Amna Nawaz:
The Treasury Department has now created Trump accounts for every eligible child, automatically enrolling more than 60 million children. This is in addition to the approximately seven million children whose parents have already participated since the program launched in July.
But the expansion also comes with changes to how the program operates. Donors can now donate individual shares to the accounts, shares that families cannot choose or reject and must hold for five years. Direct donations can also be made to specific groups of children based on location or age.
For more on all this, I’m joined now by Wall Street Journal reporter Richard Rubin.
Good to see you. Thanks for being here.
Richard Rubin, The Wall Street Journal:
Hi. Thank you for inviting me.
Amna Nawaz:
So how different are these new rules, these changes brought about by increased registrations, from what was initially in place with the Trump accounts?
Richard Rubin:
Oh, they’re totally different.
So, auto-enrollment really expands this program and makes it a universal savings account for kids. So parents who didn’t sign up initially and maybe didn’t want it or didn’t know about it, everyone participates now, so it’s universal for kids with a social security number.
And then stock donations are also a big change. The original idea and what Congress had written was that this money was going into low-cost index funds, and that’s what parent and employer contributions are still made for.
But now you have these donors who are able to put together individual stocks and hold them for five years.
Amna Nawaz:
And just to clarify, when we talk about donors here, who are we talking about?
Richard Rubin:
So the money has to go through a nonprofit and the Treasury Department has to approve any money that can come in. But what everyone expects is for wealthy individuals to do it.
So we’ve seen this happen with cash donations. Michael Dell and his wife Susan have donated more than $6 billion in $250 increments. These are cash donations and not stock donations. But Treasury officials said they expect more of those donations to come in and that the shift to stock donations will encourage some of those donors who might not have given otherwise.
Amna Nawaz:
Well, that’s part of the Treasury Department’s argument, right, that this will incentivize private donors and businesses to contribute more. They also claim that this type of automatic enrollment benefits children in low-income groups. Is there any evidence of this? Is there any data to back it up?
Richard Rubin:
Yes, there’s certainly been some data over time that lower-income households may be more confused by this financial product, not know it, and maybe not – may be busy with other things and not necessarily enroll their children.
And so auto-enrollment is something that I think has been sought after left and right. I think progressives really see auto-enrollment as a way to expand access to low-income households to ensure that every child starts with something in an investment account that turns into an IRA.
For conservatives, I think this is ultimately a wealth creation and financial literacy type teaching moment. And that, I think, is what attracted donors and support from legislators on that side.
Amna Nawaz:
I want to ask you more about these individual stock donations. Now, as we mentioned, families need to maintain these stocks. They can’t choose them. They cannot reject them. They must keep them for four or five years. The Treasury Department says this will help families feel more invested in businesses.
What do the experts you speak with say and what might be a problem here?
Richard Rubin:
Yes, so some concerns have certainly been raised.
The Treasury Department has indicated it is open to rules that might allow for waivers and has requested comment on the matter. But for the moment, there is no exemption. And so strange situations could arise.
The Treasury Department actually said that the goal was to encourage more giving because they wanted children and their families to have a stake, not just in America at large, by investing in America, but actually in these companies in particular.
Amna Nawaz:
Yes.
Richard Rubin:
So you can imagine a whole bunch of scenarios. We can go over a few of them.
Amna Nawaz:
Well, what are some of these scenarios?
(CROSSTALK)
Richard Rubin:
So you could imagine something where it would be part of a political or political debate. If a company is able to ensure that every 9 year old in a particular state owns a piece of their company, then when the state says we want to increase regulation, we want to increase your taxes, you might see companies or CEOs brandishing that as an incentive or a reward.
Let’s say a company is trying to get approval for a data center. They might say, oh, well, if you approve this, we’ll put two shares in the account of every child in the city, and auto-enrollment will allow them to reach more widely.
And I think you’ll also have conflict of interest issues for — again, because it’s so broad and automatic, for federal regulators, state regulators, people who have policies and rules at their employers that prevent their minor children from owning stock in entities that they are currently responsible for may have these issues.
So there are a number of things that are going to come up and could come up that the Treasury Department will need to think about as they roll out and approve each of these grants.
Amna Nawaz:
From the launch of the Trump accounts until the expansion of auto-enrollments that occurred earlier in October, there have only been about seven million sign-ups, as we mentioned. What do you think of these figures? I mean, I know it’s a new type of program, but was it weak? Do you feel like there is any hesitation to sign up?
Richard Rubin:
So it was relatively high in a subgroup, families that have newborns, children born in 2025 or 2026, because the accounts have $1,000 in them from the government if you open them. And there was a pretty good buy-in among that group.
I think for some people it was just a matter of education, without knowing it. For other people, they didn’t necessarily want to contribute, right? So if they weren’t investing money, the government wasn’t going to invest money, they didn’t know yet if their employer was going to invest money, they weren’t going to go ahead and create money.
And so that kind of left a smaller pool for these other donors. And then I think for a portion of the population, the fact that these accounts are called Trump accounts is a problem for people, and they don’t want to be involved in something that has the president’s name on it.
So you’ve seen some banks and financial institutions refer to them by their other name, which is Section 530(a) accounts.
Amna Nawaz:
OK, there’s about 30 seconds left, but I have to ask you, because of these new rules and the new language and some of the new rules around expansion, are you expecting any legal challenges to this?
Richard Rubin:
So it’s a very open question. I think it’s often difficult to challenge tax rules. People who object to this would need to find someone who is harmed in some way by these donations. And these are truly gifts.
So it’s not like there are strings attached, but there’s a real gift that’s happening in the creation of real wealth that’s going to happen, at least in this non-diversified way, for these households.
Amna Nawaz:
Richard Rubin, Wall Street Journal, great to have you here. THANKS.
Richard Rubin:
THANKS.
Gn bussni
