What Employers Should Know About the New “Trump Accounts”

The IRS recently released its first round of guidance on Trump accounts, a new type of IRA created under the 2025 One Big Beautiful Bill Act. These accounts are designed for children under age 18 who have a valid Social Security number. While many implementation details are still under development, employers now have a clearer picture of how these accounts work and how employer contributions will be treated.

How Trump Accounts Work

A Trump account functions as a child-specific IRA during a defined “growth period,” which runs from the date the account is opened until December 31 of the year before the child turns 18. During this period:

• Up to 5,000 dollars per year may be contributed (subject to future inflation adjustments).
• Contributions are not tax-deductible.
• Withdrawals are generally not allowed.
• Investments must be placed only in low-cost index funds meeting IRS requirements.

Once the child reaches adulthood, the account transitions into a traditional IRA with the usual tax and distribution rules.

Who Can Contribute

Parents, guardians, family members and the child may make contributions starting July 4, 2026. Some contributions will come directly from the federal government or qualifying nonprofit programs, such as the 1,000 dollar Treasury “pilot contribution” for eligible children.

Employer Contributions: The Key HR Impact

Employers may choose to contribute up to 2,500 dollars per year (indexed beginning in 2028) to Trump accounts for employees or their dependents. These contributions:

• Are excluded from employee taxable income.
• Must be made under a formal, employer-sponsored Trump Account Contribution Program.
• Must follow nondiscrimination and administrative rules similar to dependent care assistance programs.
• Are capped at $2,500 per employee per year, not per dependent.
• May be offered through a Section 125 cafeteria plan only when the contribution is for the employee’s dependent, not the employee.

Employers will not administer the accounts themselves; accounts will be opened and held by financial institutions selected by the Treasury. However, employers will need a written program, employee notices and a compliant administrative process in place before contributing.

What Employers Should Watch for

Regulators are still determining how employer programs will interact with ERISA, particularly whether these arrangements will fall outside ERISA’s plan requirements. That guidance will be essential for employers before launching a contribution program.

Additional guidance is expected on:

• Nondiscrimination requirements
• Required employee communications
• Reporting rules
• Administrative mechanics for funding contributions
• How pilot contributions and private donations coordinate with employer limits

What Employers Should Do Now

• Monitor upcoming IRS, Treasury and DOL guidance. Implementation details will evolve throughout 2026.
• Begin evaluating whether to offer employer contributions. Consider eligibility rules, administrative effort and budget. The benefit is optional, not required.
• Coordinate with payroll and benefits vendors early. Systems may require updates to support contributions and reporting.
• Educate HR, payroll and benefits teams. These accounts are new and come with unique requirements.

The IRS is accepting public comments on Trump account issues until February 20, 2026. Additional regulations will follow. For more information, visit the IRS website and monitor future Treasury and DOL updates.