Which plan uses the use-it-or-lose-it rule for unspent funds at year-end?

Which plan uses the use-it-or-lose-it rule for unspent funds at year-end?

• A. Flexible Spending Account (FSA)
• B. Health Savings Account (HSA)
• C. Health Reimbursement Arrangement (HRA)
• D. Employer Sponsored Savings Plan

Answer: (A)

Flexible Spending Accounts use the use-it-or-lose-it rule. In an FSA, the funds employees set aside are pre-tax and must be spent on eligible medical expenses within the plan year (often with a short grace period). If money isn’t used by that time, it’s forfeited. This is what the question is testing. Health Savings Accounts, by contrast, roll over year to year and belong to the individual, not the employer, so unspent funds don’t have to be forfeited. Health Reimbursement Arrangements are employer-funded and can vary by plan, with some carryover options, but they don’t have the same standard use-it-or-lose-it rule as FSAs. An Employer Sponsored Savings Plan is a vague term that doesn’t specify this forfeiture rule.

Flexible Spending Accounts use the use-it-or-lose-it rule. In an FSA, the funds employees set aside are pre-tax and must be spent on eligible medical expenses within the plan year (often with a short grace period). If money isn’t used by that time, it’s forfeited. This is what the question is testing.

Health Savings Accounts, by contrast, roll over year to year and belong to the individual, not the employer, so unspent funds don’t have to be forfeited. Health Reimbursement Arrangements are employer-funded and can vary by plan, with some carryover options, but they don’t have the same standard use-it-or-lose-it rule as FSAs. An Employer Sponsored Savings Plan is a vague term that doesn’t specify this forfeiture rule.