G
Blog posts

How customizable spending accounts can revolutionize your employees’ health and well-being

Learn how a Fitness and Wellness Spending Account helps employees live healthier while companies spend less.

9
 Min Read 
• 
12/5/23

Key takeaways

  • Traditional fitness and wellness stipends often fail because they don’t engage employees and lead to wasted company spend.
  • Fitness and Wellness Spending Accounts are a better solution since they truly support employees and make every dollar count.
  • Employees use funds in ways most meaningful to them which boosts engagement.
  • A well-designed Fitness and Wellness Spending Account covers a range of physical and emotional wellness expenses for maximum flexibility.
  • Companies save from optimized spend and streamlined administration, and realize tangible value.

Why conventional fitness and wellness stipends fail employees and companies

A healthier workforce helps companies achieve better business outcomes. Increased profitability from heightened organizational performance and reduced healthcare costs from an overall healthier population are two of the many advantages that firms gain.

While most companies offer fitness or wellness perks to keep well-being top-of-mind for employees, these programs often fall short of effectively and routinely engaging employees. Workers don’t get what they need, and organizations experience wasted spend.

What’s a better alternative? A customizable spending account dedicated to fitness and wellness. A Fitness and Wellness Spending Account is an employer-sponsored allowance that covers relevant expenses for employees. Employees choose how they spend their funds based on employer-defined eligibility rules.

Companies that embrace flexibility with a Fitness and Wellness Spending Account help workers enhance their well-being in ways that matter most to them. What ensues are positive health-related behavior changes – a nearly impossible outcome from conventional fitness and wellness stipends.

Before we explore the ins-and-outs of a Fitness and Wellness Spending Account, let’s understand three common approaches, and why they’re far-from-perfect solutions.

Approach #1: Companies use multiple point solutions to address needs

Why it’s problematic:

  • Doesn’t adapt to employees' unique needs: Despite offering numerous solutions (e.g. a meditation app, a platform for virtual coaching and therapy, a gym membership, and more), they do not meet the diverse needs of individuals. This results in low engagement and utilization.
  • Frustrating and disjointed experience: Employees have to figure out where and how to access these different solutions which can frequently lead to point solution fatigue.
  • Waste from inefficient spend: When you pay large sums upfront for multiple point solutions, you are required to spend huge amounts of your overall benefits budget. Often, these solutions are charged a per-employee-per-month (PEPM) fee, whether the employee uses the benefit or not. This results in a poor allocation of capital.
  • Difficult to administer: It is overwhelming to handle user management, security and privacy protocols, contracts, administration, support, and more for one vendor alone. When you multiply efforts across every app and platform, you are left with minimal headspace for strategic thinking.

Approach #2: Companies give employees a stipend that’s automatically embedded within each paycheck

Why it’s problematic:

  • Employees don’t realize the stipend’s value: The monthly amount gets buried in the employee’s regular paycheck. There is little appreciation or value for the invisible benefit.
  • Wasted capital: Your set budget for a fitness and wellness program will be fully used since you add the funds direct-to-payroll. Yet some employees don’t realize they get this perk, and for those that do, there is no guarantee the dollars go to their intended wellness purpose.

Approach #3: Companies run a reimbursement program via an expense management system

Why it’s problematic:

  • Not easy to implement and manage: Expense management tools are built for accounting and finance teams’ oversight and audits, not for HR teams. These systems may involve manual processes, can cause burdensome administration, and often lack controls necessary to manage costs and prevent abuse.
  • Unnecessary added costs: Typically when an employee submits a claim, a claim fee is charged. Consequently, companies sometimes pay superfluous costs since you reimburse the employee and pay the vendor a fee.

Why Fitness and Wellness Spending Accounts are a superior alternative

Recent approaches to fitness and wellness stipends aren’t moving the needle. What will? A Fitness and Wellness Spending Account.

Here are 5 reasons why a flexible approach to fitness and wellness will benefit your workers and your organization.

1: Employees use funds in ways that uniquely matter to them

Employees will uncover ways to spend their stipend that work for them. They will be able to live healthier lives whether they choose to spend on boot camp workouts, trekking poles for their hikes, or weekend meditation retreats.

