Seyfarth Synopsis: The IRS recently issued Notice 2025-68, providing initial guidance on a new savings vehicle: Trump Accounts, created under Section 530A of the Internal Revenue Code by the One, Big, Beautiful Bill Act (OBBBA). While proposed regulations are still forthcoming, the recent IRS guidance provides a high-level overview of various Trump Account features, including the employer contribution option.
What are Trump Accounts?
A Trump Account is a new type of traditional IRA established for the exclusive benefit of a child and must be designated as a Trump Account at inception. Trump Accounts are designed to encourage early savings for children and will operate under special rules during a “growth period,” which lasts from the time of account creation until January 1 of the year the beneficiary turns 18. Trump Accounts are tax-deferred savings accounts for children and will generally follow traditional IRA rules after the child turns 18, at which point the funds can be used for a variety of qualifying purposes, including education expenses, job training, down payment on a first home, capital to start a small business, and retirement.
How do Trump Accounts work?
An authorized individual (parent, guardian, or other relative) can elect to open a Trump Account on IRS Form 4547 or an online portal (that is expected to be available in mid-2026). The IRS creates the initial account and coordinates it with an approved trustee (usually a bank).
The following contributions may be made into Trump Accounts:
- $1,000 in federal contributions under the pilot program for U.S. citizen children with Social Security Numbers born after December 31, 2024 and prior to January 1, 2029;
- Contributions from parents or others up to $5,000 annually (not tax deductible but indexed after 2027);
- Qualified general contributions from state, local or tribal governments or 501(c)(3) organizations;
- Employer contributions, up to $2,500 annually (indexed after 2027), which contributions are excluded from the employee’s gross income; and
- Qualified rollover contributions between Trump Accounts.
These contributions are not considered income for the account beneficiary when made.
Trump Accounts may be invested in certain “eligible investments,” which investments will generally include certain low-cost index-tracking mutual funds, ETFs, and other index funds comprised of equity investments in primarily U.S. companies.
How does this impact employers?
Employers have no legal obligation to contribute to Trump Accounts, but tax-exempt employer contributions may enhance employee benefit offerings. Specific administration details are still forthcoming, but recent IRS guidance confirms the following:
- Employers may contribute up to $2,500 to employees’ or their children’s Trump Accounts pre-tax. Please note that any employer contributions count towards the general $5,000 contribution limit mentioned in item 2 above.
- The $2,500 limit applies on a per employee basis, meaning that if any employee has multiple children with Trump Accounts, the employer’s aggregate contributions to those children’s Trump Accounts may not exceed $2,500.
- Any employer contributions must be made pursuant to a written plan document and the contributions must comply with applicable nondiscrimination testing rules (which will likely look similar to the nondiscrimination testing rules applicable to Dependent Care Spending Accounts).
- The IRS also intends to issue additional guidance explaining how an employer can facilitate employee contributions to Trump Accounts for the employee’s dependents through a Section 125 cafeteria plan.
As with many new policy initiatives, Trump Accounts raise more questions than answers at this stage. Key issues remain regarding how these accounts will be funded and administered. We will continue to monitor developments closely and share updates as regulatory guidance emerges.
