Trump Accounts explained: a new era for dependent savings

A new tax-advantaged savings vehicle is set to launch in 2026: the Trump Account. Designed for dependents under age 18, this program offers families a new way to save for their children's future, and gives employers a fresh opportunity to enhance their benefits strategy.

Trump Accounts were first introduced as part of the “Big Beautiful Bill,” a sweeping legislative package focused on economic growth, tax relief, and family-oriented financial policies. While details were initially limited, recent updates from lawmakers and financial institutions have provided a clearer picture of how the accounts will work.

We recently partnered with John Schembari, a partner at Kutak Rock LLP, on a webinar unpacking the "Big Beautiful Bill." This post highlights the most important takeaways on Trump Accounts for HR teams and employers.

Here's what HR teams should know about how Trump Accounts function, how they compare to other savings tools, and whether offering them could be a strategic advantage.

What are Trump Accounts?

Trump Accounts are federally sanctioned savings accounts designed for dependents under age 18. The program will officially launch on January 1, 2026, and includes both public and private funding components.

Key features include:

$1,000 government seed deposit

All eligible newborns born between 2025 and 2028 will receive a $1,000 government-funded seed deposit, intended to jumpstart long-term savings from birth.

$5,000 annual contribution limit

Families, relatives, or any third party can contribute up to $5,000 per year, with limits indexed to inflation. Contributions are flexible and not restricted to parents or guardians.

Up to $2,500 in employer contributions

Employers can contribute up to $2,500 annually on a tax-free basis for employees. These contributions are not counted against the family’s annual limit.

Tax-deferred growth in low-cost index funds

All funds must be invested in low-cost index funds, with tax-deferred growth until withdrawal. This design encourages long-term, market-based investing with minimal fees.

What are the tax rules and withdrawal limits for Trump Accounts?

Trump Accounts function similarly to traditional IRAs in terms of taxation:

• Tax-deferred growth on all investments.
• Withdrawals after age 18 are taxed as ordinary income.
• Qualified withdrawals (e.g., first-time home purchase, medical expenses, higher education) are penalty-free.
• Non-qualified withdrawals before age 59½ incur a 10% penalty, just like IRAs.

How Trump Accounts compare to other savings vehicles

While Trump Accounts offer novel features, financial experts caution they may not outperform more established options:

Many advisors recommend pairing Trump Accounts with 529 plans or custodial Roth IRAs for a more robust financial strategy.

Why employers are paying attention to Trump Accounts

For HR and benefits leaders, Trump Accounts open the door to a new, tax-free contribution option for employee families. Employer contributions of up to $2,500 per child offer a unique way to support working parents while reinforcing long-term financial well-being.

These accounts can serve as:

• A unique recruiting or retention lever
• A boost to financial wellness programs
• A way to differentiate your benefits offering in a competitive market

Unlike more established tools like DCFSAs or 529 matches, Trump Accounts are structured more like retirement savings plans, with broader usage options once a child reaches adulthood. This can position them as a meaningful benefit for younger employees planning for future milestones like home purchases or higher education.

What employers should consider

While Trump Accounts offer exciting potential, successfully integrating them into your benefits strategy will require thoughtful planning and execution. To ensure the program delivers real value to employees and remains compliant with federal guidelines, employers should prepare in three key areas:

1. Payroll and benefits system coordination

HR and finance teams will need to collaborate closely to align Trump Account contributions with existing payroll infrastructure. This includes setting up contribution workflows, handling tax-exempt employer deposits, and ensuring accurate reporting.

2. Employee communication and education

Employees will need clear, accessible guidance on eligibility, how contributions work, and the tax implications of using these accounts. Educating parents, caregivers, and guardians about the value of the accounts—and how they compare to other savings options—will be key to driving participation.

3. Compliance and regulatory updates

The Trump Account program is still evolving. Employers should monitor IRS guidance and any rule changes related to contribution limits, nondiscrimination tests, withdrawal penalties, or integration with other benefit programs. Staying up to date will help minimize risk and administrative friction.

What HR teams should do now

While implementation isn’t required until 2026, HR leaders can start preparing:

• Track IRS guidance and updates on program structure.
• Work with payroll and finance to assess operational feasibility.
• Evaluate alignment with your broader dependent and family benefits strategy.
• Survey employees to gauge interest in long-term savings tools.

Employers who act early may gain a competitive edge, especially in industries with younger workforces or high parental engagement.

A new employee benefit worth watching

Trump Accounts offer a promising new savings opportunity for families and a strategic tool for employers. While the program is still evolving, the foundational rules are clear: tax-deferred growth, flexible withdrawals, and meaningful employer contribution potential.

As the 2026 rollout approaches, HR teams should consider whether and how this new account type fits into a modern, family-friendly benefits strategy.

Want to learn more about how Trump Accounts fit into your benefits strategy?

Watch the full webinar on the “Big Beautiful Bill” with Nava’s compliance partners, Kutak Rock LLP.