A Trump Account May Only Hold a Fund Charging 0.1% or Less. The Index It Tracks Has to Be 90% American.

Treasury and the IRS have proposed regulations setting out what a Trump Account may be invested in. The rules turn a short statutory phrase into three tests a fund has to pass, and the tightest of them is a fee cap: annual fees and expenses of no more than 0.1% of the balance of the investment in the fund. Comments are due October 20, 2026.

This is a separate rulemaking from the proposal on employer contributions to Trump Accounts, which carries its own comment deadline of September 25. The two address different questions - one, who may put money in; this one, where that money may sit.

What a Trump Account is

Trump Accounts are created under section 530A, added by the Working Families Tax Cuts. The IRS release describes a pilot contribution of $1,000 from the federal government available for children born in 2025 through 2028 where a parent elects to participate. The proposed investment rules govern what happens to the balance during what the regulations call the growth period: from the account's establishment through December 31 of the year the beneficiary turns 17.

The three tests

1. The fund tracks an equity index comprised of investments in primarily U.S. companies - the S&P 500 is the example the IRS gives.
2. The fund does not use leverage.
3. The fund does not have annual fees and expenses of more than 0.1 percent of the balance of the investment in the fund.

Each is a gate rather than a factor. A fund that fails any one of them is not an eligible investment.

What primarily U.S. means

Rather than leave the phrase to judgment, the proposal supplies a bright line: an index with at least 90 percent U.S. companies by index weight is considered to be primarily U.S. companies. That is drafted as a safe harbor, which means an index below 90% is not automatically disqualified but no longer has a rule to rely on.

What is excluded

The proposal rules out one category by name. Any investment fund that tracks the returns of an ESG index is not an eligible investment, and the definition reaches any index that has, or is marketed as having, a focus on environmental, social, or governance factors. The marketing clause matters: it turns on how an index is presented, not only on how it is constructed.

Leverage is defined functionally. A fund is considered to use leverage if it uses borrowings, derivatives, or other strategies that are economically equivalent to borrowings in a way that materially increases the risk of loss.

The trustee's job

The proposal puts the monitoring burden on the account trustee, and then limits how often the trustee has to carry it out. Determinations must be made at least once every 12 months rather than continuously. Where a fund is found to be ineligible, the trustee must sell or dispose of the shares and reinvest the proceeds within 30 days.

Where a beneficiary or parent selects no investment, the balance is invested automatically in an eligible investment chosen by the trustee.

Dates

• Proposed applicability: taxable years beginning on or after January 1, 2026.
• Comments due: October 20, 2026.
• The account-level operational procedures take effect when the regulations are finalised.

This article describes a proposed regulation and is not investment or tax advice.