A Health Reimbursement Arrangement (HRA) differs from an HSA primarily in that an HRA:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An HRA is a consumer-directed health arrangement funded exclusively by the employer. The employer owns the funds and decides the annual reimbursement amount available; employees cannot contribute, and money they do not use generally remains with the employer rather than rolling over for the employee's benefit. When the employee leaves, the HRA balance does not follow the employee the way an HSA does, because the HRA is employer-owned. Since it is an employer-sponsored account, an individual cannot open an HRA independently. This funding and ownership structure is the core distinction tested among the CDHP account types.
Why the other options are wrong
- B) Portability and individual ownership describe an HSA, not an HRA; HRA funds generally stay with the employer when employment ends.
- C) An HRA is offered through an employer plan; an individual cannot establish one independently without an employer sponsor.
- D) HRAs are funded by the employer and used to reimburse qualified medical expenses; they are not employee-funded checking accounts.
Memory hook
HRA = the employer's piggy bank: they fund it, they own it, and what you do not spend goes back to them.