2024 benchmark data insights: Driving ROI with Lifestyle Spending Accounts

The benefit of Lifestyle Spending Accounts (LSAs)

May 20th through 22nd, 2024, HR, benefits, and Total Rewards leaders gathered at WorldatWork Total Rewards'24. The event focused on bringing forward innovative solutions and networking opportunities for those in the Total Rewards space. Jason Fan (CEO of Forma) and Ellen Meza (Total Rewards leader) hosted a discussion on 2024 Benchmark Data Insights: Driving ROI with Lifestyle Spending Accounts (LSAs). 

The two discussed how HR professionals and companies are challenged to offer creative, cost-effective, strategic solutions with proven ROI. And, with Lifestyle Spending Accounts (LSAs), organizations can achieve cost savings and efficiency gains without sacrificing any of their current programs.

4 reasons LSAs add value and ROI

Because of rising healthcare costs and inflation, benefits are under scrutiny. A recurring theme at various sessions was knowing how to balance employee needs and benefit costs. Below are four categories that show why LSAs are valuable and streamline the cost of benefit programs. 

1. Flexibility and personalization

‍LSAs are infinitely customizable spending accounts. Variables such as workforce construct, specific business objectives, employee feedback, or company values can influence prioritization and strategy. There are endless use cases from fitness & wellness to caregiving, professional development, work from home needs, and more. The benefit stands out for its flexibility, personalization. LSAs are primed to meet the diverse needs of a global workforce. Employers set eligibility criteria and funding. Employees select how to use them based on their personal preferences. 

Personalization is going to be key and we'll notice a big shift in prioritizing ways to deliver more meaningful benefits for employees and their families. We're looking at ways to offer benefits that are way more creative than in the past. And, as a result, we're going to partner with vendors that are flexible, that want to learn and grow with us, that really understand our business model. 
- Ellen Meza, Total Rewards leader

We're giving a lot of flexibility to the employees and as the employer with Forma. We're able to tell people, “Hey, we're going to meet you where you are. No matter where you are in life.” 
- Jason Fan, CEO at Forma

2. Cost efficiency

‍A significant advantage of LSAs is their capacity to optimize budget allocation. Companies don’t need new dollars to fund a net new program necessarily. Organizations can repurpose budgets from underutilized perk programs to fund LSAs, thus reallocating resources more effectively.

We've been tasked as Total Rewards leaders to do more with less. What we're seeing right now is a huge trend of finding ways to consolidate all these different point solutions and benefits into something a little more meaningful. We're having to listen more and create spaces where we can actually impart benefits that have deep meaning to employees and their families. I think that if we're really looking at ROI - you don't have to take anything away. You're going to repurpose aspects into something with greater flexibility.
- Ellen Meza, Total Rewards leader

Two of the more practical questions that our team often fields are, 'How are we going to articulate this concept to leadership?' and 'How do we think about ROI?' One of the biggest ROI cases for LSA is that we want every dollar that gets allocated in the program to really catch for all the employees. One way to do that is to repurpose and redirect budgets from underutilized programs to fund the LSA program. 
- Jason Fan, CEO at Forma

3. Increased engagement

‍LSAs typically see higher engagement rates compared to traditional benefits programs. The tailored nature resonates more with employees' actual needs and lifestyles which leads to greater utilization and perceived value. The flexibility LSAs offer not only caters to individual employee preferences but also enhances satisfaction and loyalty. As a result, companies see the impact on talent retention, attraction, and productivity–all of which improve the bottom line. 

According to a survey we ran, 80% of companies offer 5 to 15 different types of perks and benefits to their employees. Yet, the average engagement rate per program is lower than 50%. On the one hand, we are in a very budget-constrained environment with medical premiums going up. On the other hand, we're stuck with really sizable portfolio programs that may not be used by employees in a very efficient way. So we have to be more creative. And this is exactly when we introduced the LSA concept. 
- Jason Fan, CEO at Forma

Look at that engagement, look at how much you're spending, and look into, ‘What if I turn this into an LSA?’ You opened some flexible use here. You give people optionality and you take the budget that you are already spending on a program that is maybe just okay or really has underutilized engagement.
- Ellen Meza, Total Rewards leader

4. Administrative simplicity

‍Consolidating various perks and benefits into an LSA reduces the complexity and cost of administration. This streamlined approach cuts down on operational overhead. Also, HR teams can focus more on strategic initiatives rather than day-to-day benefits management. What's more, the efficiency and ease benefits employees who no longer have to go to multiple systems to use their benefits. 

We're going to see tons of flexible benefits in the marketplace. We're going to see things that people can customize and personalize without me having to make those grand choices for our employees on their behalf. I'm excited about the future of that because I think we'll be able to do so much more with less. And from an administration perspective, for people like me, I'll be able to focus on the how we do what we do much more easily with fewer headcount so that we are driving most of our dollars back to our employees.
- Ellen Meza, Total Rewards leader

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