IRS proposes employer contribution rules for Trump Accounts

The Internal Revenue Service (IRS) has released proposed regulations regarding employer contributions to Trump Accounts, a new tax-favored savings vehicle for U.S. citizens under age 18. Created under the One Big Beautiful Bill Act, these accounts function as individual retirement accounts for children and include a $1,000 government seed contribution in a pilot phase.

Under the proposed rules, employers may contribute up to $2,500 annually per employee, which would be excludable from the employee’s gross income. The IRS clarified that this limit applies per employee rather than per dependent. To participate, employers must maintain a written plan outlining eligibility, error processes, and certification requirements. Additionally, employers are responsible for providing “reasonable notification” to ensure eligible employees understand the program's terms.

Financial experts note that Trump Accounts serve a different purpose than traditional §529 plans. While §529 plans are primarily designed to facilitate savings for higher education costs and are tied to estate and gift tax concepts, Trump Accounts are structured around income tax and retirement planning principles, aiming for long-term wealth accumulation within a child’s lifetime.