The U.S. Department of Labor (DOL) has issued guidance stating that most employer contributions to the newly created children’s “Trump Accounts,” or 530A accounts, will not trigger application of the Employee Retirement Income Security Act (ERISA). Businesses and benefits professionals had asked whether the federal pension law would apply to employer contributions to the 530A accounts ahead of the U.S. Department of the Treasury’s July 4th rollout.
According to the DOL, Trump Accounts are not considered employee pension benefit plans under ERISA, so long as employers meet certain conditions. The guidance is welcome news for employers considering whether to offer Trump Account contributions as an employee benefit. Trump Accounts are designed as a type of traditional individual retirement account, but they have various governing rules that apply until a beneficiary reaches adulthood at age 18. These rules include set restrictions on investments, withdrawals, and contributions.
Beginning July 4, 2026, eligible adults can contribute up to $5,000 per year to Trump Accounts for eligible children during their first 19 years of life. The program also provides for a one-time $1,000 federal contribution for eligible children born between 2025 and 2028 for individuals who establish Trump accounts and make the required elections. Employers may also contribute up to $2,500 per year to the accounts, with a limit of $5,000 per year for nonfederal contributions. Additionally, state, local, and tribal governments as well as charities can contribute to Trump Accounts.
Furthermore, account funds may be invested only in low-cost diversified U.S. stock index funds. With limited exceptions, withdrawals are prohibited during the beneficiary’s childhood. Once the beneficiary becomes an adult, the account largely becomes governed by traditional IRA rules in terms of taxes on withdrawals and eligibility for exceptions to the 10% early-withdrawal penalty.
Although the 2025 budget reconciliation law, also known as the One Big Beautiful Bill Act, authorized Trump Accounts, it did not state whether those accounts fell under ERISA. After reviewing the law, the DOL has concluded that Trump Accounts do not qualify as employee pension plans governed by ERISA. The primary reason for the DOL’s conclusion is that the account funds belong to the child beneficiary, not the employee.
The DOL guidance also addresses the relatively rare circumstance in which the account beneficiary is a child who is also an employee. In that situation, DOL advises that ERISA still does not govern the account if the employer maintains a limited role with respect to the account. More specifically, the employer must not:
- control the accounts or investments;
- impose restrictions other than those required by law;
- advertise the accounts as employer-sponsored retirement plans; and
- receive any compensation related to the accounts.
The Depository Trust and Clearing Corporation also announced technical updates to its account transfer system to accommodate Trump Accounts.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
