What employers need to know: New IRS rules for Trump Accounts and dependent care FSAs, plus tobacco surcharge FAQs

Key takeaways

• On Aug. 10, 2026, the IRS released proposed rules for employer contributions to Trump Accounts and for dependent care flexible spending account (FSA) nondiscrimination testing.
• Employers can put up to $2,500 per employee per year into Trump Accounts tax-free, starting with tax years that begin in 2026.
• On Aug. 26, 2026, federal agencies released FAQs on tobacco surcharges, a topic behind many class-action lawsuits.
• Employers with wellness programs should review how they handle mid-year rewards and how they tell people about alternative standards.

IRS proposes rules for Trump Account contribution programs and dependent care FSAs

On Aug. 10, 2026, the IRS released proposed rules that explain how employers can contribute to Trump Accounts. The rules also explain how nondiscrimination testing works for dependent care FSAs.

The rules aren’t final yet. Even so, employers can rely on them for plan years that begin before the final rules are published.

What is a Trump Account Contribution Program (TACP)?

Starting with tax years that begin in 2026, employers can contribute to the Trump Account of an employee or an employee’s dependent through a Section 128 Trump Account Contribution Program (TACP).

Here’s how it works:

• The contributions are tax-free. They aren’t counted in the employee’s income for federal tax purposes.
• There’s an annual limit. Employers can contribute up to $2,500 per employee per year. After 2027, the limit is adjusted for cost of living.
• A written plan is required. The program must have a written plan document. It also has to meet certain tax rules that already apply to dependent care FSAs, covering nondiscrimination, notices and benefits.
• Employees can contribute pre-tax, too. A TACP can let employees make pre-tax contributions to their dependents’ Trump Accounts through a Section 125 cafeteria plan, which is the type of plan that lets employees pay for certain benefits before taxes.

What do the proposed rules require?

Under the proposed rules, a TACP would need to:

• Follow the terms of its written plan document.
• Give employees reasonable notice that the plan is available and explain its terms.
• Give employees a written statement every year.
• Meet eligibility certification and account verification requirements.

What changes for dependent care FSAs?

The proposed rules are the first regulatory guidance on how nondiscrimination testing works for dependent care FSAs. Similar requirements would also apply to TACPs.

The good news is that this guidance may make testing easier for dependent care FSAs to pass, especially the 55% average benefits test.

Federal agencies issue FAQs on health plan tobacco surcharge lawsuits

On Aug. 26, 2026, federal agencies released FAQs about tobacco surcharges. Many class-action lawsuits have challenged the surcharges some health plans charge tobacco users.

Why are tobacco surcharges being challenged?

Some wellness programs add a health plan premium surcharge, or give a reward, based on a health-related standard such as tobacco use. These programs must follow specific rules for health-contingent wellness programs.

Most of the lawsuits make two claims:

• People who met the alternative standard partway through the year didn’t get the full reward.
• Employees weren’t told about a reasonable alternative standard they could meet to avoid the surcharge.

What do the FAQs clarify?

Mid-year rewards: The agencies won’t take enforcement action against a wellness program just because it gives the reward only from the point someone meets the reasonable alternative standard. The program doesn’t have to backdate the reward to the start of the plan year.

Required disclosures: Programs must mention that a reasonable alternative standard is available in:

• Every material that describes the wellness program.
• For outcome-based programs, any notice telling someone they didn’t meet the first outcome-based standard.

One exception: If plan materials only mention that a wellness program exists and don’t describe its terms, they don’t need to include this disclosure.

FAQ

How much can an employer contribute to an employee’s Trump Account? Up to $2,500 per employee per year through a Section 128 TACP, with cost-of-living adjustments after 2027.

Can employers rely on the proposed TACP and dependent care FSA rules now? Yes. Employers can rely on them for plan years that begin before the final rules are published.

Do wellness programs have to backdate tobacco surcharge rewards to the start of the plan year? No. Under the new FAQs, the agencies won’t take enforcement action against a program that gives the reward starting from when the person meets the reasonable alternative standard.

Where do wellness programs have to disclose the reasonable alternative standard? In all materials that describe the program. For outcome-based programs, it also goes in any notice saying someone didn’t meet the first standard. Materials that only mention the program exists, without describing its terms, are exempt.

The Bright Side

New rules can feel like one more thing on an already full plate. But these updates bring more clarity. Trump Accounts give employers a new tax-free way to help employees’ families save for the future. The FSA guidance may make testing easier to pass, and the tobacco surcharge FAQs spell out how to run a wellness program that’s fair and compliant.

At Daybright Financial, we believe benefits should do more than check a box. Our Compliance and Employee Benefits teams can help you decide whether a TACP fits your plan, check your dependent care FSA testing, and review your wellness program materials before open enrollment. Have questions? Let’s talk.

Source: Adapted from Zywave content. © 2026 Zywave, Inc. All rights reserved.

This post is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. Content sourced from Zywave.

• Category: News
• Tag: Compliance, Employee Benefits