Wage and Tax Statement, in

the manner specified in the form’s instructions for reporting of section 128 contributions.

(h) Employer communications—(1)

Affirmative statement. With respect to an

amount contributed under a Trump account

contribution program, the employer must,

at the time the amount is transmitted to the

trustee, affirmatively identify the amount

Bulletin No. 2026–37

as a section 128 contribution in writing to

the trustee.

(2) Procedures. The employer must

adopt procedures to ensure that section 128 contributions are properly identified and to notify the trustee when a contribution is a section 128 contribution and

when a contribution previously identified

as a section 128 contribution is not a section 128 contribution.

(3) Reliance by the trustee. The trustee

of a Trump account receiving a contribution may rely on the identification of a

contribution as a section 128 contribution

for purposes of section 530A until such

time that the trustee receives a corrective

notice pursuant to paragraph (h)(4) of this

section or has contrary knowledge.

(4) Corrective notice—(i) In general. If an amount previously identified

under paragraph (h)(1) of this section as

a section 128 contribution is subsequently

determined not to be a section 128 contribution, in whole or in part, the employer

must provide notice in writing to the

trustee identifying the affected account,

the calendar year in which the contribution

was made, and the amount determined not

to be a section 128 contribution.

(ii) Timing. The notice described in

paragraph (h)(4)(i) of this section must

be furnished within a reasonable period

of time following the date the employer

determines that an amount is not a section 128 contribution. For purposes of

this section, 21 calendar days following

the date the employer makes this determination is deemed to be a reasonable

period of time.

(i) Applicability date. This section

applies to plan years beginning on or after

the date of publication of the final rule in

the Federal Register.

§ 1.128-3 Nondiscrimination

requirements.

(a) Contributions and benefits. The

contributions or benefits provided under

the Trump account contribution program

must not discriminate in favor of HCEs or

their dependents. A Trump account contribution program that provides benefits on

the same terms for all eligible employees

satisfies this requirement. For example, a

term that allows all NHCEs to reduce salary in the same amount as HCEs does not

267

discriminate as to contributions or benefits.

(b) Eligibility—(1) In general. The

program must benefit employees who

qualify under an eligibility classification

established by the employer that is reasonably based on objective business criteria in satisfaction of paragraph (b)(2) of

this section and not found by the Secretary

to be discriminatory in favor of HCEs or

their dependents in satisfaction of paragraph (b)(3) of this section. For these purposes, an employee is eligible under the

program only if the employee had a meaningful opportunity to receive benefits, via

salary reduction or otherwise, regardless

of whether any benefits were actually

received.

(2) Reasonable eligibility classification

established by the employer. An eligibility

classification must be, based on all facts

and circumstances, reasonable and established under objective business criteria

that identify the category or categories

of employees who are eligible under the

plan. Reasonable classifications generally

include specified job categories, nature of

compensation (that is, salaried or hourly),

geographic location, and similar bona

fide business criteria. An enumeration of

employees by name or other specific criteria having substantially the same effect as

an enumeration by name is not considered

a reasonable classification.

(3) Nondiscriminatory classification—

(i) In general. An eligibility classification must be found by the Secretary not

to be discriminatory in favor of HCEs or

their dependents. A classification is nondiscriminatory for a plan year if and only

if the group of employees included in

the classification eligible under the plan

satisfies the requirements of either paragraph (b)(3)(ii) or (iii) of this section for

the plan year.

(ii) Facts and circumstances. A plan

satisfies the requirements of this paragraph (b)(3)(ii) if and only if, based on all

the relevant facts and circumstances, the

Secretary finds that the classification is

nondiscriminatory. No one particular fact

is determinative. Included among the facts

and circumstances relevant in determining

whether a classification is nondiscriminatory are the following—

(A) The underlying business reason for

the classification. The greater the busi-

September 8, 2026

ness reason for the classification, the more

likely the classification is to be nondiscriminatory.

(B) The percentage of the employer’s

employees eligible under the plan. The

higher the percentage, the more likely the

classification is to be nondiscriminatory.

(C) Whether the number of employees

eligible under the plan in each salary range

is representative of the number of employees in each salary range of the employer’s

workforce. In general, the more representative the percentages of employees eligible under the plan in each salary range,

the more likely the classification is to be

nondiscriminatory.

