Top 5 Lifestyle Spending Account benefits
Flexible benefits are becoming increasingly popular. Read the Top 5 Lifestyle Spending Account benefits for employers and employees.
What is a Lifestyle Spending Account?
Lifestyle Spending Accounts (LSAs) are infinitely customized spending accounts. Employers fund approved benefits and define eligible expenses for employees. Employees then have the choice of how they spend their benefits.
Usually, a third-party administrator, like Forma, will administer the program, process claims, and manage reimbursements. Because every employee is unique, Lifestyle Spending Accounts benefits are the most efficient approach to flexible benefits and perks available. Companies only spend on perks that get used and are meaningful to employees.
LSA funds are uniformly preferred by employees over prescriptive benefits chosen by the company. They can use the funds for what matters to them.
Why do Lifestyle Spending Accounts exist?
Employee benefits used to be simple. Not too long ago employees could expect a finite amount of benefits. These included: health insurance, dental, vision, optional life insurance, and some sort of retirement benefits.
Over the past 15 years, an employee perks and benefits arms race began. This happened because companies wanted to one-up other employers in the fight for talent. New innovations to combat rising healthcare costs started sprouting up (e.g. high-deductible plans).
With every added benefit has come more administrative burden, more contracting, more vendor management, more employee communications, and more internal support. Use for most of these programs is poor and finance starts to scrutinize whether or not a benefit is worth it. And the benefits and total rewards leaders begin to die a death of a thousand cuts because they’re overwhelmed.
What are the benefits of Lifestyle Spending Accounts?
Since LSAs can be a shift from how HR teams sourced and administered benefits, the concept can be complex to understand.
The benefits of this approach are so widespread that it can be difficult to fully explain and lobby internally for LSAs. These should be considered by organizations to streamline robust and competitive benefits offering. Here are 5 Lifestyle Spending Accounts benefits that should be considered by organizations to streamline a competitive benefits offering.
LSA benefit #1: With added flexibility, EVERY employee can get value from these benefits
The main value of Lifestyle Spending Accounts is that employees have more choices. In short, employees get to choose the benefits that matter most to them. This is a fundamental shift from how most organizations look at how they provide employee benefits, perks, and rewards.
Traditionally, all of these benefit plans were sourced with a “one-size fits all” approach. Perhaps the organization ran an engagement survey and looked at competitive benchmarking data. Each subsequent year they decided to add a new program: fertility benefits, mental health, home office stipends, gym memberships. . . all of these came with good intentions, but the approach makes it nearly impossible to address the priorities of every employee.
Some people seem to keep being left out. LSAs are different, with added flexibility, organizations are much more likely to inclusively provide meaningful benefits for everyone.
LSA benefit #2: Employee's priorities change and so do benefit needs. LSAs meet employees where they are.
A top-down approach simply cannot adapt to employees’ changing priorities. Take, for example, the employee who has recently married and is starting a family. Over a course of months, they can conceivably change their priorities many times over.
Perhaps they started valuing a physical fitness subsidy from their employer. After they got married and wanted help with family planning. Soon after that, their priorities changed again to focus on daycare support.
It is impossible for an organization to plan for everything, for every employee. On top of that, it's difficult when you factor in a multi-generational workplace. LSAs give flexibility and choice to every employee.
LSA Benefit #3: This is a rare HR Tech that employees will rave about!
Every HR team is looking for tools and tactics to improve employee engagement, increase employer loyalty, and reduce employee turnover. This can be hard to do with typical HR technologies.
How much of an impact on the employee experience do our HRIS providers, talent management systems, and intranets really have? Lifestyle Spending Accounts are different. Forma members take to LinkedIn, Instagram, and TikTok to rave about their employers and how grateful they are for their benefits.
LSA Benefit #4: Benefits teams can finally get relief from the benefits arms race
As noted above, with every new benefit offered, there comes a more administrative burden. There is increased communication, vendor management, support time, and cost.
One of the most apparent advantages of Lifestyle Spending Accounts is that they drastically simplify administration. A good benefits support software provider can reduce administrative time, consolidate vendors, and improve the employee experience and communications. They can also provide payroll integrations, claims adjudication, compliance work, vendor management, currency conversions, and more. Consequently, the Total Rewards and Benefits teams can now free themselves up to focus on more strategic initiatives.
LSA Benefit #5: LSAs actually save money and you can make every dollar count!
Lifestyle Spending Accounts are different from almost every other employee benefit and perk out there. Typically if an HR Leader wants to procure a new benefit, that will be an added cost, budget item, or subscription. In most cases, LSAs are not put in place with a net-new budget. Instead, they relocate existing program spend to help eliminate inefficiencies.
Companies can expect to eliminate wasted funds on subscriptions or services that are poorly utilized. LSAs drive down administrative costs and get an increase in employees’ perceived value in the funds put into flexible spending accounts.
Companies can look at existing benefits offerings, their costs, and their utilization. Employees will perceive it as an improvement because they receive more agency over how funds are spent.
LSAs for the modern workforce
Lifestyle Spending Accounts benefit everyone: employers, employees and families alike. If you're looking for an equitable benefit to meet the demands of the modern workforce, look no further than an LSA.
For more information on how LSAs can help your company save money, alleviate HR headaches and provide unlimited flexibility to employees, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts. We’d be happy to help you find the perfect Lifestyle Spending Account solution for your unique needs.