What is a Lifestyle Spending Account (LSA)?
What is a Lifestyle Spending Account (LSA)? A Lifestyle Spending Account (LSA) is an employer-sponsored flexible benefit of discretionary funds.
What is a Lifestyle Spending Account (LSA)?
A Lifestyle Spending Account (LSA) is an employer-sponsored benefit that allows employees to set aside money for discretionary spending. LSAs are customizable and can be used for a variety of expenses such as child-care, wellness programs, transportation, home office equipment, and much more. The funds are set up by the employer and the parameters for how the money can be spent are determined by the employer as well. LSAs have been proven to help boost employee morale, loyalty, and productivity as well as give employees the freedom of choice to select benefits that best suits their individualized lifestyles.
The different offerings under an LSA can be tailored to promote work-life balance by including options that boost productivity as well as promote downtime and relaxation. LSAs help employers attract and retain top talent while also providing employees with more control over their benefits package. Let’s take a closer look at how LSAs work and the value they bring to an employer’s benefits offering.
What can an LSA be used for?
LSAs are typically used for wellness expenses not covered by existing health plans, such as fitness classes, gym memberships, spa treatments, childcare services, and more. They can also be used to cover other lifestyle-related items such as online streaming services, food delivery programs, pet expenses, home office equipment, or other related items that promote an overall healthy lifestyle both physically and mentally. The exact parameters will depend on the specific plan offered by the employer. See the latest LSA trends and categories employers are selecting in the 2022 Lifestyle Spending Account Benchmark Report.
The options are limitless and are chosen based on where companies want to focus their benefits investment. LSAs provide advantages for employers and employees by empowering employees to discover and choose meaningful benefits that fit their personal lifestyles and needs. Employers benefit from flexible benefits strategy, endless options for customization, inflation-proof benefits budgets, and the ability to respond to the changing needs of their employees. LSAs are becoming increasingly popular as more employers are recognizing the benefits of this type of account, according to Forma, 71% of their customers offered a lifestyle spending account as of 2021, compared to less than 7% in 2020.
"What is a Lifestyle Spending Account (LSA)?"
A Lifestyle Spending Account (LSA) is an employer-sponsored benefit that allows employees to set aside money for discretionary spending. LSAs are customizable and can be used for a variety of expenses such as child-care, wellness programs, transportation, home office equipment, and much more.
The benefits of offering an LSA
Companies that offer an LSA give employers the opportunity to differentiate their benefits offering from competitors. An LSA allows employers to provide meaningful benefits that directly address the needs of their employees in areas of wellness and lifestyle outside of traditional health insurance coverage. This ultimately leads to increased employee satisfaction which helps create a better work environment for everyone involved. Additionally, when it comes to recruitment and retention efforts, offering an LSA helps position your organization as one that cares about its people.
A Glassdoor survey found that 94% of employees want benefits that positively impact their overall well-being. MetLife's 2022 U.S Employee Benefit Trends Study also showed that 60% of people are interested in a wider range of non-medical benefits they can purchase. This is supported by recent studies, with a 2021 Gartner study revealing that 74% of HR leaders aim to offer more flexible options in their retention strategy.
As the workforce becomes increasingly diverse and spread out, it is crucial to incorporate personalization and flexibility into benefits programs. This approach addresses the general needs of the workforce while also catering to the unique needs of each individual. A benefits program that is both comprehensive and adaptable leads to improved productivity, recruitment, and retention.
10 reasons companies need to switch to Lifestyle Spending Account benefits
Lifestyle Spending Accounts foster workforce wellbeing, attract top talent, and provide inclusive benefits. Companies reduce overall costs and can quickly respond to world events. Benefits professionals are spared the administrative agony of point-solutions. But most importantly, all employees can direct benefit allowances toward what matters most to their unique situation.
See below for the top ten reasons companies need to switch to Lifestyle Spending Account benefits.
- LSAs a great way to grow benefits without growing budget: Multiple point solutions can add up when HR leaders try to address all the areas of wellness. Consolidating under one holistic flexible benefit solution can actually increase the perceived value of that benefit by up to 51 percent.
- Differentiate your company. Live your values: 85% of employees say their companies don’t support their careers. By providing LSAs you empower employees.
- Only pay for what employees use - don’t let dollars go to waste: If an employee only uses $50 of their $100 of their allocated funds, the company saves money.
- You foster wellbeing in the workplace: more value perception for benefits given employee choice vs. those chosen by the employer: Employer chosen benefits see member engagement hovering around 30-50%. Forma’s Lifestyle Spending Account see user engagement around 85%.
- You can attract and retain the best employees: Employees are 1.6x more likely to stay at their company when they are satisfied with their wellness benefits.
- Benefits administrators can do away with the agony of point solutions: 60% of employers are feeling the pain of point solution fatigue. A flexible solution vendor alleviates this headache.
- Employees get to choose benefits that matter most to them: A GlassDoor survey found that 94 percent of employees want benefits that meaningfully impact their quality of life.
- Companies can quickly respond to world events and support employees: Lifestyle Spending Accounts are able to be stood up in as little as 5-10 days. For example, some employers set up emergency relief accounts to support their employees in Ukraine when the international conflict started.
- Companies can actually save money: Affirm saved over $600k by replacing Concur (at $8/claim)
- Equitable DE&I flexibility can address benefits gaps while not marginalizing others: In a recent Gallup poll, 42% of workers said DE&I initiatives were an important part of their next job.
Lifestyle Spending Accounts and the future
In short, having access to a Lifestyle Spending Account can be a great way for employers to provide additional benefits while also helping employees make the most out of their own money. By understanding how LSAs work and being mindful of potential tax deductions when making purchases with them, HR leaders can maximize the value they get from this employee benefit while making sure their team has access to all the resources they need for better physical and mental well-being.