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The power of customizable spending accounts to uplift working caregivers

How to meaningfully support an employee’s caregiving needs with a flexible approach that benefits your organization.

8
 Min Read 
• 
1/4/24

Key takeaways

  • Employee productivity and performance can suffer when caregiving becomes stressful – a common occurrence in workplaces as three in four employees are caregivers.
  • Conventional caregiving perks lack the customization that employees desire; this results in misallocated investments and low employee engagement.
  • Caregiving Spending Accounts offer a tailored solution since employees can use employer-sponsored funds to address diverse caregiving challenges efficiently.
  • Personalized and centralized support, efficient budget allocation, and streamlined administration are some of the many benefits of customizable spending accounts that make them a preferred solution for both employees and employers.

The urgent need for companies to support caregivers

Three in four employees are caregivers, a role that can take an emotional and physical toll. Challenges for caregivers are only compounded by a 30% surge in caregiving costs since 2019 and a steady decline in the availability of quality caregivers.

When caring for others becomes a predominant concern, it can diminish worker productivity, increase workplace stress, and jeopardize workforce participation altogether. More than one-third of adults not in the labor force cite caregiving as the reason why they do not work.

To help, companies might offer a flexible work environments or various point solutions that cover a range of caregiving needs. Still, businesses wind up with misallocated investments, and employees feel unsupported. 

Instead, companies should provide assistance that can adjust to the genuine needs of a caregiver. A customizable spending account dedicated to caregiving is a proven solution. With a Caregiving Spending Account, an employer defines policies for usage and caregivers can use their employer-sponsored funds to address the challenges they uniquely face.

In this guide, we will examine why common caregiving solutions may be inadequate and elaborate on how Caregiving Spending Accounts are a superior option.

4 reasons why insufficient caregiving impacts organizations

Caregiving perks are an essential benefit, especially given how commonplace it is for workers to look after someone in their home or community.  Read below for four key insights about why frequently offered caregiving perks aren’t moving the needle.

1. People have diverse and unique caregiving needs

Caregiving needs are highly unique to each individual. Your workers might support a child, parent, extended family member, pet, neighbor, or some combination of these groups, especially if they’re a member of the “sandwich generation”. 

The multitude of caregiving demands lies at the core of an employer's challenges. A generalized strategy for caregiving perks does not work.

2. Workers neither use nor value their perks

To support caregivers, companies often provide accommodating work environments as a solution. While programs like flexible working hours and leave policies do support workers, employees tend to not use these benefits because of the stigma that they will be viewed as less committed to work.

And while many purposeful caregiving-focused point solutions are on the market today, companies encounter challenges when they bring on multiple offerings. It’s complex when there is one platform for eldercare, another program for childcare centers, and a separate service for pet support. Workers become encumbered by distinct systems. This creates a frustrating employee experience, only exacerbated because individuals often tap into these programs when in need.

Consequently, point solutions may go unused and undervalued. 

3. Budgets are inefficiently used

Substantial payments for multiple caregiving solutions deplete your benefits budget. Research from The Caring Company and Harvard shows that the benefits offered by companies are frequently misaligned with the benefits that employees want, so utilization of caregiving perks across the board is low. 

Many of the tech-first point solutions operate on a per-employee, per-month (PEPM) fee structure. Payments are required no matter the employee engagement. Vendor costs are often high while value derived from the benefit can be minimal. This results in a poor allocation of capital.

4. Programs are difficult to administer

A wide array of caregiving benefits means that companies commonly offer a medley of options for workers to choose from. More programs mean there are countless systems, vendors, and processes for HR teams to manage. User support alone requires hefty admin brainpower. Your benefits team spends time managing complex systems rather than supporting individuals.

How Caregiving Spending Accounts can transform lives

Given how personal caregiving can be, bespoke solutions are what will help your employees. To this end, customizable spending accounts can be revolutionary for all involved.

Here are thekey reasons why a Caregiving Spending Account is the perfect solution for caregiving support.

Allows for customization at the employee level

Employees can choose how to use their allowance based on who they support and where they can use most help. A sample of how employees have tapped into their Caregiving Spending Account include payments for backup childcare, specialized memory care consulting, or coaching services for a family member with special needs. Employees will love their account, and you will see increased engagement and satisfaction as a result.

Becomes a centralized place to support all kinds of caregiving

One individual might require caregiving for their kids and their aging parents. Instead of switching between multiple systems to access their benefits, you can consolidate caregiving perks under a customizable spending account.

