8/7/25 What Is a “Trump Account,” and How Does it Impact Employers?

August 7, 2025

By Jeff Robertson  &  Iris Tilley

The so called “One Beautiful Bill” authorized the creation and administration of “Trump Accounts.”  Trump Accounts have both an individual component and a potential employer sponsorship component.  While many questions remain as to administration and eligibility, it is important for employers to understand the Trump Account basics.

How do Trump Accounts Operate?

A Trump Account cannot receive a contribution prior to July 4, 2026—employers and any other interested parties have close to a year to consider whether to offer/participate in this new potential program.

Beginning in July 2026, and for every year before the beneficiary child turns 18, the child, parents, employer, and others can contribute to the Account.  With some exceptions for tax-exempt entities making contributions to individuals within a pre-defined qualified group, the contributions cannot exceed $5,000 annually (this amount remains steady through 2027).  Children born between December 31, 2024 and January 1, 2029 will receive a $1,000 contribution from the Federal Government.  While parents can opt out of this benefit, the IRS will otherwise open an account for any qualifying child who meets these criteria and does not have an established account.

Distributions are limited similarly to a Section 529 Plan and Individual Retirement Account where distributions may be made for certain qualified expenses such as education and limited in time and age with tax related penalties associated with them. 

How Does a Trump Account Impact Employers as an Employee Benefit?

Employers can contribute to a Trump Account for an employee or an employee’s dependent.  Contributions cannot exceed $2,500 annually (this amount stays steady through 2027), and these beneficial contributions are excluded from the gross income of employees (pre-tax).

Trump Accounts should be administered similarly to a Cafeteria Plan.  The program must be subject to a written plan document with notification responsibilities to employees.  Contributions to Trump Accounts on behalf of employees or their dependents must meet nondiscrimination requirements, similar to those nondiscrimination rules utilized for Dependent Care Section 125 Accounts.

Next Step for Employers

Trump Accounts represent an opportunity for a relatively low-cost employee benefit and tax savings opportunity for employees.  However, many questions will need to be answered before most employers can seriously consider implementing the benefit.  Some of these questions include whether an employer must wait for an employee to establish such an account before making a contribution; whether an employee could make a pre-tax deferral into a Trump Account; how an Employer corrects a discrimination failure; and how contributions are reported on a Form W-2?

Please contact Jeff Robertson at 503-276-2140 or jrobertson@barran.com, Iris Tilley at 503-276-2155 or itilley@barran.com, or your regular attorney at Barran Liebman if you have any questions.