Which plan does not allow employee contributions on a pre-tax basis?

• A. Health Reimbursement Arrangement Plan
• B. Flexible Spending Arrangement
• C. Health Savings Account
• D. Premium-Only Plan

Answer: (A)

Pre-tax contributions reduce taxable income and are often set up through plans that let employees withhold part of their earnings to pay for eligible expenses. The Health Reimbursement Arrangement is funded solely by the employer; employees don’t contribute to it, and there’s no mechanism for employee salary reductions to fund an HRA. Reimbursements from an HRA are tax-free, but the plan itself doesn’t accept employee pre-tax contributions.

In contrast, a Flexible Spending Arrangement is typically part of a cafeteria plan where employees elect and fund a pre-tax amount from their wages to reimburse medical expenses. A Premium-Only Plan is designed to let employees pay their insurance premiums with pre-tax dollars. A Health Savings Account can be funded by both employee and employer, and employee contributions can be made on a pre-tax basis via payroll deductions in many setups.

So the plan that does not allow employee contributions on a pre-tax basis is the Health Reimbursement Arrangement.