The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, creating a new savings option, “Trump Accounts,” as a tax-preferred savings account for children, with the intent of encouraging investing from a young age.

Under the law, the federal government will make an initial contribution of $1,000 to Trump Accounts for newborns born between 2025 and 2028. Parents, grandparents, the child or other individuals can contribute up to $5,000 annually. Employers can also make contributions, which may help with the recruitment and retention efforts of current and future employees who have children or plan to have children.  

According to a recent Mercer poll, over a third of surveyed employers said they made a decision not to contribute to Trump Accounts.  While almost none of the employers had “positively decided to make contributions, a handful (4%) said they were considering it.  The majority didn’t know or hadn’t yet considered it.”

This blog discusses the main points employers should know when considering whether to contribute to these accounts, including account eligibility, employer contributions, plan document requirements, eligible investments and nondiscrimination rules. It also addresses questions that will require further guidance by the Internal Revenue Service (IRS).

Account Eligibility and Management

Only parents or guardians may open a Trump Account for a child. The child receiving the contribution must be a U.S. citizen, be under age 18 and have a Social Security number.

Parents/guardians manage the account until the child turns 18, at which point the child gains full control and funds can be withdrawn from the account, subject to traditional IRA withdrawal rules.

Employer Contributions

Employers may choose to create a Trump Account program under the newly created Internal Revenue Code Section 128. This section allows employers to voluntarily contribute up to $2,500 on an annual basis beginning July 4, 2026, either directly to the employee or the employee’s dependent child, until the end of the year the child turns 17. It is unclear whether the limit is annual or lifetime. The maximum amount an employer can contribute will be indexed to inflation beginning in 2027. Employer contributions will not be included in an employee’s gross income.  

According to Mercer, the following types of contributions don’t count toward the annual $5,000 overall limit:

• Qualified rollover contributions from another Trump Account
• A $1,000 federal government contribution under a pilot program for U.S.-citizen children born from 2025 through 2028
• Contributions by the federal government or certain governmental or nonprofit entities to a qualified class of beneficiaries.

Plan Document Requirements

According to OBBBA, an employer’s Trump Account program must be described in a separate written plan document for the sole reason of providing the benefit to employees’ dependents. The employer must communicate the availability and terms of the program. Before January 31 each year, the employer must also give each employee a written statement showing the amount paid by the employer in contributing to the dependent’s Trump Account in the prior year.

Eligible Investments

Until the first day of the calendar year when the beneficiary turns age 18, the Trump Account must be invested in an eligible investment, a U.S. stock-based fund (including mutual funds or exchange-traded funds) that:

• Tracks the returns of the S&P 500 index or another index primarily invested in U.S. companies that is not industry or sector-specific
• Does not use leverage
• Charges annual fees that are less than 0.1% (10 basis points) of the account balance.

Nondiscrimination Rules

The Trump Account rules require employer programs to meet nondiscrimination rules similar to those applicable to dependent care flexible spending accounts (DCFSAs) and dependent care assistance programs (DCAPs).

An employer cannot discriminate in favor of highly compensated employees (HCEs) when administering the program. In 2026, an HCE is someone who earned more than $160,000 in the prior plan year (plus officers and more-than-5% owners).  The plan must show the average benefit offered to non-HCEs is at least 55% of the average benefit offered to HCEs.

Questions Remain

Despite what Section 70204 of OBBBA says about Trump Accounts, there are many outstanding issues remaining that IRS will need to address through future regulations, including:

• Trump Accounts as ERISA plans. ERISA generally applies to programs established and maintained by an employer to provide retirement income to employees. Because Trump Accounts are treated as individual retirement arrangements (IRAs) once the child turns 18, employers may not be sure whether contributing to the accounts creates a new ERISA plan.
• Establishing Trump Accounts. Confusion exists as to whether a child’s initial Trump Account must be established by the federal government or how a parent can establish one.
• Plan document requirements. Requirements detailing the specifics of what is to be included in the plan document are unknown.
• Employer contribution limits.
  • It is unclear whether the $2,500 employer limit is a lifetime limit per employee or is an annual limit like those made by others. No details are included about whether an employer can contribute more than $2,500 if the overage is considered taxable income for the employee.
  • While OBBBA says the government contribution doesn’t count toward the annual $5,000 limit, it does not clearly state that the employer contribution does not count toward it.
• Employer monitoring. The guidance does not say whether employers have a duty to monitor the total amount contributed (employer + other contributions) to each employee’s Trump Accounts.
• Salary deferrals. Employees may wonder whether they can defer part of their salary to their child’s Trump Account.
• Nondiscrimination testing failure. No information was provided as to what the penalties are when an employer’s Trump Account Contribution Program fails nondiscrimination testing.

As we await answers to these questions and more, stay tuned to the International Foundation for any future guidance on Trump Accounts.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.