In the U.S., you can even pair a tax-advantaged Dependent Care FSA (DCFSA) with a Caregiving Spending Account to help provide supplementary support for any items that are not covered by a DCFSA.

Ensures your budget is spent efficiently

When you bring multiple caregiving perks under one roof, you can save in big ways.

The PEPMs required of point solutions can be done away with completely - an important consideration given how utilization is commonly low for each solution. Furthermore, spending accounts are considered notional. Companies only spend what employees use, so organizations often experience large savings once their spending account is live. 

Gives admins time back

From a benefits professional’s perspective, spending accounts are a dream to manage. You’ll no longer need to spread yourself thin across numerous vendors. With a modern TPA, admin tasks are streamlined into one easy-to-use platform.

How to craft a strong business case for a Caregiving Spending Account 

To gain alignment and buy-in across your organization, you will need to outline why you should make a change and use a spending account model for your caregiving perks.

Start with conducting a simple ROI exercise. Assess current program spend, employee utilization, and administrative time. Compare against potential savings from a consolidated flexible benefits program.

Next, you should determine forecasted spend. Consider factors such as the size of your caregiving population, potential budget utilization, and tax savings to estimate costs. Alongside forecasting, you will want to secure your budget. Companies often repurpose funds from unused or undervalued caregiving budgets. As a best practice, discuss your plans with finance and accounting.

Collaborate with stakeholders to set crucial organizational goals and success metrics. Establish targets, implement reporting for easy monitoring, and measure against them.

At this stage, you will roll out your spending accounts based on the approved budget and defined success metrics. After launch, ensure you continuously analyze the data to regularly monitor program performance. Insights will help to refine and optimize the program for ongoing success. Finally, communicate the derived value and ROI to stakeholders. This will help justify future budgets so you can make sure you achieve longevity with the program.

Experts in customizable spending accounts can help you build your business case. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a consultation</span> with Forma today for personalized support.

Best practices for Caregiving Spending Account design

Caregiving Spending Accounts can encompass a range of stipend types that help employees best support the people in their lives. 

What to include for childcare

Recently, childcare was thrust into the limelight of a major U.S. government policy: semiconductor manufacturers that apply for over $150 million in CHIPS federal funding must have childcare support to receive government money. In the guideline for application, cash assistance was highlighted as a recommended approach to childcare given the high degree of built-in flexibility.

Here is what Forma recommends to cover for an effective childcare stipend for workers, no matter the industry. 

What to cover:

  • Baby gear & accessories 
  • Babysitters or nannies 
  • Daycare centers
  • Child education (e.g., preschool,  before/after school care, tutors)
  • Child remote learning technology
  • Childcare service platforms (e.g., Care.com)
  • Parental coaching

Tax benefits:

  • To optimize tax savings, companies should utilize DCFSAs when available. 
  • When administered via a Lifestyle Spending Account, or LSA, a Caregiving Spending Account is considered a taxable benefit. For maximum employee support, a Caregiving Spending Account should be used to cover any caregiving expenses that are ineligible under a DCFSA or exceed the DCFSA maximum of $5,000 annually.

Key requirements:

  • One platform for pre-tax and post-tax spending accounts: Pair a tax-advantaged DCFSA with a taxable LSA for caregiving to provide complete coverage. Doing so under one platform makes it easy to use and easy to manage.
  • Real-time utilization and spending trends: Since there is sometimes a stigma associated with caregiving benefits that can diminish employee engagement with the benefit, ensure that you can easily monitor employee utilization and spending trends to unearth when funds aren’t being used to their fullest extent. This will help you communicate success stories to destigmatize such programs.

What to include for eldercare

The costs of caring for an adult family member add up. On average, family caregivers spend more than a quarter of their income on caregiving-related activities. To offset costs, improve financial well-being, and reduce stress, companies can provide an eldercare stipend as part of their caregiving LSA that includes both health-related and enjoyment-related expenses.

What to cover:

  • Adult daycare center or day senior care
  • Adult nursing care
  • Bereavement (e.g., funeral fees, death certificates, and burial fees)
  • Custodial elder care
  • Elder enrichment classes
  • Geriatric services consulting
  • Long-term care insurance
  • Online resources for eldercare

Tax benefits:

  • To optimize tax savings, companies should utilize DCFSAs when available. 
  • When administered via a Lifestyle Spending Account, or LSA, a Caregiving Spending Account is considered a taxable benefit. For maximum employee support, a Caregiving Spending Account should be used to cover any caregiving expenses that are ineligible under a DCFSA or exceed the DCFSA maximum of $5,000 annually.

