On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). Among other things, the OBBBA created a “starter” individual retirement account called a “Trump Account” and authorized a program under which an employer can make non-taxable contributions to an employee’s Trump Account.  Employers considering the new Trump Account program should understand the nature of the Trump Accounts, the requirements of the employer contribution program, and the questions that remain on both. 

Background on Trump Accounts

Trump Accounts receive similar treatment to individual retirement accounts under Internal Revenue Code Section 408(a) but (i) are subject to additional specific rules when the child (or account beneficiary) is under the age of 18, and (ii) do not require the child to have earnings to receive contributions to the account.

Establishment of a Trump Account.  The Secretary of the Treasury has the authority to establish a Trump Account for eligible individuals (generally, children under age 18 who have been issued a social security number).  A Trump Account may also be established by someone other than the Secretary for the benefit of a child who will not attain the age of 18 before the end of the calendar year in which the account is established. In the latter instance, though, the account must be funded by a “qualified rollover contribution,” which is a direct trustee-to-trustee transfer of 100% of the funds in one Trump Account to another Trump Account for the benefit of the same child.  Therefore, it appears that a child’s first Trump Account must be established by the Secretary of Treasury.

Contributions.  Contributions to Trump Accounts cannot be made prior to July 4, 2026.  Starting in July 2026, for each year before the year in which the child turns 18, the child, their parents, relatives, states, non-profit organizations, employers, and others can contribute to the account. These contributions are non-deductible and, except as described below, cannot exceed $5,000 annually (which limit will be subject to a cost-of-living adjustment beginning in 2028).  For children born after December 31, 2024 and before January 1, 2029, the federal government will make a $1,000 contribution to the Trump Account.  

Exceptions to Annual Contribution Limit.  The annual contribution limit does not apply to (i) the $1,000 contribution made by the federal government to Trump Accounts for children born after December 31, 2024 and before January 1, 2029; or (ii) contributions from states, Indian tribal governments, or 501(c)(3) organizations if the contributor contributes the same amount to all account beneficiaries who are in a certain “qualified class” selected by the contributor. 

Investments.  Trump Account funds may be invested only in eligible investments.  Eligible investments are limited to mutual funds or exchange traded funds that track the returns of a qualified index, do not use leverage, do not have annual fees and expenses more than 0.1% of the balance of the investment in the fund, and meet any other criteria established by the Secretary of the Treasury.  A qualified index includes the S&P 500 or any other index that is comprised of equity investment in primarily United States companies.

Limitation on Distributions.  Generally, distributions are not permitted before the first day of the calendar year in which the account beneficiary turns 18. However, there are a few exceptions: distributions resulting from a qualified rollover contribution, rollover contributions to an ABLE account in the year the account beneficiary turns 17, and distributions to correct an excess contribution.

Taxation of Distributions.  Distributions in excess of the cost basis are taxed to the account beneficiary as ordinary income. Trump Accounts are also subject to a 10% additional tax for disbursements made before age 59 ½ unless the disbursement is subject to an exception, such as education expenses or a first-time home purchase.

Employer-Sponsored Trump Account Contribution Program

The OBBBA permits an employer to create a Trump Account Contribution Program, under which employers can contribute to an employee’s Trump Account or to a Trump Account created for an employee’s dependent.  

Contribution Limit.  Employer contributions cannot exceed $2,500 (subject to a cost-of-living adjustment beginning in 2028) and are excluded from the gross income of the employee.  Employer contributions are counted toward the $5,000 annual contribution limit described above. 

Nondiscrimination Requirements.  The OBBBA requires these employer programs to meet nondiscrimination requirements that are similar to requirements applicable to dependent care flexible spending accounts.  Accordingly, an employer cannot discriminate in favor of highly compensated employees when administering a Trump Account Contribution Program, and the average benefits offered to non-highly compensated employees must be at least 55% of the average benefits offered to highly compensated employees.

Documentation, Notification, and Reporting Requirements.  The program must be described in a written plan document, and the employer must provide eligible employees with reasonable notification of the availability and terms of the program.  Additionally, the employer must provide an employee with a written statement showing the amounts paid or expenses incurred by the employer in contributing to an employee’s or the employee’s dependent’s Trump Account in the prior year.

Thompson Hine Takeaways

The OBBBA appears to have established a new benefit employers can offer to employees. However, there are several outstanding questions about Trump Accounts and Trump Account Contribution Programs, and more guidance is necessary before employers can properly consider whether it is a worthwhile benefit to offer employees.  For example:

• Is the $2,500 employer contribution limit an annual limit or lifetime limit?
• Is it possible for an employer to contribute more than $2,500 if the excess is included in the employee’s gross income for the year?
• To what extent are employers obligated to monitor the total contribution amounts to a Trump Account, particularly where the employer contribution may cause a Trump Account to exceed the annual $5,000 limit? 
• May an employer make contributions only on behalf of employees who establish Trump Accounts with a trustee selected by the employer? 
• Can an employee defer a portion of their salary to a Trump Account?
• How would an employer run nondiscrimination testing?
• What happens if a Trump Account Contribution Program fails nondiscrimination testing?
• What are the specific requirements for the written plan document (including, among other things, whether the program must be called a “Trump Account” Contribution Program)?
• Will the Form W-2 or its instructions be revised to provide for the required statement of contributions made by the employer?
• Are there circumstances under which the Trump Account Contribution Program would be subject to Title I of ERISA?

Before deciding to implement a contribution program, employers should consider waiting for further guidance clarifying the program requirements and responsibilities imposed on employers with respect to contribution programs.