Lifestyle Spending Account best practices: 5 expert recommendations
Know the health and wellness benefits options, structure, and best practices for managing your company’s lifestyle spending account.
Understand the benefits of Lifestyle Spending Accounts
Employee benefits have become an important business differentiator.
Not only do employee benefits help employers to attract and retain top talent, but it also shows employees you are invested in their overall health and their future. Offering health and wellness benefits to workers can lead to a healthier, highly motivated, and more productive workforce.
Up to 41% of employees in the health care, education, and private sectors had access to healthcare benefits in 2019, but nearly half (44%) of these workers gave up some or all of their contributions.
This is due to several reasons, but primarily because benefits aren’t meeting the specific needs of employees.
Every employee has unique needs.
A 25-year-old college grad, for instance, has very different needs than someone planning for retirement. And with the shift to increased remote or hybrid work options, there’s been a steady change in employers offering more flexibility in benefits that speak directly to employees’ unique lifestyles.
5 steps for managing an LSA effectively
Engaging employees in wellness programs can lead to a healthier, more productive workforce.
In this best practices guide, we outline the health and wellness benefits options, structure, and best practices to effortlessly manage your company’s lifestyle spending account that will harness employee engagement and interest.
1) Understand the funding needs.
So, the big question: How much funding should you allocate per employee?
This can be done in two ways:
- Companies can either base their contributions on the average industry standard for their employment sector, or by
- Determining the available budget and dividing this by the number of employees.
A great way to support remote employees is by offering a remote work stipend.
Although setting up an employee benefits program can be done internally at your company — partnering with a Third Party Administrator (TPA) such as Forma that specializes in turning your employee benefits program into a cohesive strategy without any administration required on your part can prove beneficial.
2) Determine the types of employee benefits to offer.
Let’s face it, not everyone is interested in a gym membership, and while some employees would prefer to attend a yoga class to maintain stress levels, others may benefit more from caregiver assistance or a meditation app membership.
With increased remote or hybrid work options, benefits pertaining to remote work setups are fast becoming a popular choice. Offering benefit flexibility allows employees to spend their benefits in areas that matter to them.
A survey asking employees where they would prefer to spend their money is an effective way to determine which benefit categories to offer your employees.
You’ll also need to take your company’s budget into consideration since lower-end budgets won’t allow for certain types of employee benefits. Start by offering a smaller band of options and gradually grow your employee benefits package from there. This is much more prudent than kicking off with an extensive and elaborate package and then pulling the plug later.
Work From Home
This is a flexible option for the employer and offers employees more perks with less money. This benefit, in the form of a remote work stipend, can be allocated monthly, quarterly, semi-annually, or annually and is generally used for home office equipment, a coworking pass, coffee, or learning and development.
Health and Wellness
This is generally allocated in the form of gym memberships, yoga classes, athletic wear, nutrition counseling, life coaching, and food supplements.
You could also set up the employee lifestyle spending account to pay for alternative wellness such as acupressure treatments or massage visits.
Nearly one in five people over age 18 in the US live with a mental illness, and 30% of these individuals don’t seek treatment largely because of costs. LSA can be of great benefit in this regard; especially for alternative therapies, counseling, online therapy, and meditation apps that are quickly gaining popularity in helping reduce the effects of stress, anxiety, and depression.
This type of benefit account can be used to pay for preschool, summer day camp, child and elder care, as well as before or after school programs. This takes a huge burden off employees’ shoulders, allowing them to work with more ease knowing their loved ones are taken care of.
Lifestyle benefits allow employees to use their funds for anything that promotes their own wellness.
3) Establish when to distribute funding.
Depending on the company’s budget, the Forma team recommends three options:
- Monthly funding is a good choice if the company has significant funds.
- The quarterly option is a good fit if there are a limited amount of funds — in the event, employees forget to use their benefits for the month, they still have the next two months to use them.
- Annual plans are best for small business owner budgets.
4) Set a cadence for how much time employees have to spend LSA funds.
Not allowing any rollovers may be very limiting for employees, but full rollover may be unrealistic as well.
Quarterly plans are generally the most popular and allow employees to spend January and February’s funds up till the end of March, for example.
Annual plans can be beneficial to employees, however, they can create havoc with business funds if multiple employees decide to spend their entire lifestyle spending account funds in one month.
5) Educate employees.
As companies continue to extend their remote environments, a large proportion of workers will be making important decisions without the in-person support of Human Resources (HR) teams, which means employee communications and education should take precedence.
Whether the company is introducing a new LSA to the entire organization, onboarding new hires, or reviewing options before open enrollment — it’ll be very useful to provide a high-level overview of employee spending accounts prior to any discussions about LSAs with your employees.
Providing material that covers the basics of employee spending accounts will also prove beneficial. This material can be posted on your company’s intranet or benefits site, as well as distributed via email or in paper form via postal mail.
Start small when familiarizing employees about spending accounts and gradually build your communication to expand on the details. An email campaign is a great introductory option. Other communication channels might include: presenting the information in onboarding demo sessions, in a company-wide meeting, or for more elaborate launches, consider planning a wellness event.
Partner with the Lifestyle Spending Account experts.
Delivering a customized benefits package isn’t easy. Get help and remove administrative burdens from your HR and finance teams, with our clients reporting 50% fewer employee inquiries with Forma.
Giving employees benefit options is becoming a more important strategy for successful HR leaders to maintain a supported and healthy workforce. Forma is designed to help you meet the demands of a modern and diverse workforce, giving employees the freedom to choose health and wellness options that fit their unique lifestyles.