The American Bankers Association this week offered several suggestions to improve upcoming guidance on eligible investments for Trump accounts.
The tax package passed by Congress last year created a new form of individual retirement account for children under 18, known as Trump accounts. In August, the Treasury Department proposed regulations to limit eligible investments for Trump accounts to choices with low expense ratios and to exclude products with “excessive fees or unnecessarily complex strategies.”
In a letter, ABA recommended that Treasury make four changes to upcoming guidance to promote a workable and competitive trustee framework that also protects beneficiaries. They are:
- Provide a correction mechanism for monitoring failures. The proposal as written could cause an account to retroactively lose its Trump account status. ABA recommended preserving Trump account and IRA status when an investment was eligible when acquired and the trustee disposes of it and reinvests the proceeds within 30 calendar days
- Establish monitoring and recordkeeping safe harbors. The proposal requires trustees to monitor eligible investments at least once every 12 months. ABA recommended that the annual monitoring requirement not apply to funds that Treasury has expressly approved as eligible investments
- Protect trustees executing required liquidations. The proposal requires a trustee to dispose of an investment that ceases to be eligible and reinvest the proceeds within 30 calendar days. ABA recommended a safe harbor providing that a trustee is not liable for investment losses, missed gain, or other market-related consequences of a disposition required by the law or the final regulations, provided the trustee acts in good faith
- Provide reliance protection for successor trustees. The proposal permits the entire account balance to be moved by direct trustee-to-trustee transfer to a rollover Trump account, but it does not address responsibility for eligibility determinations or monitoring conducted before transfer. ABA recommended permitting a successor trustee to rely on the transferring trustee’s documented eligibility determination until the successor trustee’s next periodic review — no later than 12 months after the transferring trustee’s last documented review — or the successor trustee’s actual knowledge that the investment is no longer eligible.
