Overview
- Contributions cannot begin until July 4, but parents can open accounts now by checking the box on IRS Form 4547, which is required to receive the Treasury’s $1,000 pilot deposit.
- Eligible beneficiaries are U.S. citizens under 18, with the $1,000 seed limited to children born from Jan. 1, 2025, through Dec. 31, 2028, and seed funds will be invested in an index fund.
- Individuals may contribute up to $5,000 per year and employers up to $2,500, with corporate and philanthropic pledges including a $6.25 billion Dell gift adding $250 to 25 million lower‑income children’s accounts.
- During the growth period, investments are restricted to domestic low‑cost index mutual funds or ETFs with fees around 0.10% and no leverage, with accounts custodial until age 18.
- Growth is tax‑deferred and earnings are taxable on withdrawal, certain pre‑tax contributions are taxed at distribution, and eight states say annual earnings will be taxable (AR, CA, HI, KY, MA, PA, SC, WI) as further IRS and Labor guidance is pending on employer plan rules and ERISA.