Can I use a Lifestyle Spending Account (LSA) for financial wellness programs?

A Lifestyle Spending Account (LSA) provides a flexible way for employees to spend on various wellness expenses, including those related to financial well-being. LSAs are funded by the employer and offer a wide range of eligible expenses.

If you're an employee, you might be wondering if you can use your LSA for financial wellness programs. The answer is yes, in most cases.

Let's take a closer look at what an LSA is and how it can support your financial well-being.

What is a Lifestyle Spending Account (LSA)?

A Lifestyle Spending Account (LSA) is an employer-funded benefit that allows you to spend on a variety of wellness expenses. LSAs are designed to support your overall well-being, including your physical, mental, and financial health.

One of the key advantages of an LSA is its flexibility. Unlike traditional benefits like health insurance, which have strict guidelines on what's covered, LSAs allow you to choose the benefits that best suit your individual needs.

For example, if you're looking to improve your financial well-being, you can use your LSA to pay for expenses like financial planning services, student loan repayment assistance, or financial literacy courses. If you're more focused on physical wellness, you might use your LSA for gym memberships, fitness classes, or wellness apps.

Employers set the rules for their LSA programs, including the amount they contribute, the eligible expenses, and the reimbursement process. Some employers offer a set amount per year, while others provide a monthly allowance.

Financial Wellness Eligibility in LSAs

Employers design LSAs to cover expenses across physical, emotional, and financial well-being. Financial wellness programs are increasingly common in LSAs, with examples including:

• Financial planning services (e.g., consultations with advisors).
• Student loan repayment assistance or Parent Plus loan payments.
• Tuition assistance and continuing education courses.
• Tax preparation services and estate planning (wills, trusts).
• Credit counseling and debt management programs.
• Financial literacy courses or seminars (e.g., budgeting, investing).
• 529 college savings plan contributions.

How Employers Customize Financial Wellness Benefits

Employers set the rules: They define eligible expenses, contribution amounts (e.g., $500–$1,000 annually), and reimbursement methods (debit card or manual claims).

No IRS restrictions: Unlike HSAs or FSAs, LSAs are post-tax accounts, so employers aren't bound by IRS eligibility criteria. This allows tailored financial wellness support beyond traditional benefits.

Tax implications: Funds used for financial wellness are taxable income for employees. Unused funds remain with the employer or roll over, depending on the plan design.

Examples of Financial Wellness Programs via LSAs

Expense TypeExamplesDebt ManagementStudent loan payments, credit counselingFinancial EducationSeminars, courses, books on investing or budgetingLong-Term PlanningRetirement planning, estate planning (wills), 529 plan contributionsDaily Financial HealthTax preparation, identity theft protection, home purchase expense reimbursements

Benefits of Including Financial Wellness in LSAs

Employee retention: 83% of employees say financial stress impacts work performance, making LSAs a strategic retention tool.

Inclusivity: Addresses diverse needs (e.g., student debt for younger employees, estate planning for older staff).

Cost control: Employers contribute fixed amounts (e.g., $850/year on average), avoiding unpredictable costs.

Limitations to Consider

Taxable income: Employees pay taxes on reimbursements, reducing the net benefit.

Employer discretion: Not all LSAs include financial wellness—check your employer's specific plan.

For maximum impact, employers often pair LSAs with other benefits (e.g., retirement plans) to create a holistic financial wellness strategy.

What Purchases do Employees Make with their Lifestyle Spending Accounts?

Many HR leaders are increasingly adopting LSAs in response to evolving work environments, new work models, shifting priorities, and changing employee expectations. Let's explore the statistics on how employees are utilizing their LSAs, based on data from the Compt Lifestyle Benefits Benchmarking Report 2025:

Employees mainly allocate their LSA funds to health and wellness (48%), family care (15%), continuous learning (10%), food (10%), and travel (8%).

Within the health and wellness category, popular purchases include fitness memberships (45%), mental health apps (20%), wellness products (15%), nutritional supplements (10%), and alternative care like acupuncture or massage therapy (10%).

For family care, employees spend on daycare or babysitting (40%), pet care (30%), senior care (20%), and family planning expenses (10%).

Continuous learning expenses encompass online courses (50%), professional development events (30%), and educational materials (20%).

Food-related purchases include meal delivery services (60%), healthy snacks (25%), and cooking classes (15%).

Travel spending covers transportation costs (50%), accommodations (30%), and travel experiences (20%).

These insights highlight the diverse ways employees leverage LSAs to support their well-being and work-life integration. As an employee, understanding these trends can help you make informed decisions about optimizing your LSA benefits.

