Sponsors (2)
Creates tax-favored Skill Savings Accounts allowing employer and employee contributions for qualified education expenses with set exclusion limits and penalties for nonqualified use.
Official title: To amend the Internal Revenue Code of 1986 to establish skill savings accounts.
Introduced May 7, 2026 by Glenn Thompson · Last progress May 7, 2026
The bill creates a new tax-advantaged account to make employer-sponsored upskilling cheaper and more attractive for workers, but it also imposes contribution limits, penalties, regulatory compliance costs, and potential tax risks for administrators that could reduce employer participation and delay near-term benefits.
Employees and employers: establishes a new tax-advantaged savings vehicle (SSA) to encourage employer-sponsored upskilling and workforce training by making employer/employee contributions tax-favored.
Contributing employees (and sponsoring employers): allows employees to exclude up to $10,000 of annual contributions (and employers up to $5,250 toward workers' SSA balances), lowering taxable income for beneficiaries who use or save funds.
Workers and students: distributions used for qualified education or training expenses are tax-free, making employer- or employee-funded upskilling cheaper.
Employees/beneficiaries: nonqualified withdrawals are taxable and subject to a 20% penalty for those under 65, creating a substantial tax penalty risk if funds are used for non-education purposes.
Employees and small employers: the $5,250 employer exclusion cap, reduced by Section 127 benefits, may limit employer willingness to contribute and thus curb employer support for training.
Employers and trustees: trustee qualification rules, reporting obligations, and new regulatory compliance will increase administrative costs and complexity for employers and account administrators setting up SSAs.
Based on analysis of 2 sections of legislative text.
Creates a new tax-preferred savings account called a Skill Savings Account (SSA) for use on qualified education expenses. Employer and employee contributions to SSAs (within set limits) and distributions used for eligible education costs are excluded from gross income; nonqualified distributions are taxable and may incur an additional 20% tax for recipients under 65. The Internal Revenue Code changes include account rules, contribution limits, trust treatment, correction and reporting procedures, integration with existing excess-contribution rules, and a requirement for Treasury regulations within one year. The rules apply for taxable years beginning after December 31, 2025.