- On July 23, 2025
On July 4, 2025, President Donald Trump signed a sweeping tax and spending package known as the One Big Beautiful Bill Act (OBBB Act) into law. Among the provisions included in the legislation are several notable updates for employee benefits, including creating a new type of federally tax-advantaged savings account for children, referred to as Trump Accounts. These accounts will become available for tax years starting in 2026.
Employer-Funded Trump Account Programs
Under the new law, employers can choose to implement a Trump Account Contribution Program, allowing them to make tax-free contributions of up to $2,500 annually to the Trump Accounts of their employees’ dependents or teenage workers. To offer this benefit, employers must adopt a formal written plan and comply with several tax requirements similar to those governing dependent care assistance programs (DCAPs).
Highlights of Trump Accounts
- Children born between 2025 and 2028 may qualify for a $1,000 one-time federal contribution to their Trump Account.
- Contributions to these accounts are generally capped at $5,000 annually and can only begin 12 months after the OBBB Act’s enactment. No contributions are allowed once the child turns 18.
- The accounts resemble traditional IRAs for tax treatment—earnings grow tax-deferred, but contributions are not tax-deductible.
- Withdrawals are restricted until age 18, and any distributed earnings are generally taxable unless they fall within taxpayer contribution limits.
Next Steps for Employers
The IRS is expected to release guidance clarifying Trump Account rules, including details on eligibility, timing, and administration. Employers interested in adopting a Trump Account Contribution Program should monitor upcoming IRS publications closely.
Overview of Trump Account Basics
Starting in 2026, families can open Trump Accounts for children under 18. According to a statement from the White House, the accounts are designed to introduce children to “the miracle of compounded growth,” helping build long-term financial stability. Children born from January 1, 2025, to December 31, 2028, who are U.S. citizens with a Social Security number, will automatically receive a $1,000 federal deposit into their Trump Account. Although children born outside this four-year window can still open an account, they won’t be eligible for the government-funded deposit. Each account can accept up to $5,000 in annual contributions from parents, relatives, or others, though these contributions are not deductible for tax purposes. Beginning in 2027, the contribution limits will be indexed for inflation. Until the child turns 18, investments must be held in a mutual or exchange-traded fund with fees no greater than 0.1% annually. Early withdrawals are generally not allowed, and distributions are taxable to the extent they exceed contributions. Unlike 529 plans, funds are not limited to education expenses.
Employer Contribution Plan Requirements
Employers may contribute up to $2,500 per year, tax-free, to Trump Accounts for employees’ children or teenage employees themselves. However, several plan rules must be followed, including:
- Nondiscrimination: The plan must not favor highly compensated employees in its eligibility or benefit structure.
- Employee Notice: Workers must be informed of the plan’s existence and details in a reasonable manner.
- Annual Statement: By January 31, employers must furnish a statement to employees summarizing amounts paid or incurred under the plan during the prior calendar year. Like DCAPs, employer contributions must be reported (for DCAPs, this is done on Form W-2).
Additional Guidance Expected
Further clarification from the IRS is anticipated, especially regarding how employers should administer Trump Account contributions. Employers should be on the lookout for official updates and compliance instructions.