Unlock workplace learning and growth at scale with customizable spending accounts

Key takeaways

• Traditional learning and growth perks often have high costs, administrative burdens, and little employee awareness.
• Customizable spending accounts dedicated to learning and growth offer an effective solution. They empower employees with the flexibility to strategically use allocated funds for their professional development and education in ways most meaningful to them.
• Companies find that customizable spending accounts generate impact – they help optimize their capital allocation, minimize administrative oversight, and maximize their tax savings.

Elevate employee learning and growth with customizable spending accounts

An organization's success depends on its people. Leaders understand that a key to the ever-changing future of work is to hire, retain, and develop top talent.

However, a staggering 74% of employees feel unsupported when acquiring new skills.

Many HR teams have limited resources and time, making it difficult to address the diverse learning and growth needs of their workforce. To empower employees, a customized approach to learning and growth is essential. But how can a personalized strategy be seamlessly implemented at scale?

Customizable spending accounts emerge as a leading solution. Professional Development and Educational Assistance Spending Accounts are quick for employers to design and easy for employees to use. Companies sponsor the account and set rules for what learning-related expenses they cover. Employees then choose how to use their learning and growth funds given their individual growth goals and love the program as a result.

This guide explores the shortcomings of current learning perks, and why customizable spending accounts stand out as a superior alternative.

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Challenges with conventional learning and growth perks

There is great evidence that shows how companies should invest in employee learning to sustain their competitiveness. This investment not only draws in high-caliber talent but also reduces turnover, fosters loyalty, and boosts overall business performance.

However, the learning and growth perks that organizations commonly offer today are laden with challenges. Here are three typical strategies that companies employ, how they can fail to engage workers, and where employers often run into problems.

Strategy #1: Invest upfront in learning and growth programs

Common challenges:

1. Inability to meet employees where they are: HR teams have a plethora of learning solutions and experiences to choose from. No matter what programs a company invests in, a one-size-fits-all approach to learning and growth often does not meet the true diversity of employee needs. 
2. Significant capital required: Annually in the U.S., $88 billion is spent on corporate training programs alone. Despite heavy investments, only 40% of companies effectively align their learning strategy with their business’s strategic objectives. Fixed topics like how to communicate effectively or project management 101 delivered to large groups likely means the content will not be relevant for every attendee. With minimal practice on how to apply the skills to real-world situations, learnings are quickly forgotten.
3. Heavy admin required for Learning & Development teams: L&D teams have a lot on their plates. They manage vendors and provide user support for their learning management system (LMS) and learning experience platform (LXP), develop curricula, manage compliance mandates, lead trainings, and more. These tasks may get in the way of strategic efforts.

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Strategy #2: Retroactively reimburse for learning and growth-related expenses

Common challenges:

1. High burden of proof prevents employee usage: Especially if companies aim to optimize tax savings, relevant policies and procedures need to be in place for proper compliance. The amount of proof required for reimbursement may be too burdensome for employees, therefore they don’t maximize potential savings. They miss out on the value they could have received had it been simpler to submit for reimbursement.
2. Paperwork and compliance make for complex administration: All of the aforementioned reimbursement paperwork needs to be managed. Some semblance of cross-functional support is needed to make this happen, usually among benefits, L&D, and accounting teams. The time it takes to manage a reimbursement program quickly adds up.  
3. Hidden added costs: Companies often use expense management systems to manage reimbursement processes. While the primary use case for these systems – business travel reimbursement – similarly requires adherence to company policies, these platforms can come with hidden costs. Each time an employee submits a claim, the expense management vendor charges a per-claim fee. Therefore, your forecasted budget has to painfully incorporate the amount you reimburse to employees and such extra fees.

Strategy #3: Proactively provide a stipend to all employees for learning

Common challenges:

1. Lack of appreciation for the benefit: If it’s appended to each paycheck, employees might not be aware that you give them a set amount for their learning. In addition, they may not understand what the amount is for without proper internal education or communication. The invisibleness of the stipend further hinders employees from realizing its true worth.
2. Misallocated capital: The allocated budget for your learning stipend is used to its fullest extent. Since employees may not know about the valuable perk, you provide a benefit that goes unrecognized. For the few employees who are aware of the stipend, there is no assurance that the funds are directed toward their intended learning. This diminishes the well-intended impact on professional growth and development.

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How customizable spending accounts can transform individual learning and growth

Customizable spending accounts are a groundbreaking solution with major benefits for workers and companies.

Employees highly value the perk

When designed well, a customizable spending account can be both inherently flexible and directive. With the help of L&D teams, benefits professionals can determine what’s eligible and what’s not for learning and growth spending accounts.

