What is a medical savings account?

• A. A tax-exempt account employees can use to pay certain medical expenses. May be funded by employer or employee contributions
• B. A retirement savings account
• C. A flexible spending account
• D. An employer-sponsored credit line for medical bills

Answer: (A)

A medical savings account is a tax-advantaged fund set up specifically to pay for eligible medical expenses. It can be funded by either the employee or the employer, or both, and the money grows tax-free as long as it’s used for qualified medical costs. This distinguishes it from retirement savings accounts and from flexible spending accounts, and it isn’t a line of credit—it's savings earmarked for medical expenses.