Which type of plan reimburses employees for incurred medical expenses?

The correct choice is Health Reimbursement Arrangement (HRA) because it is specifically designed to reimburse employees for medical expenses they incur. With an HRA, employers provide a set amount of funds that employees can use for qualified medical expenses, including co-pays, deductibles, and other healthcare costs. The arrangement is entirely funded by the employer, and the reimbursed amounts can vary depending on the employer’s policies.

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA), while also related to healthcare expenses, differ significantly in how funds are managed. An HSA allows employees to save pre-tax dollars to pay for eligible medical expenses, but the reimbursement typically comes from the employee's own contributions. An FSA is a pre-tax benefit account that employees can use for medical expenses, but again it is not primarily focused on employer reimbursement after the fact—it allows employees to use funds set aside from their earnings upfront.

A Short-term Disability Plan provides wage replacement benefits to employees who are unable to work due to a medical condition but does not reimburse for medical expenses. Instead, it focuses on providing financial support during a temporary inability to earn income.

In summary, an HRA's core feature is its role in directly reimbursing employees for their incurred