Certified Financial Consultant (CFC) Practice Exam

Who determines the eligibility and contribution limits in a Health Reimbursement Arrangement (HRA)?

1. The insurer determines both.

2. The employee determines both.

3. The employer determines eligibility, but the employee determines contributions.

4. The IRS determines both.

The correct answer is: The employee determines both.

In a Health Reimbursement Arrangement (HRA), it is the employer who determines the eligibility and contribution limits. HRAs are employer-funded benefits that reimburse employees for incurred medical expenses and are not directly influenced by the employees in terms of setting contributions. The employer establishes the terms of the HRA, including who is eligible to participate, the amount of reimbursements available, and the types of expenses that can be reimbursed. Contribution limits are set based on the plan design decided by the employer and the plan’s guidelines, which means employees do not have control over these aspects. While the IRS does provide regulations regarding HRAs, such as tax treatment and nondiscrimination rules, the specific details of eligibility and contribution limits are ultimately determined by the employer’s plan design.