Insurance
Home›Insurance›Industry & Deals›Employers told to treat DCAP and Trump Account rules a…
Employers told to treat DCAP and Trump Account rules as one compliance package
The proposed guidance would index the HCE threshold for 2026 to $160,000 and allow nondiscrimination failures to be handled via reclassifying excess benefits as taxable W-2 income.
Insurance Business reports that brokers advising employers should approach new dependent care compliance and Trump Account requirements as a single package rather than two separate items, according to CBIZ's September 2026 regulatory and legislative update.
The guidance stems from proposed IRS and Treasury regulations released in August that address both dependent care assistance program (DCAP) nondiscrimination testing and new Section 128 Trump Account contribution rules, with the same core nondiscrimination concept applied to Trump Accounts as to DCAPs, according to law firm NFP.
CBIZ said the highly compensated employee (HCE) threshold used in DCAP testing would be indexed to $160,000 for 2026, and that a failure of testing could result in employers reclassifying the discriminatory portion of benefits as taxable W-2 income rather than eliminating the benefit, a mechanism described by Groom Law Group as a remedial measure.
The article also notes potential changes to how the average benefits test is calculated, including counting only actively participating employees in the denominator of a 55% test, plus a 90% eligibility safe harbor described by OneDigital. It further cites the DCAP pretax contribution exclusion rising to $7,500 in 2026 from $5,000, and says the combined annual Trump Account contribution limit would be $5,000 for 2026 and 2027, with up to $2,500 per employee rather than per dependent.