Trump Accounts to Auto-Enroll Children

BY RICHARD RUBIN AND ASHLEA EBELING

The Treasury Department will automatically enroll tens of millions of children in the government’s new Trump Accounts as soon as this week, replacing the previous structure that required parents or guardians to sign up, the agency said in rules published Tuesday.

The shift to automatic enrollment will ensure much broader access to the child investment accounts, creating them for more than 60 million additional children under age 18, according to the Treasury Department. The shift to auto enrollment means that big contributions from wealthy donors to the program—like the $6.25 billion pledge from Michael Dell—would reach more households.

“Stakeholders have expressed that eligible donors prefer that their contributions reach all children, not just children whose parents have the awareness to opt in,” the rules say.

The administration rolled out Trump Accounts with fanfare in early July, pushing them as a way for children to save and invest well before they could typically qualify for some other tax-advantaged accounts.

As of the end of July, the Treasury Department had processed 5.6 million forms to open the accounts. Treasury Secretary Scott Bessent has said seven million children are signed up. Some 73 million children are eligible for the program.

The accounts come with a government contribution of $1,000 for children born from 2025 through 2028. But autoenrollment won’t automatically trigger that contribution. Under last year’s tax law, which created Trump Accounts, taxpayers must specifically elect to get that $1,000, and Tuesday’s rules don’t change that.

Switching to auto-enrollment will let assets in those accounts start growing without families needing to do anything, said Jin Huang, a professor of social policy at Washing--ton University in St. Louis. “This is the most important design change since the law passed,” he said. “This is huge.”

Still, parents and guardians must take further steps to claim those automatically created accounts to take full advantage of them. Claiming the accounts would also allow them to make their own contributions and accept employer contributions.

The accounts are being managed through Robinhood and Bank of New York Mellon. There is a dedicated phone app and website for the accounts. Tuesday’s rules don’t provide full details for how parents and guardians can claim accounts for children who are being auto-enrolled.

Administration officials had previously contended that the law didn’t allow the government to create accounts for people who hadn’t enrolled.

They wrote in Tuesday’s rules that they “found a path to overcome those constraints.” They will use a master group trust that can handle transactions without obtaining specific information about individuals that investment managers wouldn’t be legally able to receive. That also will enable the government to add about two million additional newborns a year without parents signing up.

The government also created a framework for private donors to put appreciated stock directly into Trump Accounts. That move could spur more donations from wealthy Americans but also introduces the child accounts to the risk of holding individual securities.

Although the law requires Trump Accounts to be invested only in diversified, low-cost indexes, the Treasury Department said direct donations of stock don’t violate that prohibition. The agency’s reasoning is that the donations are merely being received by the Trump Accounts, not purchased with Trump Accounts funds.

“It undermines the entire purpose of the regulated index fund requirement, which is stability,” said Nina Olson, the former national taxpayer advocate who is now executive director of the Center for Taxpayer Rights. “Let’s say someone donates a bunch of tech stocks and then we have another dot-com meltdown so that you end up with worthless stocks. How does that help the child?”

Those stocks must be held for five years before being sold, according to the regulations.

Allowing those stock donations will give wealthy donors with appreciated securities a way to contribute them to Trump Accounts while avoiding capital-gains taxes on the shares. They can donate stock to a charity, which can then donate the stock to Trump Accounts. The donor avoids capital- gains taxes, gets an income- tax deduction and pushes assets out of taxable estates.

In the rules, the Treasury Department said there are several donors who are ready to make contributions of stock on the scale of Dell’s but who wouldn’t donate cash. The benefits from those additional donations will outweigh the additional risk from more concentrated portfolios, the government concluded.