(D) The difference between the plan’s

ratio percentage (within the meaning of

paragraph (b)(3)(iii)(A) of this section)

and the employer’s safe harbor percentage (within the meaning of paragraph (b)

(3)(iii)(B) of this section). The smaller the

difference, the more likely the classification is to be nondiscriminatory.

(iii) Safe harbor. A plan satisfies the

requirements of this paragraph (b)(3)(iii)

for a plan year if and only if the plan’s ratio

percentage (as defined in paragraph (b)(3)

(iii)(A) of this section) is greater than or

equal to the employer’s safe harbor percentage (as defined in paragraph (b)(3)(iii)

(B) of this section).

(A) Ratio percentage. For purposes

of this paragraph (b)(3)(iii), with respect

to a plan for a plan year, the plan’s ratio

percentage means the ratio expressed as

a percentage (rounded to the nearest hundredth of a percentage point) determined

by dividing the eligibility percentage of

NHCEs by the eligibility percentage of

HCEs, as such eligibility percentages are

defined in paragraph (b)(3)(iii)(C) of this

section.

(B) Safe harbor percentage. The safe

harbor percentage of an employer is 90

percent, reduced by 3/4 of a percentage

point for each whole percentage point by

which the NHCE concentration percentage exceeds 60 percent.

(C) Eligibility percentage. The eligibility percentage of NHCEs is determined by

dividing the number of NHCEs who are

eligible under the plan by the total number

of NHCEs of the employer. The eligibility percentage of HCEs is determined by

dividing the number of HCEs who are eligible under the plan by the total number

September 8, 2026

of HCEs of the employer. In determining

these eligibility percentages, employees

described in paragraph (e) of this section

are excluded.

(D) NHCE concentration percentage.

The NHCE concentration percentage

of an employer is the percentage of all

the employees of the employer who are

NHCEs.

(c) Average benefits test—(1) In general. A plan satisfies the requirements

of this paragraph (c)(1) if the average

benefits provided to employees who are

NHCEs under all Trump account contribution programs of the employer is

at least 55 percent of the average benefits provided to HCEs under all Trump

account contribution programs of the

employer.

(2) Average benefits provided—(i) General rule. For purposes of paragraph (c)(1)

of this section, the average benefits provided to a group of HCEs or NHCEs for

a plan year equals the total dollar amount

of contributions provided under all Trump

account contribution programs of the

employer during the plan year to employees in that group, divided by the number

of employees in that group to whom any

such contributions are provided during the

plan year, via salary reduction or otherwise.

(ii) Employees taken into account.

For purposes of applying the calculation

in paragraph (c)(2)(i) of this section, any

individual employed by the employer

on any day of the plan year is taken into

account in the denominator if:

(A) The employer makes a section 128

contribution to a Trump account as to

which the employee or the employee’s

dependent is the beneficiary during the

plan year, via salary reduction or otherwise; and

(B) The employee is not described in

paragraph (e) of this section.

(3) Time to perform nondiscrimination test. The requirements of this paragraph (c) must be satisfied as of the last

day of the plan year.

(4) Salary reduction agreements. For

purposes of this paragraph (c), in the case

of any benefits provided through a salary

reduction agreement, a plan may disregard

any employee whose compensation is less

than $25,000. For purposes of this paragraph (c)(4), the term “compensation”

268

has the meaning given such term by section 414(q)(4).

(5) Correction of nondiscrimination

failures—(i) In general. If a plan fails the

requirements of the average benefits test

of this paragraph (c) as of the last day of

the plan year, the plan may nonetheless

be treated as satisfying the requirements

with respect to HCEs and their dependents if the plan takes remedial action as

described in paragraph (c)(5)(ii) of this

section.

(ii) Remedial measures—(A) Correction. If a Trump account contribution

program fails to satisfy the requirements

of this paragraph (c) as of the last day of

the plan year, the plan may be treated as

satisfying those requirements by including in income any excess benefit amounts

received by HCEs. For this purpose, an

excess benefit amount is included in

income if the amount is treated by the

employer as gross income and, to the

extent applicable, wages within the

meaning of sections 3401, 3121, and

3306, and compensation within the

meaning of section 3231, and reported as

such with respect to the year being tested

by the deadline prescribed in § 31.60511(d)(1)(i) of this chapter for furnishing

statements on Form W-2, Wage and Tax

Statement, for the year in which the

excess benefits were received. In addition, because the excess benefit amounts

are not provided under a Trump account

contribution program, the plan must provide a corrective notice as provided in

§ 1.128-2(h)(4).

