Compliance Update: Trump Accounts – New Tax-favorable Accounts for Children

The “One Big Beautiful Bill Act” (OBBBA), which was signed into law on July 4, 2025, included a variety of changes for employee benefit plans. Notably, it created a new type of federal tax-favored account for children, called Trump Accounts, effective for tax years beginning in 2026. Key features of Trump Accounts include the following:

• Children born between 2025 and 2028 may be eligible to receive a special $1,000 contribution from the federal government through a pilot program;
• Annual contributions are generally limited to $5,000 and may be made beginning July 4, 2026;
• The accounts are treated similarly to traditional individual retirement accounts (IRAs) for tax purposes, with special rules applying until the calendar year in which the child reaches age 18; and
• Withdrawals are not permitted until the year that the child reaches age 18, subject to a few limited exceptions.