The Department of the Treasury on Aug. 11 issued guidance on employer contributions to Trump Accounts, proposing rules for how companies can run a valid contribution program for their employees.
A Trump Account is a savings and investing account designed to help children get a kickstart to reaching financial wellness and can be opened in the name of any individual younger than 18 with a valid Social Security number.
Employers can contribute up to $2,500 tax-free per year to an employee’s Trump Account. The latest guidance proposes allowing businesses to set up a Trump Account employer contribution program if they maintain a separate written plan document for such an initiative, the Treasury said in a statement.
The plan must clarify which classes of employees are eligible to participate in the program, according to an IRS proposal published in the Federal Register on Aug. 11. It must specify the rules governing employer contributions, including the amount of contributions that can be made.
An employee can exclude contributions from an employer in a taxable year when filing returns if contributions are within a certain limit. For 2026 and 2027, the limit is set at $2,500. The threshold will be adjusted for taxable years after 2027, according to the notice.
The notice also proposes allowing employees to make pre-tax contributions to Trump Accounts of their dependents through a salary deduction.
According to the notice, a Trump Account contribution program set up by an employer will only be considered valid if it strictly follows the terms of the written plan.
When enrolling employees in the contribution program, employers can rely on certain self-certifications provided by workers. The employee certification should be in writing. It must state the account beneficiary and their date of birth.
Employers must not “rely solely on an employee certification to establish that the recipient account is a valid Trump account,” the notice said. The employer should use a “reasonably designed” method to verify that the contribution they make goes to a valid Trump Account.
The notice outlined rules regarding the selection of trustees by the employers. Trustees are institutions that manage Trump Accounts on behalf of the beneficiaries.
In its latest statement, the Treasury said that more than 50 companies have so far committed to making Trump Account contributions for their employees. Trump Accounts offer businesses a way to help retain and attract employees and aid in their wealth-building efforts, the Treasury said.
Maria Black, the president of human resources company ADP, said in the statement that they welcome the release of the Treasury guidance.
“As the leading provider of payroll and HR solutions that pays 1 in 6 American workers, we have seen first-hand the critical impact financial wellness solutions can have on long-term wealth creation for workers and their families,” Black said.
How Do Trump Accounts Work?
Trump accounts work similarly to nondeductible traditional IRAs. This means you can’t deduct contributions made to these accounts. Earnings grow tax-deferred until the child reaches age 18.
When the child reaches age 18, they can make withdrawals. At that point, the account essentially becomes a traditional IRA and follows contribution rules for IRAs.
The accounts are essentially designed to give children a head start in retirement savings.
Trump Account Growth
This is because higher-earning parents or guardians of Trump Account beneficiaries may have greater access to employee contributions than other workers, McDermott said.
McDermott highlighted that last year, 83 percent of workers in the highest-earning 10 percent had access to an employer-sponsored retirement plan. In contrast, only 36 percent of the lowest-earning 10th of workers had similar access.
According to the Trump Account website, a deposit of $1,000 at the birth of a child and no contributions thereafter can give the person an estimated $6,000 at age 18.
If $250 is contributed yearly, the estimated fund can grow to $19,000. A maximum $5,000 per annum contribution can result in an account value of $271,000 at 18 years of age.
