“Trump accounts” are a newly introduced, government-seeded savings vehicle for children, established under the One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025.
Designed to foster early savings and investment habits, these custodial accounts are intended to be established for U.S. citizens born between January 1, 2025, and December 31, 2028, pending final Treasury implementation rules.
A one-time $1,000 federal seed deposit will be made into each baby’s account. Parents, others, and employers can add up to $5,000 per year, including an optional employer contribution of up to $2,500 annually. Contributions may start July 4, 2026; for existing dependents (born before 2025), funding begins then without the seed money.
Based on current guidance, qualified expenses for dependents who reach the age of 18 may use the accrued funds with similar rules to an IRA. According to the White House’s stated vision, accounts might be used as follows:
Funds are restricted to low-cost, passive U.S. stock index mutual funds or ETFs, with total annual fees capped at 0.1%. Earnings grow tax-deferred, and withdrawals for qualified purposes are taxed at long-term capital gains rates, not ordinary income. Non-qualified withdrawals may be taxed as ordinary income plus penalties.
Employers can contribute up to $2,500 tax-free—similar to a mini‑401(k) benefit for employees’ children. Integrating Trump accounts into benefit offerings could support family wealth-building strategies. However, employers must understand the investment restrictions, administrative timeline, and regulatory details that may evolve with final IRS guidance. The current understanding is that these accounts could be subject to non-discrimination rules; and there is no current guidance on whether these will be considered ERISA-governed plans.
Trump accounts offer a novel way to kick-start savings early with a $1,000 gift and low-fee investing geared toward families. However, compared to 529s and Roth IRAs, their tax advantages and flexibility are limited. We foresee much more detail in upcoming Treasury Department/IRS guidance regarding possible qualified expenses, how funds can be accessed or transferred, possible tax penalties, and which vendors or financial institutions will be administering these accounts. We’re here to keep you informed, so stay tuned to the Businessolver blog and consult your HR counsel for additional guidance.
