Child Investment Accounts (aka Trump Accounts): What Employers Need to Know

Written by Vita | March 9, 2026

Child Investment Accounts are the new tax-favored savings accounts which are designed to encourage early savings for children. These accounts are also referred to as Trump Accounts. The accounts allow for tax-free contributions and tax-deferred growth until the child turns 18. After age 18, the funds can be used for a variety of qualifying purposes, including education expenses, job training, down payment on a first home, capital to start a small business, and retirement. 

In December 2025, the IRS and Treasury Department issued Notice 2025-68 which provides initial guidance on the establishment and operation of these new accounts. The IRS Notice provides the following:

A general overview of how the accounts will be structured
Extensive Q&As relating to the establishment and funding of the accounts
Details on how employers may both contribute to the accounts and arrange for pre-tax salary reductions for employee contributions

Child IRA vs. Trump Accounts vs. 530A Accounts?

It should be noted that these accounts go by many names. Many sources are referring to these as accounts as 530A accounts as it is Section 530A of the IRS code that authorized them. This nomenclature parallels the common use of the terms 401(k) accounts and Section 125 plans, which also are named after the IRS code sections that authorized them. The administration is referring to them as Trump Accounts. They are also known as Child IRAs as the structure of the account mirrors IRAs, except that they are only available to children. We have adopted the generic name of Child Investment Accounts as we believe it aptly describes the intent and purpose of the accounts.

The Basics in One Sentence

This section outlines the basics of Child Investment Accounts in one sentence per issue for readers interested in a high-level overview. For a deeper dive, more information can be found under The Nitty Gritty Details of Child Investment Accounts section at the end of this article.

The Accounts. These accounts are a new tax-deferred investment vehicle for children under age 18 with the ultimate purpose of improving a child’s life upon entering adulthood.
Eligible Individuals. A Child Investment Account may be established for any child under the age of 18 who has been issued a Social Security number.
Annual Contribution Limit. $5,000 to a single account (adjusted for COLA after 2027). Annual contributions may be made on a lump sum or on a periodic investment basis.
Pilot Program/Seed Contributions. A pilot program has been established whereby a $1,000 seed contribution is made to the account of each eligible child by the federal government.
Taxation of Direct Contributions. Contributions made during the growth period directly by parents or other individuals are not tax deductible, and such contributions are not considered taxable income by the account beneficiary (the child).
Taxation of Contributions through Employers. Contributions made by employers (up to the $2,500 limit) and by employees via a cafeteria plan are not taxable.
Taxation of Earnings. Earnings on account values are tax deferred during the growth period but taxable upon distribution.
Distributions. After the child turns 18, the account functions like a traditional IRA where taxable distributions can be made prior to age 59½ for qualified reasons (without the 10% tax penalty). The most common of these are education or first home purchase.
Effective Date. Contributions to accounts can be made on or after July 4, 2026.

Employer Participation

This section provides an overview of employer contributions and employee salary reductions into Child Investment Accounts. It is important to know that individuals have the ability to establish Child Investment Accounts independently (not through their employer), and there are advantages and disadvantages to both approaches. Most importantly, there are immediate tax advantages for employee salary reduction contributions and the obvious benefit of any direct employer contribution.

Tax Free Contribution Limit. Employers may contribute up to $2,500 annually to the Child Investment Accounts of their employees. This annual limit is subject to cost-of-living adjustments after 2027.
Apply to $5,000 Limit. Employer contributions apply to the overall $5,000 annual limit per account. As such, employer contributions to an account would reduce the amount an employee could contribute.
Limit Per Employee Not Per Recipient. The $2,500 employer contribution limit applies to all contributions for any one employee. It does not apply on a per recipient/child basis, meaning that if any employee has multiple children with Child Investment Accounts, the employer’s aggregate contributions to those children’s accounts may not exceed $2,500. 
Eligible Recipients. Employer contributions can be made into the Child Investment Accounts of the dependents of employees or employees themselves (if the employee is under age 18). Contributions to the accounts of dependents will likely be the most common application.
Taxation of Contributions. Employer contributions are excluded from the employee’s income. Employer contributions are considered a deductible business expense for the employer.
Tax Basis. Unlike contributions from parents to the accounts of their children, employer contributions do not create tax basis in the account. This means all employer contributions and subsequent growth may be fully taxable upon eventual withdrawal after the growth period (depending on the tax rules in effect at the point of distribution).
Plan Document Requirements. Employers must establish a Trump Account Contribution Program (TACP) with a written plan document. The program must address eligibility, notification, statements and benefits and must comply with non-discrimination testing rules to ensure that it does not favor contributions to highly compensated employees (HCEs). It is expected that these will be similar to the nondiscrimination testing rules applicable to Dependent Care Spending Accounts.
Not Subject to ERISA. While not explicitly stated, the IRS Notice indicates the intention to promulgate guidance clarifying how employers can facilitate Child Investment Accounts without creating an ERISA plan.
Employee Salary Reductions. The IRS Notice clarifies that employee contributions may be offered via salary reduction as part of the employer’s cafeteria plan. Salary reductions may be made for the employee’s dependent children, but not for an employee’s own account. Employers can expect more guidance on the details of how this would work. Importantly, parental contributions can be made on a pre-tax basis if employers set up a Trump Account Contribution Program. Otherwise, contributions would be made on an after-tax basis.
Geeky Reference. A new section of the IRS code (Section 128) was added to authorize tax-free employer contributions to Child Investment Accounts.

