A provision of H.R.1, the One Big Beautiful Bill Act, allows for a new investment account for children under 18.
ADP’s Ron Ulrich describes how these accounts, called Trump accounts, are expected to work.
For more information, visit ADP.com/BigBeautifulBill
Transcript:
Meg Ferrero:
From an employee point of view, one of the provisions of the bill impacts workers with children. What do we know so far about these accounts?
Ron Ulrich:
Yeah, those areTrump accounts. So they're a new tax favored savings account for individuals under the age of 18. And parents can set up these accounts for their children. And they can contribute up to $5,000 per year as an after tax contribution.
Now, the contributions can only be made up until the year the child turns age 18. And they have to stop. And once the child turns age 18, they can actually start taking withdrawals. No withdrawals can occur before the age of 18. And at that time, it appears that these accounts turn nto pretty much regular traditional IRA accounts in terms of contributions and distributions going forward.
Now, there's a lot of details that will need to be worked out about these accounts. And we expect the Treasury Department and the IRS will need to provide guidance on how to properly account for and report on these accounts.
Now, finally, the act includes a temporary newborn pilot program that will allow the government to make a contribution of $1,000 for every child born after 2024 and before 2029 to really kickstart these accounts for them.