Set up your program with a modern third-party administrator (TPA) so it’s easy for individuals to use their funds. Employees will place high value on their newfound perk, whether to reduce student loan debt or pursue certifications, and this, in turn, boosts employee satisfaction. Over time, your people will become more skilled, exhibit greater performance at work, and generate tangible value for your business.

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More efficient allocation of capital

Spending accounts give employees options for their learning journeys. They can spend their allowance on the skills they want to learn or financial support they need which only maximizes the return on your investment. 

You minimize costs that you might spend today on underutilized learning platforms and experiences, or any unnecessary per-claim fees from your reimbursement programs. 

Companies also gain because they only pay for funds that employees use. Spending account funds are considered notional. This means that the company incurs costs only when employees utilize their benefits and submit claims for reimbursement.

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Minimal admin oversight to optimize tax savings and ensure compliance

Customizable spending accounts can be used to administer both taxable learning benefits and tax-free qualified educational assistance programs. While companies must meet several requirements to qualify under such programs, a modern TPA uses technology to make processes seamless. The convenience and ease of use encourage employees to engage with their benefit. Employers can seamlessly support individuals and satisfy requirements so both parties garner tax savings.

Want more insight into how customizable spending accounts can help your business save? <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Get in touch with a Forma expert</span> for a 1:1 consulting session.

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What should you include in a customizable spending account to support learning and growth?

A comprehensive learning and growth stipend will ensure every employee feels supported by their employer. The following details how to set up attractive and competitive spending accounts.

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What to include in a Professional Development Spending Account

The World Economic Forum anticipates that 44% of workers’ skills will be disrupted in the next five years. Companies are well positioned to help upskill and reskill their workforce, and that’s where a Professional Development Spending Account comes into focus.  You can empower employees with limitless options to pursue their career advancement.

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What to cover:

• Career coaching
• In-person or online learning courses 
• Industry events
• Professional tools for learning (e.g. books)
• Testing fees (e.g. certificates)

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Tax benefits:

• A Professional Development Spending Account can be set up as either a taxable Lifestyle Spending Account (LSA) or a tax-advantaged account.
• Under Internal Revenue Code Section 127, employers can provide each worker up to $5,250 per year tax-free for education expenses that may or may not be work-related. And under IRC Section 132, employers can provide workers tax-free funds for education expenses that are related to a worker’s job as a working condition fringe benefit. 
• Employers can provide additional reimbursement beyond $5,250, however, it will be classified as taxable income and is best administered via an LSA.

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Key requirements:

• A single platform for all spending accounts: Use a TPA that can host tax-advantaged and post-tax benefits in one place. This streamlines how you craft and manage your programs to optimize tax savings for you and your workers.
• Consumer-grade user experience: Within your solution, ensure that it’s clear to individuals what expenses are covered by the program and any policies they must adhere to. This way, individuals know what’s covered and take advantage of the perk.

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As a leader in the flexible benefits space, we have the industry's first eligibility standards for customizable spending accounts. Download your copy of the standards set for a Professional Development Spending Account today.

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What to include in an Educational Assistance Spending Account

Educational assistance can be a competitive perk that attracts people to your company. Your workers may carry debt from their education and student loans can severely burden an employee’s financial well-being. In turn, this could impact their work performance. Only 17% of employers offer student loan repayment benefits which showcases an opportunity for companies to do more to support their people.

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What to cover:

• Tuition assistance
• Student loan consulting services
• Student loan repayment
• University programming 

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Tax benefits:

• An Educational Assistance Spending Account can be set up as either a taxable Lifestyle Spending Account (LSA) or a tax-advantaged account.
• For tuition assistance, under Internal Revenue Code Section 127, employers can provide each worker up to $5,250 per year tax-free for education expenses that may or may not be work-related. And under IRC Section 132, employers can provide workers tax-free funds for education expenses that are related to a worker’s job via a working condition fringe benefit. 
• For student loan payments, employers can provide each worker up to $5,250 per year tax-free for student loan payments under IRC Section 127. This is in addition to any educational expense payments. The provision under the CARES Act is set to expire in 2026 therefore it is recommended that companies take action sooner rather than later.
• Employers can provide additional reimbursement beyond $5,250, however, it will be classified as taxable income and is best administered via a Lifestyle Spending Account.

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Key requirements:

• Program compliance & approvals: Given the high price tag for education, leadership should be looped in when employees wish to spend their educational assistance dollars. Ensure that there’s a process for managers to approve funds for employees and the ability for employees to submit records of completion that adhere to company policies.
• Support for global workers: Consider how to scale your learning and growth perk to global workers so you achieve benefits equity. Cost-of-living adjustments, or COLA, can help you determine how much funding to provide to your international population.

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Five steps to build a strong business case

With an understanding of the benefits that customizable spending accounts can bring to you and your people, you will need to convince others in your organization that the approach is a must-have benefit.

