Like many employers, you and your leadership team may be constantly on the lookout for additional employee benefits that your workforce might value. Well, the recently enacted One Big Beautiful Bill Act (OBBBA) gives you a new one to consider.
Among the law’s many provisions is legal language creating so-called “Trump accounts,” which will become available next year. Although individuals must voluntarily create such accounts, once they do, employers will be able to make contributions as an employee benefit. IRS guidance hasn’t been issued yet, but here’s what we know so far.
Cash Reserves For Kids
Beginning in 2026, eligible parents can set up a Trump account for any child who has a Social Security number and is under age 18 at the end of the tax year. The accounts are intended to help children build cash reserves for various purposes when they reach adulthood. These include domestic travel, continuing education, training in skilled trades, and launching a small business.
Parents, as well as other qualifying relatives and governmental and taxable entities, can make contributions of up to $5,000 annually until the year the beneficiary turns 18. Notably, children who are U.S. citizens and born between January 1, 2025 and December 31, 2028, may qualify for a one-time government-funded deposit of $1,000.
Contributions to Trump accounts aren’t tax deductible. However, earnings grow tax-deferred as long as those funds remain in the account. Generally, withdrawals aren’t permitted until the beneficiary turns 18. Thereafter, account distributions are tax-free as long as they’re used for qualifying purposes. (Other restrictions may apply).
Important: Trump account funds must meet certain requirements. For example, they must be invested in exchange-traded funds or mutual funds that track the return of a qualified index.
Employer Contributions
Arguably, one of the more overlooked features of Trump accounts is that employers may make contributions to them. Although employers can’t deduct such contributions as a business expense, they’re excluded from each recipient’s gross income. This means they’re not subject to payroll taxes, and employees don’t have to pay taxes on the amounts you contribute. Employer contributions are subject to a $2,500 per-employee limit annually.
To make contributions, you’ll need to establish a formal Trump account contribution program. Doing so requires developing a written plan document that outlines eligibility, timing, and administration. The program will likely have to meet requirements similar to those applicable to dependent care assistance programs under Section 129 of the tax code.
Regarding information reporting, currently, it’s expected that employers will need to report Trump account contributions on a form other than Form W-2, “Wage and Tax Statement.” Guidance on this and other administrative aspects of Trump account contribution programs is likely on the way.
Family-Friendly Benefit
As mentioned, Trump accounts don’t “go live” until January 1, 2026. So, you have some time to consider whether your employees would appreciate a program under which you make contributions to their accounts. If you’re interested in establishing your organization as a family-friendly place to work, it may be a good addition to your benefits package. We can help you better understand the rules — particularly as further guidance is released. Contact us.