Proposed rules would restrict Trump account eligible investments

The IRS on Thursday proposed regulations (CC-00349938-26) that would limit Trump account investments to low-fee stock index and exchange-traded funds (ETFs) during the growth period. The rules, according to a Treasury news release, are intended to help account balances grow over the long term by limiting investment costs and promoting broad diversification.

The growth period begins when the account beneficiary’s initial account is established and ends on Dec. 31 of the calendar year in which the beneficiary turns age 17. After that period, the restrictions would no longer apply.

The proposed regulations generally limit eligible investments to mutual funds and ETFs that track an equity index of primarily U.S. companies (such as the S&P 500), do not use leverage, and have annual fees and expenses of no more than 0.1% of the balance of the fund.

The limit on annual fees and expenses does not apply to trustee fees under the proposed regulations.

Background

Trump accounts are a new type of individual retirement account for eligible children under Sec. 530A. The provision was created by H.R. 1, P.L. 119-21, commonly referred to as OBBBA.

Under a pilot program, a $1,000 contribution from the federal government is available under Sec. 6434 for eligible children born after Dec. 31, 2024, and before Jan. 1, 2029. Individuals are generally eligible to have a Trump account established if they have been issued a Social Security number and have not turned 18 before the close of the calendar year in which the election to open a Trump account is made.

Investment framework

Treasury previously announced that the State Street SPDR Portfolio S&P 500 ETF (SPYM) would serve as the initial default investment for Trump accounts. The department also identified four additional low-cost index ETFs that parents or other responsible parties can choose for the accounts.

If a beneficiary does not select an eligible investment offered by a trustee, funds in the account would automatically be invested during the growth period in an eligible investment selected by the trustee, according to the proposed regulations.

Comments and applicability

The IRS requested comments through Oct. 20 and said the regulations generally would apply to tax years beginning on or after Jan. 1, 2026. The agencies said the proposed regulations reflect comments received in response to Notice 2025-68.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.