IRS proposes letting Treasury create 63.36 million Trump Accounts without parental election

The IRS issued draft regulations Tuesday that would let the Secretary of the Treasury create an initial Trump Account, a 530A account, for an eligible child without a parent, guardian or other adult filing an enrollment election, a mechanism the agency estimates would create 63.36 million accounts that qualifying U.S. children could later claim. The rules replace regulations proposed in March, and they change where a family enters the sequence: an account that previously had to be elected could now arrive already opened, created by the secretary or by a parent or guardian. Coverage of the proposal anticipates that automatic creation would make Trump Accounts a near-universal child savings and investment program, an expectation that rests on identification machinery the regulations leave unexplained. What prompted the replacement of the March version is not in the coverage.

How the accounts would be held is settled in outline. Treasury would maintain account-level records, assets would be pooled for investment through a master group trust, and individual ownership records would stay separate. Access still waits until a beneficiary turns 18. The proposal adds one path out: at 17, a beneficiary could roll an account into an ABLE Account, a savings vehicle previously offered only to people with disabilities. The terms of that rollover are not detailed in the coverage.

That structure is doing two jobs at once, and the second is the harder one. Pooling many small balances into a single trust is the straightforward part of running a program of this shape; keeping an individual ownership record for every one of tens of millions of accounts, and doing it for children who will not touch the money for years or decades, is a standing obligation rather than a launch project. The regulations do not attach that obligation to a named custodian, contractor or system of record, and the coverage does not say which entity inside Treasury would carry it.

Little of this is operational yet. An account existing on a record and an account a family can use are different things, and the gap between them is what the comment period will test.

The regulations do not clarify which data the Treasury or the IRS would use to determine who is eligible for an account, which leaves the 63.36 million estimate resting on a population the agencies have not said how they would identify. They also leave undefined what would be a “qualified general contribution” or a “qualified stock contribution,” the categories that would govern money entering the accounts.

On investment direction the proposal adds little. The Treasury shared four exchange-traded funds in July as preliminary default options, and industry advocates had previously asked that the investment options be diversified; the new rules do not resolve that request.

One provision reaches toward distribution rather than investment. The IRS and Treasury said they were considering allowing “eligible donors” to contribute to accounts created in specific ZIP-code-based geographic areas, including areas with a median household income below the threshold income for highly compensated employees. That would let money flow by neighborhood rather than by child, and it imports a retirement-plan term of art, the highly compensated employee test, into a savings program with no employer anywhere in it. The coverage describes the provision as under consideration.

Claiming an automatically created account requires a parent, guardian or beneficiary to authenticate their identity to the Treasury, and the proposal is looking into how people could disclaim accounts that are never claimed. Those two mechanics matter more than they read. Automatic creation removes the enrollment step that voluntary savings programs tend to fail at, and it does nothing about the steps that decide whether an account ever becomes useful: locating eligible children in the first place, deciding whether the pooled default ever grows past four funds, and handling the accounts that nobody claims.

An account can exist for years before anyone in a family knows it does, which is harmless if the balance grows and the path to control is short, and less harmless if the family was never prompted to complete authentication. At this scale, accounts that go unclaimed would likely concentrate among households least connected to the tax system, an inference the proposal's plans for disclaiming unclaimed accounts do not answer. That is the design bet at the center of the proposal. Creation is cheap and automatic; usefulness is neither.

A pilot program included in the law that created Trump Accounts would provide a one-time $1,000 federal deposit to accounts in the program, though the coverage does not say which accounts qualify. The comment record will show whether the agencies name the data that decides which children get an account, and whether the default menu stays at four exchange-traded funds.