All of the following plans allow for employee contributions to be taken on a pre-tax basis EXCEPT

• A. Health Savings Account
• B. Health Reimbursement Arrangement Plan
• C. Flexible Spending Account
• D. Health Care Savings Plan

Answer: (B)

All the major health savings and spending accounts let employees contribute pre-tax funds, reducing current taxable income. A Health Savings Account and a Flexible Spending Account both operate as part of a cafeteria plan, where the employee can forego part of their paycheck and contribute before taxes are applied. In contrast, a Health Reimbursement Arrangement is funded by the employer only; employees don’t contribute pre-tax dollars to an HRA. Reimbursements from an HRA are tax-free, but there are no employee pre-tax contributions to the plan. Therefore, the Health Reimbursement Arrangement Plan is the exception.