One way employers can attract and retain talent is through a competitive benefits package, and there’s now a new option to consider from last year’s One Big Beautiful Bill Act (OBBBA). When it was enacted, the OBBBA introduced Trump Accounts. The IRS describes Trump Accounts as, “a new type of individual retirement account (IRA) for eligible children.” The OBBBA also introduces Trump Account Contribution Programs (TACPs), which allow employers to contribute. The IRS recently issued guidance that laid a basic framework for sponsoring this benefit.
Purpose & Ground Rules
Beginning July 4, 2026, eligible parents, guardians, or other qualified parties may establish a Trump Account for any child who has a Social Security Number and is under age 18 at the end of the tax year. No contributions may be accepted before that date. The accounts are intended to help children build cash reserves for various purposes when they reach adulthood.
Parents, guardians, other qualifying relatives, and governmental and taxable entities (including employers) can contribute up to $5,000 in aggregate annually to an account during the child’s “growth period,” which generally ends before January 1 of the year the beneficiary turns 18. Notably, children who are U.S. citizens born after December 31, 2024, and before January 1, 2029, may qualify for a one-time government-funded “pilot program contribution” of $1,000. This and other exempt contributions aren’t subject to the annual $5,000 limit.
Trump Account contributions aren’t tax deductible. However, contributions and earnings grow tax-deferred as long as those funds remain in the account. During the growth period, distributions generally aren’t permitted except for limited items, such as certain rollovers, returns of excess contributions, or distributions following a child’s death. From the end of the growth period on, a Trump Account is treated as a traditional IRA and is generally subject to the same rules as other traditional IRAs.
It’s important to note that Trump Account funds must be invested in exchange-traded funds or mutual funds that track a qualified index of primarily U.S. equities. In addition, the investments must meet other IRS criteria, including limitations on leverage and fees.
Points Of Clarification
In December, the IRS issued Notice 2025-68. The guidance opens with a statement of intent to propose regulations and provide further guidance on Trump Accounts. Specifically relevant to employers, it addresses some key points about TACPs.
For instance, it confirms that employee-participants may begin excluding from income up to $2,500 annually in employer contributions, effective July 4, 2026. (The limit will be adjusted for inflation after 2027). The guidance clarifies that the employer contribution limit applies per employee — not per dependent. So, participants with more than one dependent are still subject to the $2,500 employer limit, no matter how many dependents they may have.
Another noteworthy point raised by the guidance is that, when making a contribution, employers must notify Trump Account trustees (financial institutions administering the accounts) that it’s:
- A TACP employer contribution
- Excludable from the employee’s gross income
In addition, employers can allow employees to fund a TACP through pretax salary reductions under a cafeteria plan — but only when those payroll deductions are contributed directly to a dependent’s account. Employees can’t use salary reductions to fund their own Trump Accounts because cafeteria plan rules prohibit pretax compensation deferrals for an employee’s benefit.
The guidance indicates that a TACP must be maintained under a separate written plan and directs employers to compliance requirements similar to those for Section 129 dependent care assistance programs. These include nondiscrimination and notice/reporting rules.
The IRS intends to further address how TACPs will coordinate with existing cafeteria plan rules in future guidance. It’s also requested public comments on TAs, which will be considered in drafting the forthcoming proposed regulations.
Further Exploration
To be clear, Notice 2025-68 doesn’t provide comprehensive instructions for employers on how to set up TACPs. But a careful reading does reveal the basic framework for this benefit. If interested, perhaps the first issue to address is whether to offer the program on its own or under an existing cafeteria plan. You’ll also need to establish contribution-tracking processes and an employee communication strategy. We’d be happy to help you explore the feasibility of a TACP for your organization.
