August 20, 2025 - Mercer
There are a number of benefits and programs available to families today that can help them start early to save for their children’s future. While employers are not required to contribute to any such program, communicating about the availability of these benefits may go a long way to showing employees that you have a vested interest in their future and their children’s future.
In one of the latest options available, starting no earlier than next July, the “One Big Beautiful Bill Act” will allow individuals to contribute to the “Trump Accounts” of their dependent children under 18. Employers may also contribute to these accounts, although, again, there is no requirement that they do so.
These accounts generally will be treated like non-Roth IRAs but are subject to a number of special conditions until the beneficiary turns 18. Individuals can contribute up to $5,000 annually in after-tax contributions. Employer contributions, if any, would count toward this limit, and up to $2,500 would be excludable from an employee’s gross income. ゝhis tax exclusion also applies to employer contributions to accounts of employees who are under 18. Our GRIST provides an in-depth look at employer contribution program eligibility and other Trump Account requirements.
A pilot program will be implemented where the federal government will provide $1,000 to the Trump Accounts of US citizen children born from 2025 through 2028. Although employers are not required to take any action, some may consider telling employees about the availability of these accounts.・While individuals can’t open an account yet ・the official rollout begins no earlier than July 2026 - they may appreciate knowing that these accounts are coming ∥nd that they may include a government-seeded $1,000 to help with future savings.
Will employers contribute to Trump Accounts?
When we polled - 70 employers on Aug. 7 during our Washington Update webcast, over a third said they had already made a decision not to contribute. While virtually none of them had positively decided to make contributions, a handful (4%) said they were considering it. The majority didn’t know or hadn’t yet considered it.
Beyond the requirements for these new accounts set forth in the law, there are some additional factors to consider. Among them, investment direction is limited to “eligible investments” ・low-cost index funds (e.g., no leverage, charge less than 10 basis points) ・until the child turns 18. Furthermore, once the child turns 18, these accounts will be treated like a traditional IRA, subject to existing IRA rules.
Communication about the new accounts could include information about other savings programs that currently exist ・for example, 529 plans, which provide a much-enhanced tax-preferred savings vehicle for educational expenses (employers can contribute to them too, though not on a tax-free basis).・Which program is best will likely vary from one family to the next, so you should caveat that the communication is meant to provide information only and is not an endorsement of any option.
Of course, if you are not contributing to any of these benefits, that will factor into decisions about whether, or how much, to communicate about them. Simply including information about these accounts in your parental leave materials may be a valuable addition that・could help ensure your employees don’t leave free or tax-preferred money on the table.