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 funded exclusively with employer money; employees make no contributions to it. Because the employer owns the account, any unspent balance remains the employer's property, and when an employee leaves, the remaining funds generally do not move with the worker to a new job. The HRA reimburses qualified medical expenses the employee has actually incurred, and it may allow unused amounts to carry forward within the employer's plan. The employer-funded, non-portable character of an HRA is exactly what option A describes, making it the correct statement.
Why the other options are wrong
- B) An account funded by employee pre-tax payroll deductions that follows the employee between jobs describes a portable savings vehicle, not an HRA, which is employer-funded and stays behind at termination.
- C) Forfeiting the balance at year-end is the use-it-or-lose-it rule associated with a flexible spending account (FSA), whereas an HRA may carry unused balances forward under the employer's plan design.
- D) An HRA is owned by the employer, never by the employee, and it cannot be rolled into an IRA; the employee-owned, portable, investable structure belongs to an HSA. Because the employer owns the account, the employee cannot convert the balance into any personal retirement asset.
Memory hook
HRA = the employer's wallet. The money is theirs, and the balance stays when you go.