IRS Issues Initial Guidance on New Trump Accounts: What Employers Need to Know

Takeaways

• During the account’s “growth period,” investment options, annual contributions, and distributions are tightly restricted.
• A federal pilot program will provide a $1,000 government contribution for eligible children born between 2025 and 2028.
• New Code Section 128 allows employers to make tax-free contributions of up to $2,500 per year to Trump accounts, subject to program requirements.

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The IRS recently issued Notice 2025-68 (the “Notice”) providing initial guidance on “Trump accounts,” which were created by the One Big Beautiful Bill Act.

Trump accounts may be established for children under age 18 who have a Social Security number issued prior to the establishment of the account. Contributions generally may not be made prior to July 4, 2026. The Notice describes a “growth period,” which runs from the establishment of the account through December 31 of the year before the child turns 18. During the growth period, (i) investment options are limited to certain qualifying U.S.-centered mutual funds and ETFs, (ii) annual contributions are generally capped at $5,000 (subject to future cost-of-living adjustments), (iii) contributions are not deductible, and (iv) distributions from the account are generally not permitted. After the growth period ends, the Trump account is governed by the rules applicable to traditional IRAs.

The Notice also describes a federal pilot program under which the federal government will contribute $1,000 to an eligible child’s Trump account. Eligible children generally include children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number.

Of particular interest to employers is the new Code Section 128 which permits an employer to make tax-free contributions of up to $2,500 per employee per year to Trump accounts for an employee or the employee’s dependents, regardless of the number of eligible children. Contributions must be made under a separate written program and are subject to requirements similar to those applicable to dependent care assistance programs (e.g., discrimination, eligibility, and notice requirements). The Departments of Labor and Treasury have indicated that additional guidance on employer Trump account contribution programs is forthcoming.

If you have any questions about the information in this alert, please contact your relationship attorney or any member of the Employee Benefits and Executive Compensation Practice Group.