KEY CHANGES IN OBBBA ENHANCE SAVING OPTIONS The One Big Beautiful Bill Act (OBBBA), passed by Congress on July 3, 2025, introduces several significant changes aimed at enhancing retirement savings options and financial security for individuals. Here are the key provisions that retirement savers should be aware of. Introduction of “Trump Accounts” What are Trump Accounts and how do they work? Trump Accounts are Traditional IRAs designed to provide financial support from birth to retirement. Here’s a breakdown of their key features: • Eligibility and Establishment: These accounts can be created by the Treasury Secretary for individuals under age 18 with a Social Security number. Parents or guardians can also establish these accounts with a qualified rollover contribution, which is an amount rolled over directly from one Trump account to another Trump account for the same child. • Contributions: Contributions are limited to $5,000 per child per calendar year until the year before the child turns 18. Contributions are not tax-deductible, and starting in 2028, the limit will be indexed for inflation. Any accrued earnings will remain tax deferred until distributed. • Distributions: Distributions are generally prohibited until the child turns 18, except for specific exceptions (e.g., qualified rollover contributions). After age 18, distributions follow Traditional IRA rules. Extension of ABLE Account Provisions How does the OBBBA affect ABLE accounts? The OBBBA makes permanent several key provisions affecting ABLE accounts (including the following), which were set to expire at the end of 2025: • Additional Contributions: Employed eligible individuals can contribute amounts above the annual limit, capped at the prior year’s federal poverty level or the beneficiary’s yearly compensation, whichever is less. • Nonrefundable Saver’s Credit: Eligible individuals making qualified contributions to their ABLE account can receive a nonrefundable Saver’s Credit, with the annual limit for the credit increasing to $2,100 in 2027. Enhancements to 529 Plans What changes does the OBBBA bring to 529 plans? The OBBBA introduces several enhancements to 529 education savings plans, including the following: • Increased K-12 Expense Limit: The annual limit for using 529 plan assets for K-12 expenses increases from $10,000 to $20,000 starting in 2026. • Expanded Definition of Qualified Expenses: The definition now includes expenses for postsecondary credentialing — such as tuition, fees, books and supplies required for recognized postsecondary credential programs. BY LISA HABERMAN, ED.D., QKA, CHFC, CLU ASCENSUS 14
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