Match each description with the correct item

Question

Match each description with the correct item
- Fund set up by an employee that is not taxed when the employee withdraws from the account for medical expenses. Amounts left in the account at the end of the benefit year roll over to the next year. Withdrawals for nonmedical expenses are subject to income tax and a 10-percent penalty.

Quizplus · Accepted Answer

The correct match for the description is a Health Savings Account (HSA). HSAs are savings accounts that allow individuals to set aside money on a pre-tax basis to pay for qualified medical expenses. Contributions roll over year to year if not spent, and withdrawals for medical expenses are tax-free. Withdrawals for non-medical expenses are subject to income tax and a potential 10-percent penalty, aligning with the description provided.