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What are flexible benefits?

What are flexible benefits? What are the benefits of offering them to employees and why are more and more companies offering them?

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What are flexible benefits: an overview

Employee needs in the workplace are constantly changing. Flexible benefits are a type of employee benefit plan that allows employees to customize their benefits package. With flexible benefits, employees can choose from a variety of options.

This is different than the standard offering of a core benefits package that employees may or may not utilize. Employers can allow employees to choose the benefits that fit their needs. These options include healthcare coverage, retirement plans, life insurance, Lifestyle Spending Accounts, and other perks.

Benefit flexibility has evolved over the years. “Cafeteria plans” in the U.S. allow employees to build their own pretax benefits bundle while complying with Section 125 of the IRS code. More contemporary Lifestyle Spending Accounts are effective spending accounts defined by the employer.

Common flexible benefits packages

Flexible benefits plans are just that - flexible. Some allow employees to allocate a certain amount of money toward the benefits they want to receive. Others provide mutually exclusive selection criteria. Others are set up as employee-driven spending accounts where eligibility is dictated either by regulatory or employer-defined criteria.

Below is a list of common flexible benefits packages:

  1. Healthcare coverage: Employees can choose from different levels of healthcare coverage. Employees can consider HMOs, PPOs, or other health insurance plans plans.
  2. Retirement plans: Employees can elect to contribute a portion of their salary towards retirement plans. Popular retirement plans include 401(k)s or IRAs to help employees plan for the future.
  3. Retirement plans: Employees can elect to contribute a portion of their salary towards retirement plans. Popular retirement plans include 401(k)s or IRAs to help employees plan for the future.
  4. Flexible spending accounts (FSAs): FSAs allow employees to set aside pre-tax dollars to cover healthcare expenses. These expenses include deductibles, copays, and prescriptions.
  5. Lifestyle Spending Accounts (LSAs): LSAs give employees the ultimate choice and flexibility on how they want to spend employer-sponsored funds. Rather than procure hundreds of “point-solutions” that may or may not be in the best interest of your employees, LSAs put decisions in the employee’s hands and help make every benefits dollar count.
  6. Other perks: Employers can also offer other benefits such as paid time off, education assistance, or wellness programs.

Why flexible benefits?

Flexible benefits plans offer a wide range of custom benefits for a diverse employee workforce, including:

  1. Customization: Offering flexible benefits is a smart way to increase employee satisfaction and retention. A one-size-fits-all package doesn't meet the demands of a modern workforce. Flexible benefits programs allow employees to choose the benefits that best meet their individual needs and lifestyle. This level of customization can lead to happier employees who feel valued and cared for by their employer.
  2. Tax savings: Another major advantage of flexible benefits plans is the potential for tax savings. By setting aside a portion of their salary towards benefits before taxes are deducted, employees can effectively lower their taxable income. This can be especially beneficial in today's fluctuating market conditions, where every penny counts.
  3. Increased job satisfaction: In addition to improving financial well-being, flexible benefits can also boost overall job satisfaction. Employees are more likely to feel invested in their job when they are in control of their benefits. This can lead to higher morale, productivity, and retention rates.
  4. Improved health outcomes: Flexible benefits can also have a positive impact on employee health outcomes. With access to a variety of healthcare options, employees can proactively manage their health and prevent chronic conditions. This can result in lower healthcare costs for both the employee and the employer.

The benefits of flexible benefits for employers

Flexible benefits plans also offer a range of benefits for employers, including:

  1. Cost savings: By allowing employees to choose their own benefits, employers can save money on benefits costs overall. Employees are only selecting the benefits that they actually need. Employees won't be accepting packages that includes benefits they may not use.
  2. Improved recruitment and retention: Flexible benefits plans are becoming increasingly popular among employees, particularly among younger generations. By offering flexible benefits, employers can attract and retain top talent who are looking for custom benefits options.
  3. Increased productivity: When employees are satisfied with their job and benefits, they are more likely to be productive and engaged in their work. This can lead to improved customer service and higher-quality work.
  4. Compliance with regulations: Many flexible benefits plans are subject to regulations such as the Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA). Employers can avoid costly fines and penalties by offering a compliant flexible benefits plan.
  5. Better employee engagement: With flexible benefits, employees feel that their employer cares about their individual needs and interests. Flexible benefits plans can help foster a sense of community and shared purpose within the workplace.
  6. Better overall benefits equity: Despite benefits leaders’ best intentions, it’s nearly impossible to create a benefits plan that helps an entire multi-generational workforce. Flexible benefits are more equitable for everyone because the choice is given to the employee.


In conclusion, flexible benefits plans have become increasingly popular among employers and employees alike. By allowing employees to customize their benefits package to fit their individual needs and lifestyle, flexible benefits plans offer a range of benefits for both parties.

For employees, they provide customization, tax savings, increased job satisfaction, and improved health outcomes.

For employers, they offer the employees cost savings, improved recruitment and retention, increased productivity, compliance with regulations, better employee engagement, and better overall benefits equity.

As the workforce continues to evolve, flexible benefits plans will likely become even more important in attracting and retaining top talent and promoting a culture of employee satisfaction and well-being.

For more information about flexible spending accounts, <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.

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