Insurance brokers advising employer clients should treat new dependent care and Trump Account compliance requirements as a single package, not two separate items, according to CBIZ's September 2026 regulatory and legislative update.
CBIZ's report flags proposed IRS nondiscrimination relief for Dependent Care Assistance Programs (DCAPs) and new Section 128 Trump Account contribution rules as distinct line items. But the two are governed by the same rulemaking: the IRS and Treasury Department released proposed regulations in August addressing employer contributions to Trump Accounts and DCAP nondiscrimination testing together, according to law firm NFP. Trump Account contribution programs would be subject to nondiscrimination rules similar to those applied to DCAPs, NFP said.
The highly compensated employee (HCE) threshold used in DCAP testing is indexed at $160,000 for 2026, CBIZ said, a figure NFP confirms applies to both DCAP and Trump Account testing under the proposed rules. Employers that fail testing could reclassify the discriminatory portion of HCE benefits as taxable W-2 income rather than eliminate the benefit, CBIZ said—a mechanism law firm Groom Law Group described as a "remedial measure" allowing employers to report excess amounts as wages rather than unwind the arrangement.
CBIZ said the proposed rules would count only actively participating employees in the denominator of the 55% average benefits test, calling this a significant simplification. Benefits consultancy OneDigital said the proposal would count only employees who actually receive more than $0 in DCAP benefits, while Groom Law Group called the average benefits test change "the best part of the proposed regulations." The proposal would also add a 90% eligibility safe harbor, under which a plan is generally treated as nondiscriminatory if the share of eligible non-HCEs is at least 90% of the share of eligible HCEs, OneDigital said.
The proposed rules arrive as the DCAP pretax contribution exclusion rose to $7,500 in 2026 from $5,000, an increase Groom Law Group said had raised employer concern about passing the average benefits test before the proposed relief was issued.
On the Trump Account side, CBIZ said the combined annual contribution limit is $5,000 for 2026 and 2027, with employers able to contribute up to $2,500 per employee—not per dependent—a figure confirmed by law firm Porte Brown. Those contributions are excluded from federal gross income and generally are not subject to federal income tax withholding, though there is no corresponding exclusion from wages for FICA or FUTA purposes, Porte Brown said.
CBIZ said employers must adopt a separate written Section 128 plan document, provide employee notifications and allow employees to change pre-tax salary reduction contributions at least every 30 days. Legal services provider Mayer Brown said the proposed rules also require annual written statements identifying Section 128 contributions for each employee, which can be satisfied through Form W-2 reporting using Box 12 code "TA."
CBIZ's broader September update also covered separate items, including the Medicare Part D creditable-coverage threshold rising to 73% for 2027 plans and a series of state-specific paid leave and Medicaid fee changes, which fall outside the DCAP and Trump Account rulemaking.