How to Get Started with a Lifestyle Spending Account

If your employer offers an LSA, getting started is straightforward:

1. Review your employer's LSA plan document to understand the eligible expenses, contribution amounts, and reimbursement process. If you have questions, reach out to your HR representative for clarification.
2. Determine your personal wellness priorities and how you want to allocate your LSA funds. Consider your short-term and long-term goals, as well as any immediate needs.
3. Make eligible purchases using your preferred payment method (e.g., personal credit card, debit card, or direct billing).
4. Submit a reimbursement claim through your employer's designated process, which may involve an online portal, mobile app, or paper form. Include any required documentation, such as receipts or invoices.
5. Receive reimbursement via direct deposit, payroll, or a separate LSA debit card, depending on your employer's plan.
6. Track your LSA spending and remaining balance to ensure you're maximizing your benefits and staying within the plan limits.
7. Provide feedback to your employer on your LSA experience, including any suggestions for improvement or additional eligible expenses to consider.

By proactively managing your LSA, you can take full advantage of this valuable benefit and invest in your overall well-being.

Frequently Asked Questions about Lifestyle Spending Accounts and Financial Wellness

Can I use my LSA for student loan repayment?

Yes, many employers include student loan repayment assistance as an eligible expense under their LSA plans. This can be a valuable benefit for employees looking to manage their educational debt and improve their financial well-being.

Are LSA funds taxable?

Yes, LSA funds used for financial wellness (and other eligible expenses) are considered taxable income for employees. This means you'll need to pay income taxes on the amount you receive as reimbursement or spend through an LSA debit card.

What happens to unused LSA funds at the end of the year?

Depending on your employer's plan design, unused LSA funds may either roll over to the next year or remain with the employer. Some plans have a "use it or lose it" policy, while others allow a certain amount to carry over. Check your plan document or ask your HR representative for specific details.

Can I change my LSA allocations during the year?

Most employers allow you to adjust your LSA allocations throughout the year, giving you the flexibility to adapt to changing needs and priorities. However, some plans may have restrictions or require a qualifying life event for mid-year changes. Consult your plan document or HR representative for guidance.

How do LSAs differ from HSAs and FSAs?

While LSAs, HSAs, and FSAs are all employer-sponsored benefits, they have some key differences:

• LSAs are post-tax accounts that cover a wide range of wellness expenses, while HSAs and FSAs are pre-tax accounts primarily for healthcare expenses.
• HSAs and FSAs are subject to IRS regulations, while LSAs have more flexibility in terms of eligible expenses and plan design.
• HSAs are portable and can be taken with you if you change jobs, while LSAs and FSAs are typically tied to your current employer.

Understanding these differences can help you make the most of each type of benefit and create a comprehensive wellness strategy.

Advantages of Financial Wellness Programs in LSAs

Enhanced Employee Productivity and Engagement

Financial stress significantly impacts employee performance, with 83% reporting that it affects their work. LSAs that include financial wellness programs can help alleviate this stress, leading to more focused and engaged employees.

When employees feel supported in their financial well-being, they are more likely to be productive and committed to their work. This increased engagement can translate into better overall performance and job satisfaction.

Tailored Support for Different Life Stages

Financial wellness needs vary depending on an employee's life stage. Younger employees may prioritize paying off student loans or saving for a down payment on a home, while older employees may focus on retirement planning or managing healthcare costs.

LSAs that offer a range of financial wellness benefits can cater to these diverse needs, providing targeted support for employees at different points in their lives. This personalized approach helps ensure that everyone feels supported and valued, regardless of their age or financial situation.

Predictable Costs for Employers

One of the challenges of offering financial wellness programs is the potential for unpredictable costs. However, LSAs provide a solution by allowing employers to set fixed contribution amounts for each employee.

This structure enables better budgeting and cost control, as employers know exactly how much they will be spending on financial wellness benefits each year. Additionally, any unused funds typically remain with the employer or roll over to the next year, depending on the plan design.

By offering financial wellness programs through an LSA, employers can support their employees' financial well-being while maintaining control over their benefits budget.

Attracting and Retaining Top Talent

In today's competitive job market, a comprehensive benefits package that includes financial wellness programs can be a key differentiator in attracting and retaining top talent.

Employees increasingly value benefits that support their overall well-being, and financial health is a critical component of that. By offering LSAs with financial wellness options, employers demonstrate their commitment to their employees' success both in and out of the workplace.

This commitment can foster a positive employer brand and improve employee loyalty, leading to lower turnover rates and a more stable, engaged workforce.

Improved Financial Decision-Making Skills

Financial wellness programs offered through LSAs can help employees develop better financial decision-making skills. This may include learning about budgeting, saving, investing, and managing debt.

By providing access to educational resources, workshops, and personalized advice, LSAs empower employees to take control of their financial futures. This knowledge can help reduce financial stress and improve overall financial health.

