IRS Moves Address Rollovers, Trump Accounts, Paid Leave and OT

The U.S. Internal Revenue Service (IRS) has been quite active as of late in providing guidance, reminders and notices that have direct ramifications for employers and their employees.

Working in conjunction with the U.S. Department of the Treasury, the IRS issued guidance on:

• Rollovers between retirement plans and individual retirement accounts (Aug. 12);
• Proposed regulations on employer contributions to “Trump Accounts” under the Working Families Tax Cuts (Aug. 11); and,
• The permanent expansion of paid family and medical leave under the Working Families Tax Cuts law (Aug. 5).

The IRS also updated a “frequently asked questions” (FAQ) document about deductions for qualified overtime compensation (Aug. 6).

Let’s take a closer look at each of these.

Retirement Rollers

Long-awaited guidance designed to simplify, streamline and standardize the retirement rollover process was officially released.

Authorized under Section 324 of the SECURE 2.0 Act, Notice 2026-49 introduces standardized sample forms, procedures and protocols aimed at eliminating friction for both employer plan sponsors and retirement plan participants.

The notice addresses historically fragmented and confusing retirement transfer procedures by introducing a unified framework that covers:

• Transfer scope. The new sample forms apply strictly to direct rollovers moving between workplace retirement plans — such as 401(k) or 403(b) accounts — or transfers between a retirement plan and an individual retirement account (IRA). It doesn’t apply to standard IRA-to-IRA transfers.
• Data security and privacy. The forms were built to maximize the protection of participants’ personal identifying information (PII) while heavily minimizing the administrative burden placed on individuals trying to move their wealth.
• Optional adoption. Plan sponsors and financial institutions retain full flexibility, as the use of these newly introduced sample forms and standardized protocols remains optional.

The guidance reflects a larger federal agency effort to demystify complex tax codes for those navigating retirement transitions. By providing clear, official templates, the Treasury and IRS hope to establish protocols that accelerate transaction times, prevent accidental taxable distributions and help employees maintain their retirement velocity when moving between jobs.

Trump Account Contributions

Newly proposed regulations aim to provide clear guidelines for employers choosing to make tax-free contributions to employee Trump Accounts, which are federal investment plans (under Section 530A of the Internal Revenue Code) for U.S. children under age 18.

The new framework would:

• Allow businesses to contribute up to $2,500 annually per employee or their dependents; and,
• Establish strict nondiscrimination rules to ensure these benefits are distributed fairly across the workforce.

Under the proposals, any employer seeking to maintain a valid Trump Account contribution program must satisfy three primary criteria:

• The program must exist as a separate, formal written document.
• The plan must operate solely for the benefit of the company’s employees or their direct dependents.
• The program must satisfy all structural and legal safeguards outlined by the IRS.

A major component of the guidance focuses on equity within corporate benefit structures. The IRS clarified that both Trump Account contribution programs and traditional dependent care assistance programs must remain highly accessible across all income levels. Specifically, eligibility criteria, employer contributions and plan benefits can’t discriminate in favor of highly compensated employees or their dependents. Lower-wage workers must have equitable access to the contributions, preventing companies from using the tax-free allocations exclusively as an executive perk.

Paid Family and Medical Leave Expansion

Notice 2026-28 provides guidance on how employer tax credits under the Working Families Tax Cuts (WFTC) law have been permanently expanded for paid family and medical leave (PFML). This provides businesses (particularly small businesses) with greater incentives to offer up to 12 weeks of paid leave. Employees may use the leave to recover from a serious health condition or to care for certain family members with serious health conditions. 

The law also makes several key improvements to the credit, including:

• Expanded eligibility. Employers can claim the credit for employees with six months of service and for part-time employees who regularly work 20 or more hours per week. 
• Expanded coverage. Employers can claim the credit for insurance premiums to provide leave or wages paid during leave. 
• State and local mandates. Employers can count leave provided under state or local mandates toward the eligibility for this federal tax credit, but not toward the credit calculation. 

Beginning this year, employers can claim the credit for premiums paid for PFML insurance policies, in addition to wages paid during PFML leave.

Overtime Compensation Deductions

Frequently asked questions about the deductions for qualified overtime compensation were updated to reflect changes brought forth by the “no tax on overtime” provisions within the 2025 H.R. 1 law (also known as the “One Big Beautiful Bill Act”). 

Fact Sheet 2026-13, which supersedes guidance issued in January 2026:

• Deletes information that was applicable solely to the 2025 taxable year.
• Provides clarification on the limits and timing of the qualified overtime (OT) compensation deduction.
• Provides additional information on coverage and exemptions under the Fair Labor Standards Act.
• Provides detailed information on Form W-2, Form 1099-MISC and Form 1099-NEC requirements applicable to employers and payors of qualified OT compensation.
• Adds information on federal income tax withholding procedures related to qualified OT compensation.
• Adds information on the requirement that qualified OT compensation must be separately reported on Form W-2 to claim the deduction.
• Provides more detailed information on issues applicable to federal employees.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Employee Compensation
• Equitable and Diverse Workplaces
• Total Rewards