Which of the following is NOT characteristic of a Health Reimbursement Arrangement (HRA)?

The correct response indicates that an HRA is not entirely funded by the employee. A Health Reimbursement Arrangement (HRA) is designed primarily as an employer-funded account. Under this arrangement, it is the employer who contributes funds for qualified medical expenses, allowing employees to receive reimbursements for these costs. Employees themselves do not contribute to the HRA; therefore, characterizing it as entirely employee-funded is inaccurate.

Employer contributions to the HRA are tax-deductible for the employer, making it a beneficial arrangement for them. Additionally, HRA funds can indeed be rolled over from one year to the next, and employees can be reimbursed for specific qualified medical expenses. This combination of features supports the employee's health needs while providing tax advantages to employers, reinforcing the distinction between HRAs and other health accounts.