As employees become more confident in their financial decision-making abilities, they may be more likely to participate in other company-sponsored benefits, such as retirement plans or stock purchase programs. This increased engagement can lead to better financial outcomes for both employees and employers.

Holistic Approach to Employee Well-Being

Financial wellness is just one aspect of overall employee well-being. By including financial wellness programs in LSAs, employers can take a more holistic approach to supporting their employees' health and happiness.

This comprehensive approach recognizes the interconnectedness of physical, mental, and financial well-being. When employees feel supported in all areas of their lives, they are more likely to be engaged, productive, and loyal to their employer.

LSAs that offer a range of wellness benefits, including financial wellness programs, demonstrate an employer's commitment to their employees' overall success and satisfaction. This commitment can help create a positive workplace culture that attracts and retains top talent.

Limitations of Financial Wellness in LSAs

While LSAs offer a flexible way to support your financial well-being, there are some limitations to consider.

One important factor to keep in mind is that funds used for financial wellness through an LSA are considered taxable income. This means you will need to pay taxes on any reimbursements or expenses related to financial wellness programs. As a result, the net benefit of using your LSA for these purposes may be reduced.

Another potential limitation is that not all employers include financial wellness as an eligible expense in their LSA plans. Employers have discretion over which expenses they choose to cover, so it's essential to review your specific plan details to confirm whether financial wellness programs are included.

If your employer's LSA does not currently offer financial wellness options, consider discussing the potential benefits with your HR representative. Many employers are open to feedback and may be willing to expand their eligible expenses to better support their employees' needs.

Despite these limitations, LSAs remain a valuable tool for supporting your overall well-being, including your financial health. By understanding the tax implications and verifying your plan's eligible expenses, you can make informed decisions about how to allocate your LSA funds to achieve your wellness goals.

How to Maximize Your LSA for Financial Wellness

To make the most of your Lifestyle Spending Account (LSA) for financial wellness, start by reviewing your employer's LSA policy. Familiarize yourself with the eligible expenses, contribution limits, and reimbursement process. This will help you understand which financial wellness programs and services you can use your LSA funds for, such as financial planning, student loan repayment assistance, or educational courses.

Next, create a personalized financial wellness plan that aligns with your goals and priorities. Assess your current financial situation, including your income, expenses, debts, and savings. Identify areas where you can improve your financial health, such as reducing high-interest debt, building an emergency fund, or saving for retirement. Use this information to determine how you can allocate your LSA funds to support your financial wellness objectives.

Consider coordinating your LSA with other employee benefits to maximize your overall financial well-being. For example, if your employer offers a 401(k) plan with matching contributions, prioritize contributing enough to receive the full match before using LSA funds for other financial wellness expenses. Similarly, if you have a Health Savings Account (HSA), you can use it for qualified medical expenses, freeing up more of your LSA for non-medical financial wellness needs.

When using your LSA for financial wellness expenses, keep detailed records of your transactions, including receipts and documentation. While not all employers require documentation for LSA reimbursements, having good records can help you track your spending, ensure you're using your funds appropriately, and provide evidence if needed for tax purposes or employer audits.

Forma's Lifestyle Spending Accounts offer a user-friendly platform for managing your LSA funds, making it easy to submit claims, track your balance, and access educational resources to support your financial wellness journey.

Are Lifestyle Spending Accounts worth it for financial wellness?

Lifestyle Spending Accounts (LSAs) can be a valuable tool for supporting your financial well-being, especially when your employer's plan includes a wide range of eligible expenses related to financial wellness. These may include financial planning services, student loan repayment assistance, educational courses, and more.

However, it's important to consider the tax implications of using your LSA for financial wellness. Since LSA funds are considered taxable income, you'll need to factor in the potential tax burden when evaluating the overall benefit.

Additionally, the specific details of your employer's LSA plan will impact how much value you can derive from using it for financial wellness. Plans with higher contribution limits, more flexible eligible expenses, and rollover options may provide greater benefits than more restrictive plans.

Pairing your LSA with other financial benefits offered by your employer, such as retirement plans, health savings accounts, or employee assistance programs, can help you create a comprehensive financial wellness strategy. Discovering if an LSA is right for your company involves assessing your workforce's needs, your benefits budget, and your overall employee well-being goals.

When used strategically, LSAs can be a powerful tool for improving your financial health and reducing financial stress. By understanding your employer's plan details, coordinating with other benefits, and focusing on high-impact expenses, you can maximize the value of your LSA for financial wellness.

Forma’s Lifestyle Spending Accounts (LSAs) give you the flexibility to invest in your financial well-being, from debt management to retirement planning. With an easy-to-use platform and customizable benefits, Forma helps you maximize your employer-sponsored wellness funds. Schedule a consultation with one of our experts today.