The U.S. Treasury Department and IRS have issued new guidance that would make it easier for parents and employers to put money into Trump Accounts for children.
The Treasury announced the guidance Tuesday, outlining how employers could contribute to the accounts and allow employees to direct pretax dollars from their paychecks into accounts for their children. The proposal is subject to public comment and a hearing in October before the rules can be finalized.
Pretax money is taken from a paycheck before income taxes are calculated, which can reduce the amount of income subject to tax before the money goes into the account.
Trump Accounts, also known as 530A accounts, are tax-deferred investment accounts for children. Tax-deferred means taxes on the investment growth are generally postponed rather than paid immediately.
“Today, Treasury is publishing guidance that will help families grow Trump Accounts by allowing employers to contribute up to $2,500 tax-free each year for employees’ dependents and giving employees the option to contribute pre-tax dollars directly to those accounts,” Treasury Secretary Scott Bessent said.
How The New Rules Could Work
Parents, guardians, grandparents and others can contribute up to $5,000 a year to a Trump Account until the year before the beneficiary turns 18. Employer contributions are included within that limit, with employers able to contribute up to $2,500 per worker each year.
Children born from 2025 through 2028 can receive a one-time $1,000 Treasury contribution under the program. About 7 million children had been signed up, according to Bessent.
The Treasury guidance also allows employees to make pretax contributions through an employer cafeteria plan to their dependents’ Trump Accounts. Employers that establish contribution programs must maintain a separate written plan, provide notices and annual statements, rely on employee certification of the beneficiary’s age and dependent status and verify that the receiving account is a Trump Account, while also reporting contributions to the trustee.
The Treasury said children who are not eligible for the initial $1,000 government contribution can still receive tax-free money through employer contributions. More than 50 companies have committed to Trump Account contributions, with some offering to match the government’s initial contribution.
IRS Chief Executive Officer Frank J. Bisignano said the guidance provides “a framework for businesses establishing a Trump Account employer contribution program” and noted that the IRS had worked with more than 50 large employers to prepare them for the program.
Employers Weigh Contributions
An April Mercer poll of nearly 350 U.S. employers found that only about 4% expected to implement a Trump Account contribution program in 2026 or 2027, while two-thirds had decided not to make contributions. Others were undecided.
Melissa Elbert, a partner of wealth solutions at Aon, told CNBC that employers now have a much better understanding of the administrative and compliance framework. “We saw early adoptions, and I think many more are considering it, and this guidance is going to help,” she said.
Earlier details about the program showed that Trump Accounts could affect eligibility for need-based college financial aid, although official guidance on how the accounts would be treated on the FAFSA had not yet been issued.
The program has also attracted private-sector commitments. Strategy Inc. (NASDAQ:MSTR) said it would contribute $250 annually to a Trump Account for every eligible child under 18 of its U.S. employees and make a one-time $1,000 contribution for eligible newborns, matching the government’s initial contribution.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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