What is covered under a Lifestyle Spending Account?
Not sure what is covered under a Lifestyle Spending Account? LSAs are an expansive wellness benefit with expenses defined by your employer. Read here.
An overview of Lifestyle Spending Accounts
Lifestyle Spending Accounts (LSAs) are infinitely flexible benefit spending accounts where the employer contributes a stipend for approved benefit use cases. Employers can define eligibility rules and what is covered under a Lifestyle Spending Account. They then give the employees choice on how they spend their benefits.
Usually, a third-party administrator, like Forma, will administer the program. The administrator will process claims and manage reimbursements.
Employees are unique, which makes Lifestyle Spending Accounts the most capital-efficient approach to benefits and perks available. Companies only spend their budget on perks that get used by employees.
LSAs are uniformly preferred by employees over prescriptive benefits chosen by the company. These employer-funded accounts get used by employees for things that matter to them.
How do Lifestyle Spending Accounts Work?
With LSAs, employers can set up various allowances and define eligibility parameters. For example, a company can offer employees $100 per month for approved wellness activities. Employers can create a separate LSA account for financial aid assistance, and even one-time usage benefits for things like adoption assistance or a new hire’s home office equipment. The options are truly endless.
Some companies will be prescriptive with multiple spending account types. Others oftentimes create a catch-all Lifestyle Spending Account where employees can use LSA funds in a variety of ways. Examples include mental health, physical fitness, learning & development, and caregiving. The company decides what is eligible.
This is where things get exciting. Rather than investing in another well-being initiative that employees may not use, the LSA approach ensures employees can choose what’s best for them given their unique needs. You can envision employees allocating their benefits differently throughout their lives. Perhaps 20-year-olds spend it on gym memberships, 30-year-olds on childcare assistance, and 40-year-olds on added financial planning.
Typically, the benefits platform provider manages all of the employee reimbursement claims, vendor relationships, and compliance factors within one platform. The benefits teams’ “point solution fatigue” goes away. More importantly, employees have more flexibility and choice for the vendors and services they use.
What is covered under a Lifestyle Spending Account?
Lifestyle Spending Account expenses can fall under several categories. Some accounts are designed to include health and wellness expenses. Others include education and personal development expenses, child and elder-care expenses, and other eligible expenses.
Health and wellness expenses include fitness memberships, wellness programs and services, and mental health services. Education and personal development expenses include tuition fees for courses, books, and learning materials. Child and elder-care expenses include childcare services and in-home nursing care for elders. Other eligible expenses include travel expenses, pet care services, and charitable donations.
Forma Research conducted a study on the most popular accounts employers set up as eligible expenses for Lifestyle Spending Accounts. There are endless options for designing an LSA program. The only limiting factors are imagination and budget. Here were the top 5 LSA categories and sub-categories from Forma Research:
- Fitness activities
+Gym class fees
+Athletic event fees
- Home office
- Fitness equipment
+Home gym equipment
+Child supplemental education
- Well-being services
+Primary care substitute
The list above only scratches the surface of what can be approved under a lifestyle spending account. It’s ultimately up to the employer to how the program is designed. The Lifestyle Spending Account benchmark report is a great resource to help with your program design.
Ineligible expenses under Lifestyle Spending Accounts
It is essential to note that not all expenses are eligible for reimbursement under a Lifestyle Spending Account. Ineligible expenses include expenses that are not related to the employee or their dependents, illegal or fraudulent expenses, and expenses not permitted by the employer or the plan administrator. It is critical that the plan design is explicit so employees know which expenses are covered under the plan.
How LSAs are leveling up benefits
Many HR leaders may be rightfully desensitized to technology companies and service providers who constantly claim to be a silver bullet to attract and retain talent. The same can be said about claims to improve employee engagement.
But as mentioned above, LSAs are proven to provide more competitive benefits offerings without increasing budget. They increase employee advocacy and nudge employees toward their own development. LSAs give them something they truly find meaningful. Lifestyle Spending Accounts have a positive impact on company culture, attracting talent, and keeping engaged employees.
In conclusion, a Lifestyle Spending Account is a beneficial employee benefit plan that promotes employee well-being and increases job satisfaction. It is essential to understand what expenses are eligible for reimbursement to maximize the benefits of a Lifestyle Spending Account. By offering this benefit to employees, employers can attract and retain top talent while promoting a better work-life balance for their employees.
<span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Reach out to one of our Forma experts</span> to learn more about implementing a Lifestyle Spending Account today!