U.S. employers update Trump Accounts, IRC §127, and 529 plans; Permanent student loan repayment and inflation-adjusted $5,250 cap

Recent Changes Could Impact Employers’ Approach to Certain Employee Savings Benefits | Goldman Sachs

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Recent Changes Could Impact Employers’ Approach to Certain Employee Savings Benefits

1 The IRS has released specific guidance for employer-sponsored Trump Account contribution programs. These guidelines govern plan structure, taxation, contribution limits, reporting, and ERISA considerations.

2 OBBBA updated and clarified a number of key aspects of Educational Assistance Programs (IRC §127). Top of mind among these updates are the new permanence of student loan repayment coverage under §127 programs and the $5,250 limit on support per employee in 2026.

3 Enhanced 529 savings plan capabilities could drive employee interest in the accounts. OBBBA expanded the definition of qualified educational expenses and increased the annual limit for K-12 expenses.

Recent regulations have created additional opportunities for employer-sponsored programs aimed at education and retirement planning for employees and their families. This article provides an overview of changes and requirements related to Trump Accounts, Educational Assistance Programs (IRC §127), and 529 Savings Plans.

Trump Accounts from an Employer’s Perspective

As of July 4, 2026, individuals can begin funding Trump Accounts for eligible children. While these accounts are similar to traditional IRAs, they are intended for children under the age of 18 and have special rules.

The annual contribution limit for Trump Accounts (currently $5,000) includes both individual and employer contributions. 1

Read more about the basic functionality in Trump Accounts in Six Questions .

What are the rules for employer-sponsored Trump Account contribution programs?

Plan Structure. In order to qualify as an employer-sponsored Trump Account Contribution Program, the program must meet certain requirements. For example:

It must be established in a separate written plan.

The employer must provide notice of the program to employees.

The program cannot be structured in a way that favors highly compensated employees. The nondiscrimination testing is similar to the requirements for dependent care assistance programs.

Employers can choose to structure their programs to allow employees to make pre-tax salary deferrals. These deferrals can only be made to a Trump Account that belongs to an employee’s dependent. The deferrals would be excluded from gross income and would be taxable at distribution. They would count toward the annual contribution limit ($5,000).

Employer Contributions. Employees can exclude up to $2,500 per year of employer contributions to their dependents’ Trump Accounts from their gross income. 1 This limit is based on the individual employee—not on the number of dependents. For example, whether an employee has one child or multiple children with Trump Accounts, the limit for the employee remains $2,500 per year.

While employer contributions are excluded from an employee’s gross income, they would be deemed wages subject to FICA taxes.

Reporting. When making a contribution, employers must affirmatively indicate to the trustee of the Trump Account that the contribution is a §128 employer contribution—making it excludable from the employee’s gross income.

ERISA Considerations. Contributions—whether made by the employer or through pre-tax employee contributions—made to Trump Accounts owned by an employee’s child or dependent will not cause the plan to be subject to ERISA.

Educational Assistance Programs (IRC §127)

A §127 educational assistance program (§127 program) is an employer-sponsored program that provides tax-free educational assistance for employees. §127 programs must be for the exclusive benefit of employees and cannot be extended to spouses and

The coverage an employer can include in their §127 program is limited to qualifying expenses and support as defined by the IRS. 2 Qualifying expenses include expenses incurred during employment such as tuition, fees and similar expenses, books, supplies, and equipment for either undergraduate or graduate courses. A §127 program can also cover qualified student loan payments.

What has changed with §127 programs under OBBBA?

Student loan repayment assistance is now a permanent option for employers—no longer subject to sunset.

The amount employers can provide in tax-free educational assistance (up to $5,250 in 2026) will be indexed for inflation beginning in 2027. Employees may exclude up to $5,250 from their gross income. Employers can deduct the full amount of educational assistance payments as a necessary business expense.

Employers must inform employees if they offer a §127 program, providing guidance on plan specifics.

OBBBA clarified timing rules on eligible expenses, mandating that expenses are only eligible if they were incurred during employment with the sponsoring employer—except for student loans.

A 529 Savings Plan (529) is a tax-advantaged investment account specifically designed to save for qualified education expenses.

Under an employer-sponsored plan, the employer can:

Administer automatic payroll deductions for employees

Provide matching contributions to employees’ plans

For employees: Employer contributions would be taxable income to the employee. Depending on the state rules that apply, the employee may be able to take a deduction or receive a credit for employer contributions.

For employers: Employer contributions are generally deductible as a fringe benefit. Some states offer specific tax advantages (e.g., providing an employer with a tax deduction or tax credit for making direct contributions).

STATE-SPECIFIC TAX ADVANTAGES: COLORADO Colorado’s CollegeInvest program provides employers with a 20% tax credit for every dollar they contribute to an employee’s account—up to a maximum of $500 per employee per year.

This example is for illustrative purposes only. Source: tax.colorado.gov

Employers interested in these benefit offerings should connect with their payroll provider, relevant state 529 savings program(s), and company counsel to review specific considerations.

What has changed with 529 savings plans under OBBBA?

The annual withdrawal limit for qualified K-12 education expenses increased to $20,000 as of January 1, 2026. 3

The definition of qualified higher education expenses was expanded to include professional certifications and private schooling.

The ability to roll over 529 funds into an ABLE account tax-free is now permanent.

The Goldman Sachs Ayco team will monitor ongoing updates related to employer-sponsored accounts and other regulatory changes that could impact compensation and benefits planning.

If you have questions related to this topic, or are interested in receiving regular updates like this, contact your Goldman Sachs Ayco representative or start a conversation today.

1 To be indexed beginning in 2028. 2 IRS Fact Sheet 2026-10 3 Increased from $10,000 in 2025.

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As changes under the One Big Beautiful Bill Act (OBBBA) take effect, many individuals may look to their employers for guidance a