Medical Expense✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which statement correctly describes a Health Reimbursement Arrangement (HRA)?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A Health Reimbursement Arrangement is funded exclusively by the employer — employees cannot contribute their own money into an HRA. The employer sets the maximum reimbursement amount and may decide whether unused funds carry forward to future years. Reimbursements for qualified medical expenses are generally tax-free to the employee. Because the funds belong to the employer until spent, an employee who leaves the job may forfeit the remaining balance, depending on the plan's rules. This distinguishes the HRA from both HSAs and FSAs.
Why the other options are wrong
- B) Employee pre-tax funding with a year-end forfeiture describes a flexible spending account, not an HRA.
- C) An HRA is an employer-sponsored account arrangement, not a government assistance program.
- D) HRAs are consumer-directed health plan accounts and have no requirement to be paired with Medicare Advantage.
Memory hook
HRA = employer's money, employer's rules. Only the boss pays in, and carryover is the boss's choice.