New Year, New Benefits: Trump Accounts Offer a New Opportunity for Employer-Sponsored Benefits

While Trump Accounts have been widely publicized as a savings vehicle for parents and grandparents, the statute and IRS guidance also contemplate a potentially significant role for employers. In particular, Trump Accounts may be integrated into employer-sponsored benefit programs through both employer-funded and employee-funded contributions.

What Is a Trump Account?
A Trump Account is a special type of traditional individual retirement account (IRA) established for the exclusive benefit of an eligible individual—referred to as a “beneficiary”—who has not attained age 18. Although technically an IRA, Trump Accounts are subject to a unique set of rules during a “growth period,” which generally ends on December 31 of the year in which the beneficiary turns 17.

During the growth period, Trump Accounts differ from traditional IRAs in several important ways:

• Contributions are permitted even if the beneficiary has no earned income.
• Contributions are generally not deductible.
• Distributions are largely prohibited.
• Investments are strictly limited to low-cost, U.S.-equity index mutual funds or ETFs, with annual fees capped at 0.1%.
• Separate reporting rules apply, including reporting the source of the contribution.

After the growth period ends, most of the special restrictions fall away, and the account generally becomes subject to the traditional IRA rules governing taxation, distributions, Roth conversions and required minimum distributions.

Trump Accounts may only be opened at a financial institution that has been preapproved by the IRS to serve as a Trump Account trustee. Such trustees play a central compliance role, including enforcing contribution limits, restricting investments, preventing impermissible distributions, and filing detailed annual reports with the IRS under IRC Section 530A(i) regarding contribution sources, account balances and basis.

Initial Federal Government Contributions
As part of a pilot program, the federal government will make a one-time $1,000 contribution to a Trump Account for qualifying children born between January 1, 2025, and January 1, 2029. To qualify, the child must be a U.S. citizen, a timely election must be made which includes the child’s social security number, the IRA must clearly specify via a written instrument that it is a Trump Account, and no prior pilot program contribution may have been made.

Contributions are expected to be deposited beginning July 4, 2026, after the Trump Account has been established and activated.

Contributions to Trump Accounts
During the growth period, Trump Accounts may receive several types of contributions:

• Pilot Program Contributions. The one-time $1,000 government contribution for qualifying children born between 2025 and 2028, discussed above.
• Qualified General Contributions. Contributions funded by governmental entities or IRC Section 501(c)(3) tax-exempt organizations for a defined class of beneficiaries, such as the widely publicized $6 billion pledge from the Dell Foundation, which promises $250 to 25 million for children in low- or middle-income neighborhoods.
• Employer Contributions Under IRC Section 128. Tax-free employer contributions, discussed further below.
• Qualified Rollover Contributions. Trustee-to-trustee transfers between Trump Accounts.
• Other Contributions. Contributions from parents, relatives or other individuals.

Apart from pilot program, qualified general contributions and qualified rollover contributions, total contributions are capped at $5,000 per year (indexed for inflation beginning after 2027).

Employer Contributions Under IRC Section 128
Section 128 permits employers to make tax-free contributions of up to $2,500 per year (indexed for inflation after 2027) to a Trump Account for an employee or the employee’s dependent. These contributions are excludable from the employee’s gross income and must be made pursuant to a formal Trump Account contribution program. Importantly, this limit applies per employee, not per dependent. (Such contributions can be made by an employee on their own behalf should the employee be under age 18 and otherwise meet the qualification requirements.)

The requirements applicable to Section 128 Trump Account contribution programs are similar to those applicable to dependent care assistance programs under IRC Section 129, including nondiscrimination, eligibility and notice requirements.

Pre-Tax Employee Contributions Through IRC Section 125 Cafeteria Plans
In addition to employer-funded contributions, employees may be permitted to make pre-tax salary reduction contributions to a qualified child’s Trump Account through an employer’s Section 125 cafeteria plan, provided such plan is amended to allow this feature.

If properly structured, employee contributions would be excludable from gross income and wages for federal income tax purposes and would count toward the annual $5,000 aggregate contribution limit applicable to non-exempt contributions.

Compliance and Design Considerations for Employers
Employers considering Trump Account contributions should begin evaluating several key issues:

• Nondiscrimination and Eligibility Rules. Section 128 Trump Account contribution programs are subject to nondiscrimination requirements similar to those under Section 129. Employers will need to carefully design eligibility rules to avoid favoring highly compensated employees.
• Employment Retirement Income Security Act (ERISA) and Other Legal Compliance Issues. Most importantly, the IRS in conjunction with the U.S. Department of Labor anticipate issuing guidance on how to structure employer contributions to Trump Accounts to avoid being subject to the fiduciary and other obligations that could otherwise apply under ERISA. Until that guidance is issued, ERISA status of Trump Account employer contribution programs remains a critical open issue. Furthermore, the IRS has yet to address how Trump Accounts could interact with state law tax implications, as well as being subject to federal and state law privacy requirements.
• Administrative Complexity. Employer contributions must be affirmatively identified as Section 128 contributions, tracked separately and reported by trustees. Employers will need to coordinate closely with payroll systems, trustees and recordkeepers.

Takeaways for Employers
Trump Accounts represent a unique convergence of tax policy, family benefits and long-term savings—and provide employers with a new opportunity to support their employees and their families. Although Trump Accounts cannot receive contributions before July 4, 2026, employers interested in this new benefit can begin considering how Trump Accounts align with their existing benefits packages and financial wellness strategies. For employers who wish to or currently make available retirement readiness resources, they may wish to enhance their program to educate employees regarding establishing Trump Accounts and utilizing the federal government’s $1,000 pilot program. Furthermore, employers considering making employer contributions should evaluate program design, administrative readiness and 2026 budgeting considerations.