Contributions to Trump Accounts: What Employers Need to Know

The One Big Beautiful Bill Act, signed into law on July 4, 2025, established a new type of individual retirement account for eligible individuals under age 18 with a valid Social Security number. A parent or legal guardian can establish a “Trump Account” and contribute up to $5,000 annually in after-tax dollars.

Employers that set up a qualifying program can contribute up to $2,500 annually per employee pretax, as long as certain requirements are met. Although rules are not yet finalized, the IRS published Notice 2025-68 on December 3, 2025, providing preliminary guidance to employers seeking to make such contributions. The Notice includes a request for public comment regarding some of the issues.

Final regulations aren’t expected until early 2028, although the program officially launches on July 4, 2026. Nevertheless, employers have many issues to consider and should begin planning now if they decide to offer Trump Account contributions as part of their benefits packages.

What Are Trump Accounts?

A Trump Account is a government-created, tax-advantaged investment account for U.S. citizens under 18. A parent, legal guardian, or other authorized adult can open a Trump Account for a child by filing IRS Form 4547 or using the online portal at trumpaccounts.gov. Although the account is in the child’s name, the parent or guardian acts as the custodian until the child reaches 18.

Formally known as 530A accounts, they are officially dubbed Trump Accounts under the One Big Beautiful Bill Act. For children born between January 1, 2025, and December 31, 2028, the account is seeded with a one-time $1,000 deposit from the U.S. Treasury. The $1,000 contribution is part of a pilot program that begins July 4, 2026. Parents and legal guardians can elect to receive the contribution via IRS Form 4547.

The accounts are intended to provide long-term financial security, enabling families to save for major milestones such as college or buying a home. Contributions are made with after-tax income, but investments grow tax-free until withdrawal, similar to a Roth IRA. The funds are designed to be held at least until the child reaches adulthood, and are typically restricted to broad-based U.S. equity index funds to focus on long-term growth.

Who Can Contribute to Trump Accounts?

Individuals can contribute up to $5,000 annually per child. Charities and certain governmental entities may also make contributions to a qualified class of Trump Account beneficiaries. The $1,000 in federal seed money, rollovers, and certain qualified contributions do not count toward the $5,000 annual limit. Contributions are permitted through the end of the calendar year before the child turns 18, and can be made even if the child does not have taxable compensation.

Employers can contribute up to $2,500 annually to the Trump Account of an employee who is under 18 or to an employee’s dependent. The employer contribution counts toward the $5,000 annual contribution limit. The $2,500 limit applies per employee, regardless of the number of dependents the employee has. Employer contributions to Trump Accounts are generally deductible as a business expense.

Additionally, the contributions are not considered taxable income to the employee if the employer has set up a Trump Account Contribution Program (TACP) and met other requirements. A TACP must be a formal, written plan established for the exclusive benefit of employees. Funds must be invested in specific exchange-traded funds (ETFs) or mutual funds that track American equities.

What Are the Requirements for Trump Account Contribution Programs (TACPs)?

The TACP must not discriminate in favor of highly compensated employees (HCEs), defined as those earning more than $160,000 in 2026. HCEs also include officers and those who own more than 5% of the company’s stock or capital. The average benefits provided to non-HCEs must be at least 55% of the average benefits provided to HCEs. If a plan fails these tests, the tax-exempt status of the contributions may be lost.

TACPs can also be added as a feature to a Section 125 cafeteria plan — an employer-sponsored benefit program that allows employees to pay for qualified benefits using pretax income. Employees may make pre-tax, salary-reduction contributions to the Trump Accounts of their dependents. However, employees under 18 may not make contributions to their own accounts, as it would be deemed a deferred compensation arrangement, like a 401(k) plan.

Employers must provide reasonable notification of the plan’s availability and terms to employees. The plan must provide employees with a written statement showing the amounts paid or expenses incurred by the employer, which is commonly handled through end-of-year W-2 reporting. When contributing, the employer must inform the trustee (the institution administering the account) that the contribution is a Section 128 contribution and excludable from the employee’s gross income.

How Are Trump Account Funds Distributed?

On January 1 of the year the beneficiary turns 18, the Trump Account converts into a traditional IRA. The child is considered the account owner and may take distributions. As with an IRA, earnings, pretax contributions, and government and philanthropic contributions are taxed as ordinary income upon withdrawal. Employer contributions are also treated as pre-tax dollars, even though they are considered a nontaxable employee benefit rather than taxable income. After-tax contributions made by parents or individuals are not taxed again when withdrawn.

A 10% penalty may apply to taxable amounts withdrawn before age 59½, similar to traditional IRAs. There are exceptions for qualified higher education expenses, a first-time home purchase, or certain medical expenses.

Trump Account funds can be transferred from one Trump Account to another. They can also be rolled over into a traditional IRA, a Roth IRA, or, if eligible, an Achieving a Better Life Experience (ABLE) account.

What Should Employers Do Now?

Employers may choose to set up TACPs to offer a tax-advantaged benefit that helps them attract and retain working parents and differentiate themselves in a competitive hiring landscape. TACPs are also a lower-cost option compared to traditional employer-sponsored retirement plans.

It’s important to begin planning now. Although regulations are still evolving, proactive preparation can help HR leaders design the necessary systems and processes based on preliminary IRS guidance. Employers could also begin drafting a formal written document that defines TACP eligibility and terms.

However, experts advise that early adoption carries risk until final regulations are issued. It remains unclear whether TACPs will be subject to the Employee Retirement Income Security Act (ERISA), which would add administrative burdens. The final IRS rules may also impose new requirements.

For now, employers seeking to set up TACPs should monitor for final IRS regulations on plan document requirements. They should also engage counsel and tax professionals to discuss the pros and cons of Trump Accounts as part of their employee benefits package.

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