(B) Allocation of excess benefits. (1) If

all HCEs have section 128 contributions

in excess of the quotient of the amount of

the average section 128 contribution for

all NHCEs divided by 0.55, the amount of

excess benefits to be included in income

of each HCE is the excess of the amount

of that HCE’s section 128 contribution

over that quotient.

(2) If not all HCEs have section 128

contributions in excess of the quotient

of the amount of the average section 128

contribution for all NHCEs divided by

0.55, the plan may allocate the reduction of section 128 contributions among

HCEs in any reasonable manner, including methods for apportioning distributions

of excess amounts similar to those used in

§ 1.401(k)-2(b)(2)(iii).

Bulletin No. 2026–37

(d) Safe harbor for contributions made

with respect to pilot program amounts—

(1) In general. Contributions under a pilot

match contribution arrangement described

in paragraph (d)(2) of this section are disregarded for the purposes of paragraphs

(a) and (c) of this section.

(2) Pilot match contribution arrangements. A pilot match contribution arrangement must—

(i) Be designed to provide contributions to Trump accounts because the

account beneficiary is:

(A) A dependent of an employee; and

(B) An eligible child within the meaning of section 6434(c); and

(ii) Make contributions under the

arrangement available on the same terms

and conditions to all employees not

described in paragraph (e) of this section.

(3) Establishment of eligibility. An

arrangement will not fail to be a pilot

match contribution arrangement because

the arrangement relies on reasonable

measures to establish that an employee’s

dependent is an eligible child within the

meaning of section 6434(c). For this purpose, employee certification of a dependent’s date of birth is a reasonable measure to ensure eligibility.

(4) Additional section 128 contributions. If an employer makes contributions

under a pilot match contribution arrangement described in paragraph (d)(2) of this

section and also makes section 128 contributions that are not under such an arrangement, via salary reduction or otherwise,

such contributions that are not pilot match

contributions must separately satisfy paragraphs (a) and (c) of this section. In determining whether paragraphs (a) and (c) of

this section are so separately satisfied, the

pilot match contributions may be disregarded.

(e) Excluded employees. For purposes

of paragraphs (b) and (c) of this section,

there shall be excluded from consideration—

(1) Subject to rules similar to the rules

of section 410(b)(4), employees who have

not attained the age of 21 and completed

one year of service (as defined in section 410(a)(3)); and

(2) Employees not included in a Trump

account contribution program who are

included in a unit of employees covered

by an agreement that the Secretary finds

Bulletin No. 2026–37

to be a collective bargaining agreement

between employee representatives and

one or more employers, if there is evidence that the Trump account contribution program was the subject of good

faith bargaining between such employee

representatives and such employer or

employers.

(f) Contributions taken into account.

For purposes of paragraphs (a), (b), and

(c) of this section, an employer’s contributions to the Trump account of an employee

or an employee’s dependent outside any

Trump account contribution program

(such as taxable contributions in excess of

the § 1.128-2(d)(5) annual limit) are not

taken into account.

(g) Effect of failure. Except as otherwise provided in paragraph (c)(5) of

this section, if a plan would qualify as a

Trump account contribution program but

for a failure to satisfy one or more of the

requirements of this section, then the plan

is not a Trump account contribution program with respect to HCEs. Notwithstanding such failure, the plan is treated as a

Trump account contribution program with

respect to employees who are NHCEs.

(h) Examples. The following examples

illustrate the rules in this section.

(1) Example 1. For 2026, an employer has 15

HCEs and 15 NHCEs. The employer maintains a

Trump account contribution program funded solely

via salary reduction elections made by employees

under the employer’s section 125 cafeteria plan. All

30 employees are eligible to make salary reduction

elections under the plan on the same terms. Eleven

of the HCEs elect benefits under the plan of $2,500

each, and four of the NHCEs elect benefits under

the plan of $2,500 each. The remaining employees

elect no benefits under the plan. The average benefits provided to the HCEs is $2,500 ($27,500/11)

and the average benefits provided to the NHCEs is

also $2,500 ($10,000/4). Accordingly, the average

benefits provided to the NHCEs is 100 percent of

the average benefits provided to the HCEs, and the

required threshold of 55 percent under paragraph (c)

(1) of this section is satisfied.

