Publication
Trump Accounts: Four Things Employers Should Know
The One Big Beautiful Bill Act created a new tax-advantaged vehicle called a “Trump Account,” which is intended to encourage children to start saving and investing at an early age. As a primer, here are four things that employers should know about Trump Accounts:
- Opening & Seeding a Trump Account. Qualifying parents and guardians may open a Trump Account on behalf of any child who is under the age of 18 and a United States citizen. As part of a pilot program, the federal government will seed with $1,000 the accounts of children born between January 1, 2025, and January 1, 2029. For those children, the Treasury Department may open a Trump Account to hold start-up payments in the absence of any parental election.
- Contributions & Limits. Trump Accounts may receive contributions from a variety of sources, including family members, employers, government agencies, and private charities. In general, contributions will be capped at $5,000 per year, as adjusted for inflation, for tax years beginning after 2027. With some limited exceptions, the contribution limit applies in the aggregate across all sources (i.e., a parent and an employer together cannot contribute more than $5,000 per year per Trump Account).
- Tax Treatment of Employer Contributions. Employer contributions up to $2,500 are excluded from an employee’s taxable wages so long as they are made pursuant to a qualifying written plan and meet certain other requirements.
- Distributions & Select Tax Treatment. The timing and tax treatment of distributions from Trump Accounts are complicated and depend on the type of contribution at issue, the age of the beneficiary, and the purpose of the distribution. In general, no distributions may be made before a beneficiary attains age 18. Thereafter, accounts may be distributed in much the same way as an IRA (i.e., for certain qualifying purposes before age 59 ½). Principal and earnings on pre-tax contributions (e.g., the federal seed money and certain employer contributions) are taxed as ordinary income.
The rules governing Trump Accounts are complex, owing to the many changes made to the program as it worked its way through Congress and to the several issues that remain unresolved absent additional guidance. Employers interested in funding Trump Accounts for the children of their employees or for their minor workers may wish to monitor developments in this space.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Los Angeles, Orange County, Palo Alto and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno-Tahoe, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
