Trump Accounts Face Adoption Questions as Employers Weigh Complexity

The move by the Treasury Department and IRS last month to automatically step up the creation of Trump accounts, also known as 530A accounts, for all eligible children in the U.S. has changed the conversation around the new savings vehicle from account creation to participation. Industry observers say the challenge is no longer opening accounts, but persuading parents, employers and employees to use them.

When the program launched in July, parents and guardians needed to use a specific IRS election form to establish an account, which affected enrollment.

“We hadn’t seen as many sign-ups as were eligible, by far,” says Melissa Elbert, partner at Aon. “So [the federal auto-enrollment] is one way to make sure that every child who is eligible has an account established for them.”

But Elbert notes that automatic account creation does not eliminate the need for parental involvement.

“The parents or guardians need to go out and claim the account [and] authenticate their identity,” she says. “In order to kind of really get the account going, we still need parents to be engaged.”

The shift comes as Treasury and the IRS continue refining rules governing employer contributions, payroll deductions and account administration. At an IRS hearing on the proposed regulations last week, speakers from payroll firms, benefits providers and consultants largely supported the concept of Trump accounts but argued that operational simplicity is needed if employers are expected to participate.

In particular, speakers wanted to know whether employer contributions would be subject to payroll taxes and if those contributions could be made using similar infrastructure to that used for payroll administration. They warned that the proposed regulations for Trump accounts would not allow employers to make direct contributions to a single trustee, and the administrative process would need to accommodate multiple trustees.

“An employer could be required to validate accounts, drop payroll and employer contributions, and communicate corrections separately with numerous financial institutions, which would increase costs, create opportunities for error, and may discourage employers from offering a Trump account contribution program at all,” said Grace Lattyak, a partner at Aon, in the hearing.

Elbert says she increasingly sees employers looking beyond direct company contributions and toward payroll-facilitated savings.

“I think what will become more popular is the ability of facilitating employee savings through the cafeteria plan option—so allowing employees to save on a pre-tax basis into accounts for their children,” Elbert says.

Meanwhile, Andrea Feirstein, CEO and managing director of AKF Consulting Group, says families are still weighing the value of Trump accounts against other savings priorities, including 529 plans for college savings and emergency savings accounts. However, she says there is interest in the pilot program of one-time $1,000 federal deposits for eligible children born from 2025 through 2028.

“We are not seeing a broad rush for these accounts other than to take advantage at this moment of what is free money,” Feirstein says. “My sense is that any family with a newborn who qualifies for the $1,000 has been urged to take advantage of that and should be taking advantage of that. There is no reason not to.”

For many households, however, the decision becomes more complicated when additional contributions are involved, especially since the money cannot be accessed before the account holder is 18 years old.

“If you’re a family that can part with up to $5,000 a year and not need it again, then it’s a wonderful way to jump-start your child’s retirement savings,” Feirstein says. “I think you have to look, as a family, at, ‘How much money can I afford to put into an account that I cannot touch for 18 years?’”

Feirstein also says the program has generated broader discussion about children’s savings and wealth-building opportunities.

“I think this really sends a message that we do need to focus on wealth-building,” she says. “We do need to provide access to a whole swath of young children who don’t otherwise have access to wealth-building vehicles.”

Both Elbert and Feirstein say the breadth of the rollout of Trump accounts is unprecedented for workplace benefits, as are the yet-to-be-finalized tax laws regarding the donation of equities to accounts. For example, SpaceX CEO Elon Musk promised on social media this week to donate a share of his company to every child in the U.S., which would likely be facilitated by Trump accounts.

“It’s a brand new type of benefit [that,] if done well, has potential to have a real impact on the next generation of Americans and their financial security,” Elbert says. “Previously, we had philanthropists wanting to give significant dollar amounts to all the children in America [but] we didn’t have the means to do that. And now we’ll have a system in place to allow that sort of progress.”