New investment rules shape Trump Account planning

Treasury and the IRS have proposed investment rules that move Trump Accounts from broad statutory promises toward an operating framework. The proposal matters now because families can make elections, trustees must prepare compliant investment menus, and employers considering contributions will need to build programs around limits that apply during a child’s formative saving years.

Under the proposed regulations published in the Federal Register, a Trump Account generally could hold a mutual fund or exchange-traded fund that tracks a qualified index of primarily U.S. companies, avoids leverage and charges annual fees and expenses of no more than 0.1% of the investment balance. The restrictions apply during the growth period, which begins when the initial account is established and ends on December 31 of the calendar year in which the beneficiary turns 17.

The proposal also addresses what happens when a fund stops qualifying. Trustees would be expected to sell or otherwise dispose of the investment promptly and reinvest the proceeds in another eligible investment. If a beneficiary does not select an available option, the account would be placed automatically in an eligible investment selected by the trustee. That makes the trustee’s default fund, fee monitoring and replacement process important planning issues rather than back-office details.

The IRS guidance says a parent, guardian or other authorized individual may use an IRS Individual Online Account to complete Form 4547 for a child with a Social Security number, provided the election is made before the calendar year in which the child turns 18. For children who are U.S. citizens born in 2025, 2026, 2027 or 2028, the same election can request the $1,000 pilot-program contribution.

The timing matters for households comparing a Trump Account with a 529 plan, custodial account or other savings approach. The Trump Account is a type of traditional IRA, and its growth-period rules generally restrict distributions. The federal deposit is therefore not a reason to overlook the account’s long holding period, investment limits or future distribution treatment.

The statute also permits employer contributions to an employee’s Trump Account or to an account for the employee’s dependent. As described in the earlier IRS Trump Account regulations, qualifying employer contributions can be excluded from the employee’s income up to $2,500, adjusted for inflation, but they count toward the account’s generally applicable $5,000 annual contribution limit.

That combination creates a design question for employers: whether to offer a contribution broadly, restrict it to a defined employee class, or wait for additional guidance. A written program, payroll controls and employee communications will be needed to prevent contributions from exceeding the annual limit or being made to an account that has not been properly established.

The investment proposal is not final. Comments are due October 20, 2026, and the final rule could change the definition of a qualified index, trustee responsibilities or the transition process for investments that become ineligible. Treasury has separately indicated that a default investment has been selected for the program, but trustees and employers should not treat current platform arrangements as a substitute for reviewing the final regulations.

For now, the practical work is administrative: eligible families can make elections, trustees can test low-cost investment lineups and employers can model the payroll and nondiscrimination consequences of a contribution program. The central planning question is not simply whether to open an account, but how it will fit with the child’s longer-term education, retirement and wealth-transfer strategy.