IRS proposes 10-basis-point cap for Trump accounts

The IRS has proposed a portfolio rule for Trump accounts that leaves little to an advisor's discretion. During the growth period, as the IRS calls the years before January 1 of the child's age-18 year, the money must sit in a low-cost mutual fund or ETF that tracks the S&P 500 or another index comprised primarily of U.S. companies, with no leverage and annual fees capped at 0.10% of net assets. IRAHelp reported the guidance, which arrived as proposed regulations on August 21.

Treasury had already narrowed the field on July 1, when it said initial contributions must go into the State Street SPDR Portfolio S&P 500 ETF (SPYM), with allocations among four other ETFs promised in coming months, though the guidance does not name them. The proposed regulations extend that logic across the entire growth period and add the rule's one genuine judgment call: "comprised primarily of U.S. companies" is loose enough that other index sponsors will want to test its edges.

The timetable deserves attention as well. Most of the proposed rules would apply retroactively to January 1, 2026, which means families who funded accounts in the first half of the year moved money under a rule that did not yet exist in writing; the custodian-related provisions hold off until the IRS finalizes the regulations. The retroactivity is less alarming than it sounds, since Treasury's July directive already confined initial contributions to an S&P 500 ETF, but the account file should show the source of every contribution.

The design reads as a deliberate narrowing of the account's job. A 10-basis-point ceiling is a procurement standard, not a portfolio test: the tracking requirement alone excludes active products, and at that price the realistic field is the cheapest of the large index funds. Whatever an advisor's house view on factors, ESG, or private markets, this account is not where it gets expressed. That is a defensible way to run a government-sponsored account, and the likely winners are the big index shops running the leanest products. A Trump account in its growth period is pure U.S. equity beta; the tax and estate work that justifies an advisor's fee happens in the accounts around it. The four additional ETFs Treasury has promised are the names to watch as the regulations move toward final, and the loose "comprised primarily of U.S. companies" clause is where the ETF industry will press its case.