What Employers Should Know About Trump Accounts – Updated

August 31, 2026

The One Big Beautiful Bill Act created a new tax-advantaged savings 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 were allowable starting July 4, 2026, and can be made by anyone, including parents/guardians, grandparents, philanthropic contributors and even employers. Employers interested in funding TAs for the children of their employees or for their minor workers have substantially more clarity about how the new benefit will work after recent guidance from the Department of the Treasury, but unanswered questions remain, particularly related to the mechanics of delivering money to TAs. The following is an updated summary of the rules for consideration by employers:

Trump Account Basics

1. 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.
2. TAs may receive contributions from a variety of sources, including family members, employers, government agencies and private charities.
3. 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.
4. These accounts are a type of traditional IRA, with special tax rules that apply during a “growth period” that ends on December 31 of the year in which the child reaches age 17.
5. During the growth period, 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/year/TA), although the federal government’s $1,000 pilot program contribution is not counted against this limit.
6. Principal and earnings on pre-tax contributions (e.g., the federal seed money and certain employer contributions) are taxed as ordinary income.
7. 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.
8. 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).
9. IRS published Notice 2025-68 in December 2025 covering basic rules for establishing a TA and provides additional information about the TAs on trumpaccounts.gov.

Pilot Program Seed Contributions

1. As part of a pilot program, the federal government will seed with $1,000 the accounts of eligible children born between 2025 and 2028.
2. For an eligible child to receive a $1,000 pilot 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.
3. 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.
4. 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.
5. In March 2026, the IRS issued proposed rules on the pilot program, establishing a broad pilot program election period 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.

Employer Contributions

1. 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).
2. Employer contributions up to $2,500/employee/year (subject to cost-of-living adjustments after 2027) are allowed and are not includible in the employee’s income for federal tax purposes (but will remain subject to FICA and FUTA taxes), 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.
3. As an example of the $2,500/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.
4. The $2,500/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.
5. Employers making contributions pursuant to a TACP must affirmatively indicate to the TA trustee that the contribution is an employer contribution excludable from the employee’s gross income.
6. In June 2026, guidance was issued indicating that, in general, TA programs are not considered employee benefit plans subject to ERISA.
7. In August 2026, the IRS issued proposed rules, providing detailed guidance on TA contribution programs.

Cafeteria Plan Elections

1. Employers may choose to amend cafeteria plans to allow employees to direct pre-tax salary reductions of up to $2,500 annually/employee (indexed) specifically for their dependent’s TA, with employees able to change elections at least monthly.
2. 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.

Employers should be prepared to answer questions from their employees about the TAs and the availability of employer contributions and pre-tax employee contributions. With the recent guidance issued in August, employers now have enough information to begin deciding how TAs might fit into their benefits strategies. Most employers are still learning about TAs and moving cautiously. Remaining questions about account verification, payroll systems, trustee options and the movement of money will determine how quickly employers will embrace TAs.

We expect more guidance providing further details on implementation issues, and 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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