Which medical savings arrangement under federal law is available only to self-employed individuals and employees of small employers, and requires coverage under a high-deductible health plan?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An Archer Medical Savings Account (MSA) is a federal tax-advantaged account created before HSAs. It is available only to self-employed individuals and employees of small employers, and it must be paired with a high-deductible health plan. Coverage under an Archer MSA is much more limited than an HSA, which is open to anyone enrolled in a qualifying high-deductible health plan regardless of employment size. Because eligibility is restricted by law, the Archer MSA is the correct answer when a question asks which arrangement is limited to self-employed persons and small employers.
Why the other options are wrong
- B) An HSA is available to any individual who is enrolled in a qualifying high-deductible health plan and has no disqualifying coverage, regardless of employment size.
- C) An HRA is funded by employers for their own employees and does not require a high-deductible health plan or restrict participation to self-employed persons.
- D) An FSA is a use-it-or-lose-it spending account offered through employers and is not limited to self-employed individuals or small employers.
Memory hook
Archer MSA = small business only. Think of Archer: one arrow, one narrow target.