Leaderboard

The reg does not refer to small or large plan. The safe harbor is available to plans with fewer than 100 participants. The methodology for counting participants for audit threshold purposes does not impact the availability of the 7 day safe harbor. Your plan does not qualify for the safe harbor.

I've done it before. I don't see any issue.

Sure thing. It's definitely an issue, but of course that's an issue with lots of benefits. For example, the OBBB also made permanent and indexed the ability for employers to provide tax-free student loan repayment assistance under §127. That section of the code contains no mechanism to avoid constructive receipt, and it's specifically excluded from the cafeteria plan safe harbor per the cite you copied in the original post. So just like tax-free employer Trump Account contributions, tax-free employer student loan repayment assistance is exclusively an employer option. If the guy in the cubicle next to you has student loan debt and gets $1k from the company, and you already repaid your student debt, might some people perceive a mild unfairness in that? Employee benefits are riddled with similar forms of unfairness. Like the larger employer contribution to the health plan for families, or the fact that families with lots of kids pay the same as families with one. The hope is you touch enough bases that everyone feels satisfied with the employer's overall strategy, and that you've hit enough contingencies as an employer to drive your recruiting/retention demands. Some really big name employers expressed interest in making contributions to Trump Accounts before the bill passed, but we'll see whether that actually occurs when the rubber hits the road on 7/4/26. Those prominent names will drive a lot of the market forces in either direction here I think.

"Note that these payroll companies have already rolled things out to their clients. " Actually, my clients are telling me that they have NOT heard from their payroll companies on how this is supposed to work in payroll. I had a client recently reach out to Paycor about how they are going to manage the Roth catch-up requirement and Paycor's response on August 19th was that they are awaiting additional direction from the IRS, including potential impacts to retirement provider files and potential W2 reporting requirements. They told my client they would notify the client once their system was ready to support the new requirement. (?) I've had several clients ask me about how their payroll companies are going to handle the Roth mandate, because the payroll companies have given them no guidance at this point..

See this thread from yesterday:

Newly enacted Section 401(b)(3) (Section 316 of SECURE 2.0) might help you here.

Not by my reading. Trump Accounts are a form of IRA, and IRAs are not a Section 125 qualified benefit. Furthermore, the cafeteria plan rules are littered with the prohibition of deferred compensation through a cafeteria plan, outside of the very limited and explicitly referenced 401(k) option with cashable flex credits. But even if I were wrong, there would be little benefit to including Trump Accounts in a cafeteria plan. The OBBB is clear that Trump Account contributions must be nondeductible. So there wouldn't be any way to use a cafeteria plan for a pre-tax TA contribution. I suppose it could be interesting as an after-tax flex credit allocation option, but very few employers offer flex credits. Here's my take-- https://www.newfront.com/blog/trump-accounts-as-an-employee-benefit Note that there is no option for employees to contribute through payroll on a pre-tax basis to TAs because they are not a Section 125 qualified benefit. Nor is there the option to embed tax-free TA contributions in a broader arrangement such as flex credits through a cafeteria plan or a lifestyle spending account (LSA). The constructive receipt rules prevent any tax-advantaged approach other than standard employer contributions. Here's a couple cites-- OBBB: (b) Trump account. For purposes of this section— (1) In general. The term “Trump account” means an individual retirement account (as defined in section 408(a)) which is not designated as a Roth IRA and which meets the following requirements: ... (c) Treatment of contributions. (1) No deduction allowed. No deduction shall be allowed under section 219 for any contribution which is made before the first day of the calendar year in which the account beneficiary attains age 18. Prop. Treas. Reg. §1.125-1: (o) Prohibition against deferred compensation. (1) In general. Any plan that offers a benefit that defers compensation (except as provided in this paragraph (o)) is not a cafeteria plan. See section 125(d)(2)(A). A plan that permits employees to carry over unused elective contributions, after-tax contributions, or plan benefits from one plan year to another (except as provided in paragraphs (e), (o)(3) and (4) and (p) of this section) defers compensation. This is the case regardless of how the contributions or benefits are used by the employee in the subsequent plan year (for example, whether they are automatically or electively converted into another taxable or nontaxable benefit in the subsequent plan year or used to provide additional benefits of the same type). Similarly, a cafeteria plan also defers compensation if the plan permits employees to use contributions for one plan year to purchase a benefit that will be provided in a subsequent plan year (for example, life, health or disability if these benefits have a savings or investment feature, such as whole life insurance). See also Q&A-5 in §1.125-3, prohibiting deferring compensation from one cafeteria plan year to a subsequent cafeteria plan year. See paragraph (e) of this section for grace period rules. A plan does not defer compensation merely because it allocates experience gains (or forfeitures) among participants in compliance with paragraph (o) in §1.125-5. (2) Effect if a plan includes a benefit that defers the receipt of compensation or a plan operates to defer compensation. If a plan violates paragraph (o)(1) of this section, the availability of an election between taxable and nontaxable benefits under such a plan results in gross income to the employees.