How does a Health Reimbursement Arrangement (HRA) differ from a Health Savings Account (HSA)?

• A. An HRA is employer-funded and owned by the employer; an HSA is employee-owned with roll-over rights and tax advantages.
• B. An HRA is employee-funded; an HSA is fully employer-funded and owned by the employer.
• C. An HRA and HSA are both owned by the employee.
• D. An HRA is funded by taxes; an HSA is funded by employer contributions only.

Answer: (A)

The main idea here is who owns the account and who funds it, because that drives how each plan works. An HRA is funded and owned by the employer. The employer sets aside dollars to reimburse the employee for eligible medical expenses, and the employee does not own an individual account with a balance they control. Unused amounts stay under the employer’s plan rules, not as a personal, portable balance.

An HSA, on the other hand, is owned by the employee. Both the employee and the employer can contribute, and the employee controls the account as their own. Funds roll over year after year, stay with the employee even if they change jobs, and the account offers tax advantages for contributions, growth, and qualified withdrawals.

So the statement that correctly captures these differences—employer-funded and employer-owned for the HRA, and employee-owned with roll-over rights and tax advantages for the HSA—best describes how they differ. The other options misstate who funds or owns the accounts or how rollover and tax features work.