2: Engagement and utilization rise

With choice comes heightened enthusiasm for your fitness and wellness program. Employees will use their benefit more and associate greater value with what you’re offering. It’s common to see utilization rates north of 74% for Fitness and Wellness Spending Accounts. A bonus: customizable spending accounts are a great way to attract job seekers.

3: Employees gain holistic support for their well-being

Individuals need support within the emotional, physical, and social spheres of well-being, too. Programs that use customizable spending accounts are powerfully extensible with limitless options to support your diverse employees.

4: Companies optimize spend

Across the board, there are vast inefficiencies in how fitness and wellness programs are run today. You will gain more with customizable spending accounts:

  • Consolidate to save: Streamline costs by consolidating benefits. Employees who did use the point solutions will still be able to access their favorite programs with their employer-sponsored funds.
  • Only pay for what employees use: Funds are “notional” so the company only pays for the claims when employees use their benefit. When compared to traditional perks provided to all employees, this approach is much more effective.
  • Measure clear value: When employees engage with their new flexible benefit, they need to contemplate how to make the most of the dollars you’ve provided. They’ll thank you for the benefit with a newfound appreciation for the funds.

5: Admins get back time and energy

When you outsource to a modern third-party administrator (TPA), benefits professionals will be unchained from heavy administrative duties.

A single touchpoint to manage stipends means that admin work is streamlined. Do away with taxing claims reimbursement, compliance work, employee support, and general administration. You should be able to operate at a more strategic level with more time.

To brainstorm with an expert about how your company can enhance your employee experience and recover wasted spend with a Fitness and Wellness Spending Account, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> today.

What to include in a Fitness and Wellness Spending Account for your employees

It’s clear why a customizable spending account for fitness and wellness is better than market alternatives. Read below for best practices of what to include in your stipend that supports the health and wellness of all people.

What to include for employee fitness 

Employees use their account funds to proactively take control of physical wellness.

Their choice in the matter helps them realize true health benefits. Companies benefit, too – physical wellness is tightly linked to positive outcomes on worker productivity, employee satisfaction, and job satisfaction.

What to cover:

  • Fitness activities (e.g. gym memberships, athletic events)
  • Digital health
  • Fitness equipment
  • Fitness accessories
  • Supplements
  • Massage therapy 

Key requirements:

  • Multiple ways to spend: Give your workers various ways to use their stipend. They can spend however they choose and then submit a claim that’s reviewed by humans. A mobile wallet-enabled debit option like the Forma Card can be convenient and requires no out-of-pocket expenses. Finally, to minimize disruption, ensure your employees can easily purchase their favorite point solutions - ideally at a discounted rate - via a marketplace like the Forma Store
  • Unified platform for distinct spending accounts: Well-being incorporates every aspect of a person’s life. Your fitness and wellness stipend should live under the same roof as benefits for other important aspects of your worker’s well-being, such as mental or financial. This makes for an intuitive, seamless employee experience.

What to include for emotional wellness

Your employees may face stressors at home and at work. To help them perform their best and show up in your workplace clear-headed, provide access to tools and resources that help your people feel their best.

What to cover:

  • Therapy for general improvement of mental health or stress management (not deemed for medical care)
  • Meditation apps
  • Coaching apps
  • Habit building apps
  • Sleep aid apps
  • Wellness-related books

Key requirements:

  • One platform for pre-tax and post-tax accounts: To maximize tax savings for your employees and your company, consider how you can complement a Fitness and Wellness Spending Account with a tax-advantaged HRA for mental health.
  • Compliance support: While one might think emotional wellness support like mental health therapy should be covered by a Fitness and Wellness Spending Account, there are nuances. Work with a compliance expert to set up a lawful and optimized customizable spending account.

What other benefits are sometimes included?

Fitness and wellness stipends could also include your employee’s nutrition or meals. 

The lack of access to nutritious, affordable food has created a massive problem: diet-related diseases cost $1.1 trillion in healthcare costs. You can help your employees’ brains and bodies by covering healthful foods and nutrition-related expenses.

