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 (HRA) is an employer-funded account used to reimburse employees for qualified medical expenses, including deductibles, coinsurance, and copayments. Because the employer contributes all funds, employees do not own the account; unused balances generally roll over from year to year at the employer's option, and the money does not follow the employee to a new job. This distinguishes the HRA from both the FSA, where unused pre-tax funds are typically forfeited, and the HSA, which is individually owned and portable. The HRA is one of the account-based consumer-driven health plan models listed under individual medical insurance in the outline.
Why the other options are wrong
- B) Employee pre-tax salary reductions fund FSAs, not HRAs, which are employer-funded.
- C) HRA balances are not owned by or portable with the employee; HSAs are the portable account.
- D) HRAs generally permit rollover of unused balances, unlike the use-it-or-lose-it FSA rule.
Memory hook
HRA = employer's money that rolls over year to year but stays behind when you leave.