(2) Example 2. For 2026, an employer has 15

HCEs and 15 NHCEs. The employer maintains a

Trump account contribution program funded solely

via salary reduction elections made by employees

under the employer’s section 125 cafeteria plan. All

30 employees are eligible to make salary reduction

elections under the plan on the same terms. Eleven

of the HCEs elect benefits under the plan of $2,500

each; one of the NHCEs elects benefits of $2,500;

three of the NHCEs elect benefits of $1,500; one of

the NHCEs elects benefits of $1,000; and two of the

NHCEs elect benefits of $500, for a collective $9,000

in benefits provided to seven NHCEs, and an average

benefits provided to NHCEs of $1,285.71 ($9,000/7).

269

The average benefits provided to the HCEs is $2,500

($27,500/11). Accordingly, the average benefits provided to the NHCEs is 51.4 percent of the average

benefits provided to the HCEs ($1,285.71/$2,500),

and the required threshold of 55 percent under paragraph (c)(1) of this section is not satisfied.

(3) Example 3. The facts are the same as in paragraph (h)(2) of this section (Example 2) except that

the following four NHCEs are excluded employees

within the meaning of paragraph (e) of this section:

two of the NHCEs who elected benefits under the

plan of $1,500; and the two NHCEs who elected benefits of $500. With the exclusion of these employees, a collective $5,000 in benefits are provided to

three NHCEs, and the average benefits provided to

NHCEs is $1,666.67 ($5,000/3). Accordingly, the

average benefits provided to the NHCEs is 66.7 percent of the average benefits provided to the HCEs

($1,666.67/$2,500), and the required threshold of

55 percent under paragraph (c)(1) of this section is

satisfied.

(4) Example 4. The facts are the same as in paragraph (h)(2) of this section (Example 2) except that

on or before the furnishing deadline for the Form W-2

for the year in which the benefits were provided,

the employer treats $500 of the benefits elected by

each of the HCEs as gross income and wages for the

year in which the benefits were provided, reducing

the benefits provided to the HCEs to a collective

$22,000 in benefits provided to 11 HCEs, reducing

the average benefit to HCEs to $2,000 ($22,000/11).

Accordingly, the average benefits provided to the

NHCEs is 64.29 percent of the average benefits

provided to the HCEs ($1,285.71/$2,000), and the

required threshold of 55 percent under paragraph (c)

(1) of this section is satisfied.

(5) Example 5. The facts are the same as in paragraph (h)(3) of this section (Example 3) except the

employer also makes a contribution of $1,000 that

is not excludable from income under section 128 (a

non-section 128 contribution) to each of the employees who elected benefits under the plan. The taxable

employer contributions are not considered when

calculating the average benefits. Accordingly, the

conclusion is the same as in paragraph (h)(3) of this

section (Example 3).

(6) Example 6. The facts are the same as in paragraph (h)(1) of this section (Example 1) except that

the 11 NHCEs to whom benefits are not provided

are not eligible to elect benefits under the terms of

the plan. The 11 excluded NHCEs are not excluded

employees within the meaning of paragraph (e) of

this section. The plan has discriminated in favor of

HCEs as to eligibility and thus does not satisfy the

requirements of paragraph (b) of this section. Thus,

the plan is not a Trump account contribution program

with respect to HCEs and the benefits provided to

HCEs are included in their income and wages within

the meaning of sections 3401, 3121 (or compensation within the meaning of section 3231), and 3306.

Because the benefits are not provided under a Trump

account contribution program, the plan must provide

a corrective notice as provided in § 1.128-2(h)(4).

(i) Applicability date. This section

applies to plan years beginning on or after

the date of publication of the final rule in

the Federal Register.

September 8, 2026

§ 1.129-1 Dependent care assistance

programs.

(a) Definitions. For purposes of section

129, this section and § 1.129-2—

(1) Dependent care assistance. The

term dependent care assistance has the

meaning set forth in section 129(e)(1).

(2) Dependent care assistance program. The term dependent care assistance

program means a separate written plan of

an employer for the exclusive benefit of

its employees to provide such employees

with dependent care assistance that satisfies the requirements of section 129(d)

and this section.

(3) Dependent care assistance provided to an employee. The term dependent

care assistance provided to an employee

means amounts paid or incurred by the

employer to provide dependent care assistance to the employee that are excludable

under section 129, including amounts provided through a salary reduction agreement under a section 125 cafeteria plan.

