Trump Accounts are a new tax-favored, IRA-style savings vehicle that may be established for eligible children by an authorized individual—such as a parent, legal guardian, or grandparent—and may receive federal, family, and employer contributions. For families, Trump Accounts may provide an early savings foundation with long-term growth potential. For employers, they may offer a visible, family-friendly benefit that supports recruiting, retention, and employee financial wellness.
Market interest is growing, but implementation questions remain. Public announcements indicate that employer interest is developing quickly, particularly among financial services, technology, and large public companies. Reported approaches include one-time seed contributions, fixed annual contributions, matches tied to the federal pilot contribution, and payroll contribution programs. Although Treasury guidance has answered several initial compliance questions, the practical mechanics of administering Trump Account contributions remain unsettled.
Key Implementation Steps. Employers interested in offering Trump Account contributions should develop a compliant written program and confirm operational readiness. A roadmap to compliance is provided below:
Compliance Roadmap
- Employer Plan Documentation. Employer contributions should be made under a separate written Trump Account contribution program maintained for the exclusive benefit of employees.
- Establishment of Trump Accounts. Employers should make clear that authorized individuals—not the employer—are responsible for establishing Trump Accounts, selecting providers and investment options, monitoring account fees and performance, and making account-level decisions.
- Annual Limits. For employer contributions, up to $2,500 may be excluded from an employee’s gross income for a taxable year, subject to cost-of-living adjustments for taxable years beginning after 2027. The exclusion limit applies per employee, not per child or account.
- Coordination with Payroll. Employers should coordinate with payroll and any third-party administrator or vendor to properly identify contributions as Section 128 employer contributions, apply the annual exclusion limit, confirm applicable tax reporting and withholding treatment, and establish appropriate contribution procedures and vendor controls.
- Nondiscrimination Rules. A Trump Account contribution program is subject to requirements similar to those that apply to dependent care assistance programs, including nondiscrimination rules relating to eligibility, contributions, benefits, employee notifications, and statements of benefits.
- Investment Restrictions. During the growth period, Trump Account assets generally may be invested only in low-cost, non-leveraged mutual funds or ETFs tracking qualifying U.S. equity indexes, subject to applicable fee and eligibility limits.
- ERISA. DOL guidance indicates that properly structured Trump Account programs generally should not be treated as ERISA pension plans. Employers should preserve that position by limiting their role to the employer-contribution program and avoiding involvement in investment selection, account establishment and administration, and other activities that could suggest employer sponsorship or endorsement of the account.
- Employee Communications. Materials should explain eligibility, contributions, tax treatment, administrative procedures, and employee action required.
Trump Account contributions may become a useful family-focused benefit, but employers should approach implementation carefully. Because federal guidance is new and operational practices are still developing, employers should review program design, payroll administration, vendor capabilities, employee communications, and related tax and ERISA considerations before commencing the program. Since IRS guidance remains proposed and the comment process is ongoing, we are continuing to monitor for final regulations and effective dates.
Please contact Susan Niver at 212 407 7645 or your Vedder attorney for assistance designing a compliant written program and preparing appropriate employee communications.
