Trump Accounts: An Overview for Employers

An authorized individual (parent or legal guardian) may open a Trump Account for an eligible individual (a child born after December 31, 2024, and before January 1, 2029) using forms and/or online processes prescribed by the IRS and the applicable account provider (for example, IRS Form 4547). Trump Accounts are expected to be offered through financial institutions that meet Treasury/IRS requirements and is generally expected to be one funded Trump Account for an individual at any time.

Eligible investments - During the Growth Phase, funds generally must be invested in a mutual fund or exchange traded fund that tracks an index of primarily U.S. companies (e.g., S&P 500) and does not use leverage. Annual fees may also be subject to limits under current guidance; confirm fee/expense caps with the account provider.

Distributions are generally not permitted during the Growth Phase, except as allowed under the statute and applicable guidance other than:

1. qualified rollover contributions;
2. qualified ABLE account rollover contributions;
3. distributions correcting excess contributions; or
4. distribution upon death of the account beneficiary.

After the Growth Phase, distributions are generally expected to follow the rules that apply to distributions from a traditional IRA, including the rules applying potential additional taxes or penalties on early distributions if an exception does not apply (e.g., distributions for qualified higher education expenses; first home purchases; or distributions made after age 59 1/2). Consult applicable IRS guidance and your advisor regarding exceptions and tax treatment.

Four types of non-employer contributions may be made to a Trump Account. Trump Accounts generally cannot be funded prior to July 4, 2026 (based on current effective-date guidance):

1. Pilot program - contribution from the U.S. Treasury of $1,000 for an eligible child born after December 31, 2024, and before January 1, 2029;
2. Qualified general contribution - funded by states or tax-exempt organizations for members of a qualified class of account beneficiaries;
3. Rollover contributions from another Trump Account; and
4. Contributions from other sources - such as the account beneficiary, parents or any other person, made on an after-tax basis.

Pilot program contributions, qualified general contributions and rollover contributions are described in the current guidance as not being subject to the annual contribution limit. Contributions from other sources are described as being limited to $5,000 annually.

Employers may be permitted to contribute to the Trump Accounts of their employees or employees’ dependents. Such contributions are generally intended to be excludable in the gross income of the employee or the employee’s dependent, subject to applicable requirements. Employer contributions are described as being limited to $2,500 per employee (not per dependent) per year (subject to cost-of-living adjustments after 2027). Additionally, these contributions may count towards the aggregate annual limit of $5,000.

Employers considering contributions should consult counsel and may need to establish a separate written plan document establishing a Code Section 128 Trump account contribution program (TACP) indicating that employer contributions are for the exclusive benefit of its employees to provide contributions to the Trump accounts of its employees and/or their dependents. Contributions generally must be directed to the trustee of the Trump Account, indicating that the contribution is a section 128 employer contribution. These plans are subject to the rules governing Section 129 dependent care assistance programs, including nondiscrimination testing and the 55% average benefits test, as described in current guidance.

Employee contributions via an employer’s Sec. 125 cafeteria plan may be limited under current guidance, except in cases where the employer permits an employee to make a pre-tax salary contribution to an account of the employee’s dependent, subject to applicable rules. The IRS indicated that it intends to address rules relating to the coordination of Trump Accounts with Section 125 cafeteria plans in future regulations.