(4) Employee. The term employee

means an individual who is an employee

under the common-law standard described

in § 31.3401(c)-1 of this chapter, and

a self-employed individual within the

meaning of section 401(c)(1).

(5) Employer. The term employer

means the person that is the employer of

an employee under the common-law standard described in § 31.3401(c)-1 of this

chapter. All persons treated as a single

employer under section 414(b), (c), (m),

or (o) are treated as a single employer for

purposes of section 129.

(6) Highly compensated employee

or HCE. The term highly compensated

employee has the meaning set forth in section 414(q).

(7) Non-highly compensated employee

or NHCE. The term non-highly compensated employee means an employee who

is not a highly compensated employee.

(8) Principal shareholder or owner.

The term principal shareholder or owner

means an individual, or such individual’s

spouse or dependent, who (on any day of

the taxable year) owns more than 5 percent of the stock or of the capital or profits

interest in the employer.

(9) Plan year. The term plan year

means the 12-month period on the basis

of which the dependent care assistance

September 8, 2026

program is administered (or, if shorter,

the period for which the program is maintained).

(b) Applicability date. This section

applies to plan years beginning on or after

the date of publication of the final rule in

the Federal Register.

§ 1.129-2 Nondiscrimination

requirements.

(a) Contributions and benefits. The

contributions or benefits provided under

a plan that provides dependent care assistance must not discriminate in favor of

HCEs or their dependents. A plan that

provides benefits on the same terms for all

eligible employees satisfies this requirement. For example, a term that allows

all NHCEs to reduce salary in the same

amount as HCEs does not discriminate as

to contributions or benefits.

(b) Eligibility—(1) In general. The

dependent care assistance program must

benefit employees who qualify under an

eligibility classification established by

the employer that is reasonably based on

objective business criteria in satisfaction

of paragraph (b)(2) of this section and not

found by the Secretary to be discriminatory in favor of HCEs or their dependents

in satisfaction of paragraph (b)(3) of this

section. For these purposes, an employee

is eligible under the dependent care assistance program only if the employee had

a meaningful opportunity to receive benefits, via salary reduction or otherwise,

regardless of whether any benefits were

actually received.

(2) Reasonable eligibility classification

established by the employer. An eligibility

classification must be, based on all facts

and circumstances, reasonable and established under objective business criteria

that identify the category or categories

of employees who are eligible under the

plan. Reasonable classifications generally

include specified job categories, nature of

compensation (that is, salaried or hourly),

geographic location, and similar bona

fide business criteria. An enumeration of

employees by name or other specific criteria having substantially the same effect as

an enumeration by name is not considered

a reasonable classification.

(3) Nondiscriminatory classification—

(i) In general. An eligibility classifica-

270

tion must be found by the Secretary not

to be discriminatory in favor of HCEs or

their dependents. A classification is nondiscriminatory for a plan year if and only

if the group of employees included in

the classification eligible under the plan

satisfies the requirements of either paragraph (b)(3)(ii) or (iii) of this section for

the plan year.

(ii) Facts and circumstances. A plan

satisfies the requirements of this paragraph (b)(3)(ii) if and only if, based on all

the relevant facts and circumstances, the

Secretary finds that the classification is

nondiscriminatory. No one particular fact

is determinative. Included among the facts

and circumstances relevant in determining

whether a classification is nondiscriminatory are the following—

(A) The underlying business reason for

the classification. The greater the business reason for the classification, the more

likely the classification is to be nondiscriminatory.

(B) The percentage of the employer’s

employees eligible under the plan. The

higher the percentage, the more likely the

classification is to be nondiscriminatory.

(C) Whether the number of employees

eligible under the plan in each salary range

is representative of the number of employees in each salary range of the employer’s

workforce. In general, the more representative the percentages of employees eligible under the plan in each salary range,

the more likely the classification is to be

nondiscriminatory.

(D) The difference between the plan’s

ratio percentage (within the meaning of

paragraph (b)(3)(iii)(A) of this section)

and the employer’s safe harbor percentage (within the meaning of paragraph (b)

(3)(iii)(B) of this section). The smaller the

difference, the more likely the classification is to be nondiscriminatory.

(iii) Safe harbor. A plan satisfies the

requirements of this paragraph (b)(3)(iii)

for a plan year if and only if the plan’s ratio

percentage (as defined in paragraph (b)(3)

(iii)(A) of this section) is greater than or

equal to the employer’s safe harbor percentage (as defined in paragraph (b)(3)(iii)

(B) of this section).

