Explain the advantages and disadvantages of medical reimbursement accounts
What will be an ideal response?
Answer: An employee is allowed to deposit pretax earnings into a specially designed account for paying health care costs. In addition to tax savings on unreimbursed health care costs, an MRA allows pretax dollars to pay for other medical expenses that many health care plans do not cover, such as eyeglasses and orthodontia expenses.
The biggest drawback to this plan is that any contributions to the flexible spending account not used by the end of the year are lost. Care must be taken to set aside the amount of funds that approximate the bills that will be incurred.
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