What Employers Should Know About “Trump Accounts”

March 16, 2026

The One Big Beautiful Bill Act created a new tax-advantaged vehicle called a Trump Account (TA), which is a new type of traditional individual retirement account (IRA) established by authorized individuals for the benefit of eligible children. These TAs are intended to encourage children to start saving and investing at an early age. Contributions to TAs may start July 4, 2026, and can be made by anyone, including parents/guardians, grandparents, philanthropic contributors and even employers. The rules governing TAs are complex and there remain several unresolved issues that require further guidance in advance of the July 2026 start date. For now, employers interested in potentially funding TAs for the children of their employees or for their minor workers should continue to monitor developments in this space. The following is a summary of the rules for consideration by employers:

Trump Account Basics

• Qualifying parents and guardians may open a TA on behalf of any child who is under the age of 18 and a United States citizen. Taxpayers will use a new IRS Form 4547 to establish TAs for eligible children.
• TAs may receive contributions from a variety of sources, including family members, employers, government agencies, and private charities.
• TAs are tax-advantaged savings and restricted investment accounts established for the exclusive benefit of individuals under the age of 18 for whom a Social Security Number has been issued.
• Contributions to a TA are subject to an aggregate annual limit of $5,000, as adjusted for inflation after 2027. With some limited exceptions, the contribution limit applies in the aggregate across all sources (i.e., a parent and an employer together cannot contribute more than $5,000 per year per TA), although the federal government’s $1,000 pilot program contribution is not counted against this limit.
• Principal and earnings on pre-tax contributions (e.g., the federal seed money and certain employer contributions) are taxed as ordinary income.
• The timing and tax treatment of distributions from TAs are complicated and depend on the type of contribution at issue, the age of the beneficiary, and the purpose of the distribution.
• In general, no distributions may be made before a beneficiary attains age 18. Thereafter, accounts may be distributed in much the same way as an IRA (i.e., for certain qualifying purposes before age 59 ½).
• Initial guidance was published in December 2025 as Notice 2025-68, covering rules for establishing a TA, making contributions, distributions and investments. The IRS has also provided additional information about the TAs on new governmental websites: trumpaccounts.gov and White House FAQs.

Federal Pilot Program Seed Money Contributions

• As part of a pilot program, the federal government will seed with $1,000 the accounts of eligible children born after December 31, 2024 and before January 1, 2029.
• For an eligible child to receive a $1,000 pilot program contribution, an election must be filed by an individual, typically a parent or guardian, who anticipates the child will be their qualifying child under IRS Section 152(c) for the year during which the election is made.
• The parent (or other individual who qualifies to make the election) must also establish a TA for the child. For qualifying children, the Treasury Department may open a TA to hold start-up payments in the absence of any parental election.
• Taxpayers will use a new IRS Form 4547 to establish TAs for eligible children and this same form is used to make an election to participate in the $1,000 pilot program.
• IRS Form 4547 can be filed at any time, including at the same time as the electing individual’s 2025 income tax return is filed. Beginning mid-2026, these elections can also be made through an online account at trumpaccounts.gov.
• In March 2026 the IRS issued proposed rules on the pilot program. The proposed rules would establish a broad election period for the pilot program, beginning on the day that a child becomes eligible and ending on December 31 of the calendar year in which the eligible child reaches age 17.
• A pilot program election could be made any time during the proposed election period, including when the pilot program-electing individual files their federal income tax return. However, the pilot program election is not a part of any individual’s tax return and must be done separately using Form 4547.
• According to the IRS, the pilot program contribution will be made as soon as practicable after the election is made and the IRS can confirm that the initial TA has been opened. However, no pilot program contribution will be deposited in the TA of a child earlier than July 4, 2026.

Employers May Make Contributions

• Beginning July 4, 2026, employers may choose to contribute to the TAs of their eligible employees or the employees’ dependents pursuant to an IRS Section 128(c) Trump Account Contribution Program (TACP).
• Employer contributions up to $2,500 per employee per year (subject to cost-of-living adjustments after 2027) are allowed and are not includible in the employee’s income for federal tax purposes so long as the employer has established a TACP pursuant to a written plan document that meets requirements similar to certain rules that apply to dependent care assistance programs (DCAPs) regarding discrimination, eligibility, notifications and benefits.
• As an example of the $2,500 per employee annual contribution limit, an employer with two employees who share an eligible dependent could contribute up to $2,500 on behalf of each employee to the dependent’s TA for 2026. In contrast, if an employee has two or more eligible children with TAs, an employer with a TACP may not contribute more than $2,500 in the aggregate for 2026 to those accounts.
• The $2,500 per employee annual contribution limit includes any employee pre-tax salary reduction contributions made through a cafeteria (IRS Section 125) plan on behalf of an employee’s dependent.
• Employers making contributions pursuant to a TACP must affirmatively indicate to the TA trustee that the contribution is an employer contribution excludible from the employee’s gross income.

Employers Can Allow Cafeteria Plan Elections

• Employers may choose to set up a specific written cafeteria plan benefit to allow employees to make pre-tax salary reduction contributions of up to $2,500 annually per employee (indexed) specifically for their dependent’s account.
• These employee pre-tax contributions are allowed for dependents under 18, but not for a young adult employee’s own account, as that would constitute prohibited deferred compensation.
• The IRS has indicated that specialized, updated cafeteria plan guidelines will soon be issued related to the establishment of these qualified benefits under a cafeteria plan.

Employers may want to be prepared to answer questions from their employees about the TAs and the availability of employer contributions and pre-tax employee contributions. In the meantime, employers may begin to consider whether to fund TAs and how/if to implement an employer program and whether to create a salary election option under their Section 125 cafeteria plan. We expect forthcoming guidance to provide more details on implementation and funding issues, and we will provide more details on how to address the establishment and operation of TAs and TACPs and coordination with Section 125 plans and how nondiscrimination rules, including for salary deferrals, will apply.

We will provide alerts and updates as new information becomes available. As always, Conner Strong & Buckelew is prepared to assist our clients with any benefit changes or additions they might wish to consider later this year and into the future. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions.

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