Key requirements:

  • Product and service discoverability: Provide a means to help your employees find vetted help with a curated list of services. Ideally, direct employees to an all-encompassing marketplace where they can search for the right solution based on their needs. Employees will be delighted to know top-tier caregiving programs are offered at a discount in a marketplace like the Forma Store
  • Support for multiple spending accounts: In addition to a caregiving allowance, offer a distinct account dedicated to your caregiver’s own well-being - whether that be focused on your employee’s physical, emotional, or financial health.

What other benefits are sometimes included?

People – and their animals – need additional support. Two other common related accounts that companies offer to pet owners and new parents are explained below.

Pet Care Spending Account

Strikingly, 62% of Americans have a pet. Taking care of a dog, cat, bird, or even fish requires upkeep, and a customized spending account dedicated to pets will help. 

What to cover:

  • Pet products
  • Pet services

New Parent Spending Account

A baby brings excitement and joy to families. But for new parents, the first few months of parenthood can be overwhelming. Companies can help with an account that covers the tools and accessories that alleviate the stress of taking care of a newborn.

What to cover:

  • Baby food
  • Baby gear & accessories

Implement a world-class caregiving stipend

With knowledge in hand of how companies commonly set up a Caregiving Spending Account, you will need to determine how to set up the ideal solution for your employees.

Start by assessing what your employees need – focus groups and surveys with individuals across your organization work best.

Next, consider your overall company performance and productivity goals. Understand how you can design a program that supports your people given what they shared with you, and how it can help accomplish bigger objectives for your organization.

Finally, design your account. Collaborate with both internal stakeholders and your benefits administrator on efforts like budgeting and compliance. Lean on industry experts to guide what setup will work best for your unique employee population and company. Forma has benchmark data, market trends, and global best practices to help incorporate into your process.

Caregiving Spending Account FAQs

Is a Caregiving Spending Account a taxable benefit?

Yes - customizable spending accounts that are set up as Lifestyle Spending Accounts, or LSAs, are taxable. Customizable spending accounts may incorporate tax-advantaged elements in special circumstances. In certain countries, there may be laws so the benefit might be non-taxable. Work with a compliance expert to ensure your program is optimized for tax savings.

Can I offer a Caregiving Spending Account to employees in addition to a Dependent Care FSA?

Yes. An expense can be covered under a Dependent Care FSA (DCFSA) and still eligible under an LSA. For optimal tax benefits, use a DCFSA up to the IRS maximum, and consider using an LSA for caregiving expenses beyond DCFSA limits or for any items not covered by a DCFSA. 

How can I ensure a spending account covers my workers’ needs?

Employees decide how to use spending accounts funds. Within Forma’s platform, employees can discover and directly purchase top-tier caregiving-related services at discounted rates. For example, UrbanSitter helps parents hire pre-vetted babysitters, Grayce provides families with personalized plans to support aging and vulnerable family members, and Airvet gives pet owners virtual access to veterinarians.

How does a Caregiving Spending Account result in financial savings?

There are many ways to save. In terms of costs, a spending account eliminates the need for individual point solutions, a crucial move given the typically low utilization of such perks. Companies only spend when employees use their funds; the notional nature of these accounts results in organic savings. Importantly, customizable spending accounts are a hugely valued benefit. Compared to being provided with a point solution, employees perceive allowances to have higher value

Can I provide a New Parent Spending Account for employees to use on their leave, or when they return to work?

The choice is up to you. New Parent Spending Accounts are a great way to offer support via a one-time account, no matter when you offer them. Often, companies offer the account when employees share the news that they will be going on parental leave.

Partner with Forma for your Caregiving Spending Account

Forma’s modern approach to customizable spending accounts provides an effortless way for employees to access caregiving support in ways most relevant to them. Forma has supported caregiving workers around the world at companies like Allbirds and Stripe

Forma member Jasmine raves about her Forma benefit:

“Childcare is very expensive these days. Being a full-time parent/employee can be difficult to manage. There are benefits such as these provided that can be a huge help to everyone”

As you evaluate how you can help your caregiving population show up best for their families and your workplace, we’re here to help. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Get in touch</span> with a Forma expert today.

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This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor is it intended to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.