What to cover:

  • Nutrition programs or apps
  • Cooking or meal kits
  • Groceries or farmer’s markets

Key requirements:

  • Global equity: To scale across the world, cost-of-living adjustments, or COLA, should be considered for determining how much funding to provide your international workers.

How can you build a winning business case for investing in customizable spending accounts?

Customizable spending accounts are wrongly believed to be a luxury benefit when, in fact, they are better at saving companies money and directing desired wellness outcomes than the alternatives.

Before introducing a Fitness and Wellness Spending Account, it’s paramount to carefully scrutinize the program’s ROI.

Here are four steps you should take to justify the investment:

  1. Run a simple ROI exercise: Take stock of your current program spend, employee utilization, and admin time across various point solutions and systems. Compare that against the savings and derived value from a consolidated flexible benefits program that optimizes spend.
  2. Determine your forecasted spend: What you will pay for your new flexible benefits program depends upon many factors – the number of employees, their locations, tax savings, and more.
  3. Find budget and get approvals: When it relates to budget, no stone goes unturned. Consider creative options such as how you can repurpose dollars from stale pools (e.g. shift real estate budgets if your company is now hybrid or remote), use wellness funds offered by healthcare providers, shift a small portion of year-over-year increases, or reallocate your existing reimbursement program spend.
  4. Define success metrics: Collaborate with stakeholders to determine the goals that are imperative for your organization to reach. Set your targets, build reporting for easy monitoring, and measure against them.

Continuously analyze data and monitor success metrics to demonstrate the ROI of your new program. Routinely share the value derived to justify future budgets so your table stakes stipend is here to stay.

Design the optimal stipend for your people

Create a top-tier Fitness and Wellness Spending Account by first identifying employee needs. Align these needs with your company's culture and strategy.

From the start, we recommend collaborating with finance and accounting teams to evaluate the budget and ensure compliance.

With industry-first Eligibility Standards, best practices from numerous customers, and research into topics like peer benchmarks and global benefits equity, Forma will help you every step of the way.

Fitness and Wellness Spending Account FAQs

Are customizable spending accounts a taxable benefit?

Typically, yes - customizable spending accounts that are set up as Lifestyle Spending Accounts, or LSAs, are taxable. Customizable spending accounts may incorporate tax-advantaged elements in special circumstances. In certain countries, there may be laws so the benefit might be non-taxable. Work with a compliance expert to ensure your program is optimized for tax savings.

How does a customizable spending account help with cost savings?

Instead of paying for the full cost of wellness stipends regardless of utilization, spending account funds are “notional”. Companies only pay for what employees use.

How are eligibility parameters defined?

While compliance and tax optimization should be considered, it’s ultimately up to the organizations to determine what expenses they will cover for their spending account. Forma’s Fitness and Wellness Spending Account Eligibility Standards cover our best practices - <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">reach out to one of our experts</span> for a copy today!

Can LSAs be offered to global employees?

Yes, one of the best advantages of an LSA is that it can be provided to employees around the world. Forma provides one platform for all workers that makes admin easy. We have guidelines for companies who seek to provide an equitable global stipend.

What are other common types of spending accounts?

Spending accounts can be used for countless needs. Some of the most common accounts we help companies design are dedicated to remote work, caregiving, and learning and growth. The possibilities are endless! 

How Forma can help

Forma runs Fitness and Wellness Spending Accounts for some of the world’s best companies like Microsoft and lululemon.

Here’s what employees have to say about their fitness and wellness stipend:

“I'm confident I would not have met this goal without this program (I had never taken a Barry's class until I started working here!)—so I'd like to give a huge thank you to lululemon for offering such a great benefit” - Kit B., lululemon employee on LinkedIn
“I have used it for fitness equipment, sports massage and other therapy treatments and it's a whole lot simpler than the more protracted expense processes I had used in the past. It's also more flexible than many work schemes as I can book something local and at a time that works for me.” - Anthony W., G2 review

For more information on how we can help your company build a world-class Fitness and Wellness Spending Account, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts.

Interested to learn how customizable spending accounts can provide holistic support? Choose from the blogs below:

This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor is it intended to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.