Master group trust will add about two million newborns yearly without sign-up
The Treasury Department will automatically enroll tens of millions of children in the government’s new Trump Accounts as soon as this week, the agency said in rules published Tuesday, replacing an opt-in structure that had limited the program’s reach.
The shift to automatic enrollment will create accounts for more than 60 million additional children under age 18, according to the Treasury Department. The change means large contributions from wealthy donors to the program — like the $6.25 billion pledge from Michael Dell — will 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 state.
The administration rolled out Trump Accounts with fanfare in early July, promoting 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. The switch to auto-enrollment, however, will not trigger that contribution automatically. Under last year’s tax law, which created Trump Accounts, taxpayers must specifically elect to receive the $1,000, and Tuesday’s rules do not change that requirement.
Switching to auto-enrollment will let assets in those accounts start growing without families needing to take any action, said Jin Huang, a professor of social policy at Washington University in St. Louis.
“This is the most important design change since the law passed,” he said. “This is huge.”
Parents and guardians must still take further steps to claim those automatically created accounts to take full advantage of them. Claiming the accounts would also allow families to make their own contributions and accept employer contributions. The accounts are managed through Robinhood and the Bank of New York Mellon, and Tuesday’s rules do not provide full details for how parents and guardians can claim accounts for children being auto-enrolled.
Administration officials had previously contended that the law did not allow the government to create accounts for people who had not enrolled. Officials wrote in Tuesday’s rules that they “found a path to overcome those constraints.” The Treasury Department will use a master group trust that can handle transactions without obtaining specific information about individuals that investment managers would not be legally able to receive. That structure will also enable the government to add about two million additional newborns a year without parents signing up.
The same rules create a framework for private donors to put appreciated stock directly into Trump Accounts. The 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 do not 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?”
Stocks donated directly 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. Donors can contribute stock to a charity, which can then donate the stock to Trump Accounts. The donor avoids capital-gains taxes, receives an income tax deduction and pushes assets out of taxable estates.
In the rules, the Treasury Department said several donors are ready to make contributions of stock on the scale of Dell’s pledge but would not donate cash. The benefits from those additional donations will outweigh the additional risk from more concentrated portfolios, the government concluded.