Certified Financial Consultant (CFC) Practice Exam

If an insured has $500 left in his Health Reimbursement Account after quitting his job, what happens to that money?

1. The insured must forfeit the funds

2. The insured can access the funds at employer's discretion

3. The insured can transfer the amount to another account

4. The insured loses access to the money entirely

The correct answer is: The insured can access the funds at employer's discretion

The correct understanding revolves around the nature and regulations governing Health Reimbursement Arrangements (HRAs). When an insured person has funds remaining in their HRA after leaving a job, they are typically able to access those funds depending on the employer's discretion and the specific terms outlined in the HRA plan. Employers have the flexibility to define the rules concerning unused HRA balances. Some employers allow former employees to continue using the remaining balance for eligible medical expenses, while others may have policies that restrict access based on employment status. Therefore, the insured's ability to access the remaining funds is contingent upon the employer's rules regarding the HRA setup. In contrast, forfeiting funds or losing access entirely is not generally how HRAs function, as they are intended to provide reimbursements for health-related expenses. Transferring funds into another account is typically not permissible under HRA regulations, as these accounts are tied directly to employment and specific employer contributions rather than being personal assets that can be moved around at will.