(A) Ratio percentage. For purposes

of this paragraph (b)(3)(iii), with respect

to a plan for a plan year, the plan’s ratio

percentage means the ratio expressed as

Bulletin No. 2026–37

a percentage (rounded to the nearest hundredth of a percentage point) determined

by dividing the eligibility percentage of

NHCEs by the eligibility percentage of

HCEs, as such eligibility percentages are

defined in paragraph (b)(3)(iii)(C) of this

section.

(B) Safe harbor percentage. The safe

harbor percentage of an employer is 90

percent, reduced by 3/4 of a percentage

point for each whole percentage point by

which the NHCE concentration percentage exceeds 60 percent.

(C) Eligibility percentage. The eligibility percentage of NHCEs is determined by

dividing the number of NHCEs who are

eligible under the plan by the total number

of NHCEs of the employer. The eligibility percentage of HCEs is determined by

dividing the number of HCEs who are eligible under the plan by the total number

of HCEs of the employer. In determining

these eligibility percentages, employees

described in paragraph (f) of this section

are excluded.

(D) NHCE concentration percentage.

The NHCE concentration percentage

of an employer is the percentage of all

the employees of the employer who are

NHCEs.

(c) Principal shareholders or owners.

Not more than 25 percent of the amounts

paid or incurred by the employer for

dependent care assistance during the year

may be provided for the class of individuals who are principal shareholders or

owners.

(d) Average benefits test—(1) In general. A plan satisfies the requirements of

this paragraph (d) if the average benefits

provided to employees who are NHCEs

under all dependent care assistance programs of the employer is at least 55 percent of the average benefits provided to

HCEs under all dependent care assistance

programs of the employer.

(2) Average benefits provided—(i) General rule. For purposes of paragraph (d)

(1) of this section, the “average benefits

provided” to a group of HCEs or NHCEs

for a plan year equals the total dollar

amount of dependent care assistance provided under all dependent care assistance

programs of the employer during the plan

year to employees in that group, divided

by the number of employees in that group

to whom any dependent care assistance is

Bulletin No. 2026–37

provided during the plan year, via salary

reduction or otherwise.

(ii) Employees taken into account. For

purposes of applying the calculation in

paragraph (d)(2)(i) of this section, any

individual employed by the employer

on any day of the plan year is taken into

account in the denominator if:

(A) The employer provides any amount

of dependent care assistance to that

employee during the plan year, via salary

reduction or otherwise; and

(B) The employee is not described in

paragraph (f) of this section.

(3) Time to perform nondiscrimination test. The requirements of this paragraph (d) must be satisfied as of the last

day of the plan year.

(4) Salary reduction agreements. For

purposes of this paragraph (d), in the case

of any benefits provided through a salary

reduction agreement, a plan may disregard

any employee whose compensation is less

than $25,000. For purposes of this paragraph (d)(4), the term “compensation”

has the meaning given such term by section 414(q)(4).

(e) Utilization rates. Notwithstanding

paragraph (d)(2)(ii) of this section, utilization rates are taken into account to the

extent provided in section 129(e)(6) in

determining whether a plan satisfies section 129(d)(4) and (8).

(f) Excluded employees. For purposes

of paragraphs (b) and (d) of this section,

there shall be excluded from consideration—

(1) Subject to rules similar to the rules

of section 410(b)(4), employees who have

not attained the age of 21 and completed

one year of service (as defined in section 410(a)(3)); and

(2) Employees not included in a dependent care assistance program who are

included in a unit of employees covered

by an agreement that the Secretary finds

to be a collective bargaining agreement

between employee representatives and

one or more employers, if there is evidence that dependent care benefits were

the subject of good faith bargaining

between such employee representatives

and such employer or employers.

(g) Contributions taken into account.

For purposes of paragraphs (a) through

(d) of this section, an employer’s payment or reimbursement for an employee’s

271

dependent care outside any dependent

care assistance program is not taken into

account.

(h) Effect of failure. Except as otherwise provided in paragraph (j) of this section, if a plan would qualify as a dependent

care assistance program but for a failure to

satisfy one or more of the requirements of

section 129(d) and this section, then the

plan is not a dependent care assistance

program with respect to HCEs. Notwithstanding such failure, the plan is treated as

a dependent care assistance program with

respect to employees who are NHCEs.