The Nitty Gritty Details of Child Investment Accounts

Eligible Individuals. A Child Investment Account is established for the exclusive benefit of an eligible individual. An eligible individual is any individual:
1. Who has not attained age 18 before the close of the calendar year in which the election is made.
2. For whom a Social Security number has been issued before the date of the election.
Account Establishment. An authorized individual (generally a parent or legal guardian) may establish a Child Investment Account for an account beneficiary by making an election on a Trump Account Election Form (IRS Form 4547) or by registering online for an account at trumpaccounts.gov (expected mid-2026). The election must be made before January 1 of the year in which the account beneficiary turns 18. If the account is set up at the same time as the election for a pilot program contribution, the “authorized individual” must be an individual who anticipates that the eligible child will be his or her qualifying child (as defined in Code section 152(c)) for the tax year in which the election is made.  If the account is not set up at the same time as the pilot contribution election, the “authorized individual” must be a legal guardian, a parent, adult sibling, or grandparent of the eligible individual, in that order of priority.
Pilot Program. Under the pilot program $1,000 in seed money will be paid to the Child Investment Account of each eligible child, by the federal government. To be eligible, a child must be born in 2025-2028, be a U.S. citizen, and have a Social Security number. In addition, an election must be made by an individual who anticipates that the eligible child will be his or her IRS tax dependent for the year in which the election is made. The $1,000 pilot program contribution does not offset the individual annual maximum.
Growth Period Defined. The growth period is the period between when the account is established and January 1st of the calendar year in which the child attains age 18.
Contribution Types. There are five types of contributions to a Child Investment Account during the growth period.
1. Pilot program/seed contributions of $1,000 for an eligible child.
2. Contributions from parents, family members or others up to $5,000 annually (not tax deductible).
3. Employer contributions up to $2,500 which are excluded from the gross income of the employee (IRS Section 128 contributions).
4. Qualified general contributions (funded from state local, or tribal governments or 501(c)(3) organizations) for members of a qualified class of account beneficiaries.
5. Qualified rollover contributions between Child Investment Accounts.
Annual Contribution Limit. $5,000 to a single Child Investment Account. This contribution limit is adjusted for COLA after 2027. Pilot program contributions, qualified general contributions, and qualified rollover contributions are not subject to an annual contribution limit. However, all other contributions (Section 128 employer contributions and contributions from other sources) during the growth period are subject to an aggregate annual limit of $5,000.
Contribution Timing. Unlike other types of traditional IRAs, contributions to Child Investment Accounts for the year must be made by calendar year-end, not the standard tax filing deadline. 
Qualified General Contributions. An unlimited amount of “qualified general contributions” can be contributed to Child Investment Accounts. These contributions can be made by states, the District of Columbia, the Federal government, Indian tribal governments, or 501(c)(3) tax-exempt organizations. Contributions must be made for all members of a “qualified class” of account beneficiaries. The only restrictions that can be imposed on a qualified class are year of birth and geographic area.  As an example, Bill and Susan Dell pledged to contribute $250 for approximately 25 million children ($6.25 billion) to Child Investment Accounts for each eligible child who resides in a zip code where the median household income is below $150,000. These contributions are not subject to the $5,000 annual limit.
Rollover Account. The concept of Rollover Accounts allows account owners to change the institution where the account is invested. At any time during the growth period, a subsequent Child Investment Account (rollover Child Investment Account) can be established for an individual. It must be established by a direct trustee-to-trustee transfer of the entire account balance from the individual’s existing account. This is a parallel process to changing the custodian for an IRA.
Taxation. Contributions to a Child Investment Account during the growth period (while the child is under age 18) are not includible in the income of the account beneficiary (the child). Whether contributions are taxable to the donor is dependent on whether they were made directly to the account, were made by an employer, or were made by an employee via salary reductions under a cafeteria plan.
Tax Basis – After Tax Contributions. Personal, after-tax contributions to Child Investment Accounts create tax basis for the account beneficiary. These funds are not taxed upon distribution. It is important to differentiate which contributions create tax basis and which do not because the account beneficiary is not taxed on the amount attributable to basis when money is later withdrawn from the account.
