Question

Which of the following is true of healthcare spending accounts?

a) Expenses paid out are taxable.
b) Unused amounts can be cashed out.
c) Employers have complete control over the cost.
d) They are co-funded by employees and employers.

Answer 1

The correct statement about healthcare spending accounts is that they are co-funded by employees and employers. The funds are contributed on a pre-tax basis and are used for eligible healthcare expenses. Incorrect options involve the tax status of the disbursements, control over costs, and cashing out of funds.

Step-by-step explanation:

The subject question relates to healthcare spending accounts, which are savings accounts specifically designed for health-related expenses. The correct answer to the question 'Which of the following is true of healthcare spending accounts?' is:
They are co-funded by employees and employers. Here's why the other options are not correct:

• Expenses paid out are not taxable; in fact, these accounts are designed to provide tax benefits by using pre-tax dollars for eligible medical expenses.
• Unused amounts typically cannot be cashed out, though they may carry over into future periods or be lost at the end of a year depending on the type of account.
• Employers do not have complete control over the cost; employees also often contribute and have choices in how the funds are spent.

Healthcare spending accounts, including Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), are important components of personal finance and healthcare management.