To do so, follow these five steps.

1. Calculate today’s ROI: Account for direct costs like dollars spent on the stipend itself and software fees, and indirect costs like administration time from teams across your organization. Determine how engaged employees are with your learning and growth perks, and how utilized your budget is.
2. Compare the current state with the future state: Run similar calculations to understand the ROI of a customizable spending account. As experts in the flexible benefits market, Forma can help you with a personalized business value assessment. Compare this result with today’s ROI.
3. Forecast spend: Take your current employee engagement and budget utilization rates alongside your goals to forecast expenditures for spending accounts. Don’t forget to consider the unique attributes of your employee population, such as how learning and growth needs vary by department, and tax savings.
4. Seek out budget sources: Explore every avenue when it comes to your budget. Tap into L&D budgets dedicated to professional development or shuffle around the current approved budget for learning and growth perks. Non-obvious strategies could be to reallocate funds from stagnant sources within your company or to redirect a portion of year-over-year increases.
5. Set clear success metrics: Leaders want to see how you will track success with the new program. Define your target objectives and KPIs upfront. Gain buy-in from other stakeholders as you align on the program goals across your organization.

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To go full circle with your new spending accounts, make sure to re-calculate the ROI post-launch. This way, your organization can understand the importance of such a program.

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How to craft a world-class spending account

Once you have your business case approved, you will need to design your Professional Development and Educational Assistance Spending Accounts.

Here are a few simple ways to get started:

1. Assess employee needs: Conduct quick employee surveys, have recruiters gauge interest for you, or ask employees what they want via focus groups.
2. Align individual needs with your company strategy: This is an important step that many companies unintentionally miss. Determine how the needs of your employees align with your company’s broader strategic goals.
3. Collaborate with stakeholders for design: Work with L&D for input on what to cover, legal and accounting for assessment on tax optimization, and finance for support on budgets.

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Forma has tried-and-true learnings from hundreds of companies that have set up spending accounts dedicated to learning and growth. Industry benchmarks, market research, and global consulting will be accessible at your fingertips.

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FAQs about spending accounts for learning and growth

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What should I cover under my Professional Development Spending Account and Educational Assistance Spending Account?

Should you wish to optimize taxes, then you’ll need to adhere to special requirements for what’s covered. Customizable spending accounts are inherently flexible, and we advise working with an industry expert like Forma and important stakeholders across your organization to set up accounts that work best for your unique employee population.

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Are Professional Development Spending Accounts and Educational Assistance Spending Accounts treated as taxable benefits?

It depends on how the employer sets it up. If these customizable spending accounts are set up as Lifestyle Spending Accounts, or LSAs, they will be taxable. Customizable spending accounts may incorporate tax-advantaged elements in special circumstances. In the U.S., certain learning and growth-related expenses may be eligible for tax-favored treatment if the expenses qualify as working condition fringe. In other 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.

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What are some of the unique design considerations for Professional Development and Education Assistance Spending Accounts?

There can be a lot of nuances to think through. Some of the most common decisions we have helped companies make include factors such as:

• Institutions: Consider what colleges, universities, or institutions are covered and if they need to be accredited or not. Some employers will only cover tuition or reimburse loans for accredited institutions, but that is a matter of plan design rather than a requirement.
• Courses: Ensure you outline what types of coursework are covered, and what are not.
• Payment processing: Determine whether you’ll pay in advance or only after a class is completed.
• Eligibility criteria: Decide aspects like if there is payment tiering based on the course grade, and any tenure or employment status requirements.

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How exactly do companies save with customizable spending accounts?

Customizable spending accounts are notional so companies only pay for funds that employees use. This can result in significant savings when you compare to the sometimes underutilized learning and growth programs and perks companies offer today.

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How do I give my global workers the same benefit?

An advantage of using customizable spending accounts is that they can be easily deployed to workers all over the world. Forma’s platform makes it easy for centralized or regional benefits teams to administer benefits. We even have guidelines to help you determine how to provide an equitable global stipend.

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Learning and growth programs with Forma

Forma will help you elevate your learning and growth perks with soups-to-nut program design, including regulatory considerations with our in-house compliance team. 

We’ve partnered with companies like Stripe and Rhino who have set up learning-oriented spending accounts with Forma. And, employees routinely give positive feedback about the impact of their allowance:

“Forma is helping me pay off my student loan each month, giving me more money back each month in my paycheck!” - William F.

For more information on how we can help your employees holistically thrive and your organization flourish, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts today. 

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Interested to learn how customizable spending accounts can provide holistic support? Choose from the blogs below:

• How customizable spending accounts can revolutionize your employees’ health and well-being‍
• Maximize employee productivity with spending accounts for remote work‍
• The power of customizable spending accounts to uplift working caregivers
  

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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.