Tax Basis – All Other Contributions. Contributions from any source other than personal after-tax contributions to a Child Investment Account do not create tax basis. This includes pilot program contributions, qualified general contributions, and employer contributions. This is because these contributions were not contributed by the account owner. Thus, such amounts are fully taxable upon eventual withdrawal after the growth period (depending on the tax rules in effect at the point of distribution).
Tax Basis – Account Earnings. All earnings on all contributions are not included in the tax basis calculation. As such, all distributions of earnings, regardless of the source of the contribution, are taxable to the account beneficiary upon distribution.
Tax Basis – Qualified Rollovers. Qualified rollover contributions from a prior Child Investment Account carry over any basis attributable to the funds being transferred to the rollover account. After-tax contributions from other sources (such as the account beneficiary, parents or legal guardians, family, friends or other persons) create tax basis in an account.
Eligible Investments. Funds in a Child Investment Account may be invested only in eligible investments, which are low-cost mutual funds or exchange traded funds (ETFs) that track an index of primarily U.S. stocks such as the S&P 500 stock index. Eligible investments are also restricted from using any leverage or having annual fees/expenses of more than 10 basis points (0.1%) on investments in the fund. Child Investment Accounts may not be invested in any industry or sector-specific index funds or held in cash or money market funds.
No Distributions During the Growth Period. As a rule, distributions are not permitted during the growth period. Limited exceptions include qualified rollover contributions, qualified ABLE rollover contributions, distributions of excess contributions, and distributions upon death of the account beneficiary. Notably, there is no exception for hardship distributions.
Distributions after Age 18. After the growth period, distributions from a Child Investment Account generally are subject to the same tax rules that apply to distributions from traditional IRAs. This means starting in the calendar year in which the account beneficiary turns age 18, the account beneficiary can take distributions subject to regular taxation if they are used for a qualifying purpose, such as to pay for college or for a first-time home purchase. Distributions used for other purposes and taken prior to age 59½ are subject to regular taxation plus an additional 10% tax for early withdrawals. A link to the full IRS list of qualified distributions (those not subject to the 10% tax penalty) can be found under the Resources section at the end of this article.
Distributions of Basis. Distributions from the account after the growth period that are attributed to tax basis are not included in gross income. However, all other amounts in the account, including all earnings in the account, are income taxable to the account beneficiary upon distribution.
Reporting During the Growth Period. During the growth period, Child Investment Accounts are not subject to the standard IRA reporting requirements. Instead, accounts are subject to Special reporting requirements such as information regarding the source of certain contributions, the investment in the contract (basis), and a report to the Secretary by a trustee that accepts a qualified rollover contribution.
Employer Reporting. An employer that makes a Section 128 employer contribution will be required to indicate to the trustee of the Child Investment Account that the contribution is a Section 128 employer contribution when the contribution is made.
Reporting After the Growth Period. After the growth period, Child Investment Accounts transition to standard reporting requirements for IRAs. For any given calendar year, a Child Investment Account is never subject to reporting under both the standard IRA reporting and the expanded Child Investment Account reporting.
Initial Account Creation. The Treasury Department will initially select one or more financial institutions to create and hold all newly-opened Child Investment Accounts/Trump Accounts. Federal contributions will be made into the initial Child Investment Account. At a later date, the account owner can transfer the full balance of their initial Child Investment Account to a rollover account at the owner’s preferred financial institution. Account owners must first establish an initial Child Investment Account/Trump Account and then they may rollover the balance to another institution.

Outstanding Questions

While the IRS Notice outlined a basic framework for Child Investment Accounts, there are many questions that remain unanswered. Among them will be the selection of financial institutions that will serve as trustees for initial accounts (into which federal contributions will be made) and what other banking institutions will set up the infrastructure to receive rollover contributions.

References

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