Certified Human Resource Professional (CHRP) Practice Exam

Which of the following is true of healthcare spending accounts?

1. Expenses paid out are taxable

2. Unused amounts can be cashed out

3. Employers have complete control over the cost

4. They are co-funded by employees and employers

The correct answer is: Employers have complete control over the cost

Healthcare spending accounts (HSAs) are designed to facilitate the management of healthcare expenses for both employees and employers. The statement that employers have complete control over the cost is somewhat misleading because while they may have influence over how the account is structured (like determining contribution limits and eligibility), they don’t necessarily control all aspects of costs associated with healthcare spending accounts. For example, the overall spending in these accounts is influenced by the choices employees make regarding their healthcare needs and the corresponding expenses they incur. The more accurate understanding of healthcare spending accounts acknowledges that the costs can vary based on employee usage and the nature of healthcare options available. Moreover, real-world implementation often involves shared responsibilities and contributions from both employers and employees, affecting overall costs and benefits. In terms of the other options: expenses paid out are generally not taxable if they qualify under certain conditions, unused amounts may not always be cashed out but can instead roll over to the next year, and the implication of cost control suggests a lack of shared responsibility in funding between employees and employers. Thus, while the idea of employer control over costs might appear appealing, it oversimplifies the reality of how these accounts work in practice.