A new tax-advantaged savings vehicle is entering the benefits landscape that has meaningful implications for the workplace.
When the One Big Beautiful Bill (OBBB) Act was signed into law last year, it introduced a wide range of tax and benefits provisions. Among the most talked about is a brand new savings vehicle for children: the Trump Account. While much of the early buzz has centered on the federal government’s $1,000 seed contribution for newborns, there’s considerably more to unpack…especially for employers and brokers thinking about plan design and benefits strategy.
The Basics
A Trump Account is a special type of individual retirement account (IRA) established under a newly created Internal Revenue Code section for the exclusive benefit of a child under age 18. Accounts must be opened at an IRS-approved financial institution, which plays an important compliance role – including enforcing contribution limits and filing annual reports with the IRS. As part of a pilot program, the federal government will make a one-time $1,000 contribution to a Trump Account for qualifying children born between January 1, 2025 and December 31, 2028. These contributions are not expected to be deposited until July 4, 2026.
More than Just a Government Program: The Employer Opportunity
This is where things get particularly interesting for the benefits world. While the OBBB allows employers to make tax-free contributions of up to $2,500 per year to a Trump Account, there are a few critical points to consider:
- The $2,500 limit is per employee (NOT per dependent child).
- Employer contributions count toward the $5,000 aggregate annual contribution limit.
- Compliance requirements are expected to mirror those applicable to Dependent Care Assistance Programs (DCAPs) under Section 129…including nondiscrimination, eligibility, and notice requirements.
Separately, employees may be able to contribute on a pre-tax basis through a Section 125 cafeteria plan, provided the employer’s plan is amended to include this feature. These salary reduction contributions would be excluded from gross income/wages for federal income tax purposes, and would count toward the same $5,000 aggregate annual limit.
Several major employers – including Charles Schwab, Chime, JP Morgan Chase, Bank of America, and Intel – have announced they will match the government’s $1,000 contribution for their employees’ newborns. Visa has announced that credit card holders will be able to use rewards points to fund Trump Accounts.
Closer to home, Wisconsin Assembly Bills 996 and 997 would require the state (through the Dept. of Financial Institutions) to make $1,000 matching contributions for Wisconsin children, backed by $60 million in proposed funding.
What We Know vs. What’s Still to Come
Once the beneficiary reaches age 18, Trump Account funds can be used for higher education and job training, a first home purchase or down payment, business startup costs, and retirement. Notably, healthcare expenses are not among the qualifying uses…an important distinction from FSAs and HSAs that employers and employees should understand upfront.
IRS Notice 2025-68 provides substantial interim guidance, but meaningful open questions remain before employer-sponsored programs are fully operational. These gray areas include Section 125 plan document coordination, the scope of applicable nondiscrimination rules, and ERISA status.
What to Do Now
Evaluate Employers with younger workforces or competitive hiring environments may find Trump Account contributions a meaningful differentiator in their total benefits strategy.
Educate Employees with newborns or young children should understand how to establish an account now so they’re positioned to receive the government’s $1,000 contribution when it becomes available.
Coordinate Employer Trump Account programs will require careful coordination between payroll, plan administration/documentation, etc. TPAs with Section 125 and dependent care experience will be well-positioned to help.
Bottom Line
Trump Accounts are a long-term, tax-advantaged savings tool for children that employers can now help fund and employees can support through pre-tax contributions. The combination of a federal seed contribution, employer matching potential, private sector momentum, and state-level initiatives makes this a program worth watching closely.
Diversified is actively tracking the on-going regulatory developments and will continue to provide updates as the picture becomes clearer.