Legislative lowdown: IRS, Treasury propose guidance for opening Trump Accounts

The Treasury Department and Internal Revenue Service (IRS) recently released proposed guidance on how to open a Trump Account on behalf of a child, as well as how to take advantage of a pilot program that will provide government-seeded accounts to children born during the president’s second term.

While the proposed regulations could help HR teams answer questions from workers who are interested in taking advantage of this new savings account, employers are still awaiting guidance on how they can contribute to such accounts.

Key details about Trump accounts from proposed rules. “Trump Accounts” are set to launch on July 5 as part of a provision that was included in the Republican tax and spending bill enacted last summer.

The Treasury will provide children born between Jan. 1, 2025 and Dec. 31, 2028 a Trump Account seeded with $1,000. One proposed rule issued by the Treasury and the IRS details how individuals can make elections for this program on behalf of children who are eligible. Under the proposed rule, an eligible child must be:

• A US citizen
• In possession of a social security number
• An individual who hasn’t previously received a contribution from the Treasury for the Trump Account pilot program

When an individual elects to take advantage of the pilot program, it will generate a tax overpayment of $1,000 for the eligible child, which will then be refunded into a Trump Account.

Trump Account elections can be claimed until the last day of the calendar year that a child turns 17, per the proposed rule.

Another proposed rule details requirements for individuals seeking to open Trump accounts on behalf of a child, provided they aren’t eligible to receive one through the pilot program. The rule identifies individuals who may elect to open a Trump account on behalf of a child in this order:

• Legal guardian
• Parent
• Adult sibling
• Grandparent

The rule seeks to ensure that multiple accounts aren’t opened for the same child. “Once the first election is processed, no further election to open an initial Trump Account will be allowed,” it states.

Awaiting guidance for employers. The recently issued regulations could provide some clarity for employers with workers who have questions about opening Trump Accounts once they are available later this year.

Workers with eligible children might want to know “how they can set up these accounts, how they’re going to get access to the government and the philanthropic funds that have been pledged. So we think employers can help with that piece,” Melissa Elbert, a defined contribution practice solutions leader with Aon, told HR Brew before the latest regulations were announced.

Companies will have the option to contribute to Trump Accounts on behalf of their workers, and several large employers have already announced they’ll do so. But questions remain about how exactly employer contributions to Trump Accounts will work. Employers may be weighing whether to make a direct contribution or offer a cafeteria plan benefit, which would also allow employees to contribute to these accounts on a pre-tax basis, Elbert said.

“I think we’ll end up seeing quite a bit of interest in that part, in particular, once we have more guidance on how that will work,” she said.