Could an employer’s contribution to a Trump account be a qualified benefit under a § 125 plan?

The exclusion from income for an employer’s contribution to a Trump account is Internal Revenue Code § 128.

Internal Revenue Code of 1986 (26 U.S.C.) § 125(f)(1) defines, generally, a “qualified benefit” as “any benefit which, with the application of subsection (a), is not includible in the gross income of the employee by reason of an express provision of this chapter [§§ 1®1400Z-2] (other than section 106(b), 117, 127, or 132).”

After § 128’s effective date and assuming fitting timing regarding all plan and tax years,

Could an employer’s contribution to a Trump account be a qualified benefit under a § 125 plan?

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.

Brian Gilmore, thank you for your gifts to our learning.

I was not imagining a possibility of an employee’s wage-reduction contribution to a Trump account. Rather, I imagined a use of amounts an employer provides.

With your explanation, I see tax treatment difficulties.

If not under a cafeteria plan with credits a worker may apply to one’s choice of benefits, is there a slight awkwardness in an employer providing a contribution to a Trump account?

For example, if an employer provides a $1,000 contribution to the Trump account for an employee’s newborn and provides nothing for the worker in the same job in the adjacent cubicle, might some people perceive a mild unfairness in that?

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.

Thank you again, especially for the wider observation.

At least since World War II, tax law has favored specified kinds of pension, health, other welfare, education, and fringe benefits over money wages.

And that has resulted in distortions in how businesses and other employers compensate (and even hire) workers.