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On July 4th, 2025, President Donald J. Trump signed into law a piece of legislation that, among other things, created a new benefit for employees with children. Specifically, known as the “One Big Beautiful Bill Act” (Act), changes to the federal tax code were made. One of these updates was the creation of a custodial savings account for children to which parents, employers, and others can contribute. Earlier this year, the Trump Administration signed an executive order (EO) revoking the previous EO 11246. Generally, EO 11246 required affirmative action among the hiring practices of federal contractors.
How Will the Changes Help Employees with Children?
Markedly, these savings accounts are called “Trump Accounts” and were added under new section 530A of the Internal Revenue Code (Code). Specifically, these accounts are individual retirement accounts (IRAs) for children with social security numbers who’ve not reached 18. Additionally, children born between January 1st, 2025, and December 31st, 2028, who are United States citizens, will receive a $1,000 contribution from the Treasury under a pilot program. According to Jackson Lewis, “Trump Accounts differ from other existing retirement savings accounts because contributions may be made before the [employees with children begin] to recognize taxable income.”
Overview of the Trump Accounts Program
In detail, beginning July 2026, employers may make tax-free contributions to Trump Accounts along with contributions made by the child, parent, and others. Currently, there is an employer contribution limit of $2,500; however, it is unclear whether this limit is annual or lifetime. It is also not clear whether employees with multiple children can benefit or if there is a limit. According to the Trump administration, the Treasury Department will be releasing additional guidance soon. What is clear, however, is that employers must provide employees with notice of the program. Lastly, annual statements of any contributions made must also be provided.
Finally, as mentioned earlier, employers, parents, and children themselves can contribute to the new IRAs. However, total contributions are capped at $5,000 per year/per child. Also, the new rules state that once the child reaches age 18, the child must have taxable income to be eligible to contribute. Those additional contributions then become subject to the rules generally applicable to IRAs.
Employer Takeaways
In conclusion, the establishment of the Trump Account benefits may be a good benefit tool for all employers. Contributing funds to assist employees with children might be a great way to keep current workers while also drawing in potential employees. However, for employers to offer the new benefit, they must adopt a written plan document and comply with nondiscrimination requirements. In short, these requirements are similar to rules regarding dependent care flexible spending arrangements. Therefore, since the Trump Accounts are subject to the Code’s requirements, they are not subject to the Employee Retirement Income Security Act’s (ERISA’s) requirements.
