Compared with a flexible spending account (FSA), a feature of an Archer Medical Savings Account (MSA) is that funds not spent during the year:
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Why B is correct
An Archer MSA is a tax-advantaged savings account available to self-employed individuals and employees of small employers who are covered by a high-deductible plan. Unlike an FSA, unused MSA balances do not expire at year-end; they roll over, continue to earn interest, and grow tax-deferred. Withdrawals used for qualified medical expenses are not taxed, and because the account is owned by the insured, balances are not forfeited when employment changes. This carry-over and accumulation feature is a core reason MSAs are classified as consumer-driven health plan (CDHP) arrangements alongside HRAs and HSAs under AH-III.A.1b of the examination outline.
Why the other options are wrong
- A) The use-or-lose rule is characteristic of flexible spending accounts, not Archer MSAs, whose balances carry forward from year to year without forfeiture.
- C) No law requires an Archer MSA balance to be rolled into an HSA; each account stands on its own and retains its own tax treatment.
- D) MSA earnings grow tax-deferred and are not taxed annually; only non-qualified withdrawals incur income tax and a penalty.
Memory hook
MSA money rolls over and grows; FSA money vanishes at year-end.