(i) [Reserved]

(j) Correction of nondiscrimination

failures—(1) In general. If a plan fails

the requirements of the nondiscrimination

tests of paragraphs (c) or (d) of this section

as of the last day of the plan year, the plan

may nonetheless be treated as satisfying

the requirements if the plan takes remedial action as described in paragraph (j)

(2) (with respect to HCEs) or (j)(3) (with

respect to principal shareholders and owners) of this section.

(2) Remedial measures to correct

average benefits testing failures—(i)

Correction. If a plan fails to satisfy the

requirements of paragraph (d) of this section as of the last day of the plan year, the

plan may be treated as satisfying those

requirements by including in income

any excess benefit amounts received by

HCEs. For this purpose, an excess benefit amount is included in income if the

amount is treated by the employer as

gross income and, to the extent applicable, wages within the meaning of sections 3401, 3121, and 3306, and compensation within the meaning of section

3231, and reported as such with respect

to the year being tested by the deadline

prescribed in § 31.6051-1(d)(1)(i) of

this chapter for furnishing statements

on Form W-2, Wage and Tax Statement,

for the year in which the excess benefits

were received.

(ii) Allocation of excess benefits.

(A) If all HCEs have dependent care

benefits in excess of the quotient of the

amount of the average dependent care

benefits of all NHCEs divided by 0.55, the

amount of excess benefits to be included

in income of each HCE is the excess of

the amount of that HCE’s dependent care

benefit over that quotient.

September 8, 2026

(B) If not all HCEs have dependent

care benefits in excess of the quotient of

the amount of the average dependent care

benefits of all NHCEs divided by 0.55,

the plan may allocate the reduction of

dependent care benefits among HCEs in

any reasonable manner, including methods for apportioning distributions of

excess amounts similar to those used in

§ 1.401(k)-2(b)(2)(iii).

(3) Remedial measures to correct principal shareholders and owners concentration failures—(i) Correction. If a plan fails

to satisfy the requirements of paragraph (c)

of this section as of the last day of the plan

year, the plan may be treated as satisfying

those requirements by including in income

any excess ownership concentration as

defined in paragraph (j)(3)(ii) of this section. For this purpose, an excess ownership concentration is included in income

if the amount is treated by the employer

as gross income and, to the extent applicable, wages within the meaning of sections

3401, 3121, and 3306, and compensation

within the meaning of section 3231, and

reported as such with respect to the year

being tested by the deadline prescribed

in § 31.6051-1(d)(1)(i) of this chapter for

furnishing statements on Form W-2, Wage

and Tax Statement, for the year in which

the excess ownership concentration was

received.

(ii) Allocation of excess ownership

concentration.

(A) If each of the principal shareholders or owners has dependent care benefits

in excess of the permitted concentration

amount, the excess ownership concentration for each such individual is the dependent care benefits received by that individual less the permitted concentration

amount. For this purpose, the permitted

concentration amount is 25 percent of the

total dependent care benefits provided by

the employer to all participants during the

year divided by the number of such individuals to whom benefits were provided.

(B) If not all principal shareholders

or owners have dependent care benefits

in excess of the permitted concentration

amount, the plan may allocate the reduction of dependent care benefits among

such individuals in any reasonable manner, including methods for apportioning

distributions of excess amounts similar to

those used in § 1.401(k)-2(b)(2)(iii).

September 8, 2026

(k) Examples. The following examples

illustrate the rules of this section.

(1) Example 1. For 2026, an employer has 15

HCEs and 15 NHCEs. The employer maintains a

dependent care assistance program funded solely

via salary reduction elections made by employees

under the employer’s section 125 cafeteria plan. All

30 employees are eligible to make salary reduction

elections under the plan on the same terms. Eleven

of the HCEs elect benefits under the plan of $7,500

each, and four of the NHCEs elect benefits under

the plan of $7,500 each. The remaining employees

elect no benefits under the plan. The average benefits provided to the HCEs is $7,500 ($82,500/11)

and the average benefits provided to the NHCEs is

also $7,500 ($30,000/4). Accordingly, the average

benefits provided to the NHCEs is 100 percent of

the average benefits provided to the HCEs, and

the required threshold of 55 percent under section 129(d)(8) and paragraph (d)(1) of this section

is satisfied.

(2) Example 2. An employer has 15 HCEs and

15 NHCEs. The employer maintains a dependent

care assistance program funded solely via salary reduction elections made by em

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