A health reimbursement arrangement (HRA) is best characterized by which of the following?

Why A is correct

An HRA is funded solely by the employer, is owned by the employer, and reimburses employees for qualified out-of-pocket medical expenses. Unused amounts may carry over under the plan design, but the funds generally do not belong to the employee if employment ends, and the account is not portable. Employees cannot contribute their own money to an HRA. HRAs are one of the consumer-driven health plan models, along with HSAs, FSAs, and Archer MSAs.

Why the other options are wrong

• B) An employee-owned, portable account describes an HSA, which belongs to the individual and travels with them across jobs.
• C) The HSA requires a qualified HDHP and can be invested once balances grow; those are HSA features, not HRA features.
• D) HRAs are private employer-funded arrangements, not government accounts for Medicare premiums.

Memory hook

HRA = employer's money, employer's account, reimbursing your medical bills.

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.