Treasury and the Internal Revenue Service issued proposed regulations governing eligible investments for “Trump Accounts” on Aug. 20. The new tax-advantaged individual retirement account was established under the Working Families Tax Cuts Act.
The rules specify which investments are permitted in the accounts, a determination that will affect how millions of middle-income families and their employers structure retirement saving under the administration’s signature tax legislation. A public comment period is open before the rules are finalized.
Trump Accounts are structured similarly to traditional Individual Retirement Accounts but were created as a distinct savings vehicle under the new tax law. The proposed regulations define the universe of eligible investments, which could include stocks, bonds, mutual funds and other securities depending on the final rules.
Implementation will affect payroll systems, financial advisers and investment platforms across the country. Employers that offer retirement benefits will need to accommodate the new account type, and financial services firms including Vanguard, Fidelity and Charles Schwab will need to create product offerings that comply with the regulations.
The IRS Office of Chief Counsel and Treasury’s Office of Tax Policy developed the proposed regulations to provide clarity for the financial services industry and individual taxpayers.
New tax-advantaged savings vehicles affect nearly every working American family’s financial planning. The rules governing what can be held in Trump Accounts will determine whether the accounts function primarily as conservative retirement savings tools or as broader investment vehicles.
Tax practitioners and financial planners said they are reviewing the proposed rules to understand how Trump Accounts interact with existing retirement savings options including 401(k) plans, traditional IRAs and Roth IRAs.