In a world where flexibility is essential to the workplace, lifestyle spending accounts (LSAs) are a key retention and recruitment tool to boost employee wellness, happiness, and productivity. LSAs enable employers to optimize their benefits plans for maximum flexibility by offering employees the power of choice when it comes to their own well-being needs.
It’s easy to see why a recent Mercer Insights Survey found that 70% of companies are considering adding an LSA to their benefits package. LSAs increase engagement in your benefits programs, provide an option that employees can tailor to their specific needs, and even lead to employer cost savings.
Lifestyle spending accounts defined
A lifestyle spending account (LSA) is essentially a non-salaried allowance that can be used according to an employee’s personal preferences. Unlike flexible spending accounts (FSAs) and health savings accounts (HSAs), LSAs are fully funded by the employer and considered taxable income when spent.Employers can outline a set of parameters for their lifestyle spending account, ranging from what it’s called, the contribution cadence, contribution amount, eligibility rules, what happens to unspent funds, and where the money can be spent.
Lifestyle spending account eligible expenses
Lifestyle spending accounts are fully customizable. You can include spending categories across a broad swath of lifestyle pillars, or dedicate your LSA to an individual pillar (such as mental or physical health). Below are some of the spending categories typically included within LSAs:- Physical fitness (gym memberships, workout apps, fitness equipment)
- Mental health (meditation apps, online talk therapy, massage)
- Digital health and virtual care
- Work-from-home equipment, including cell and internet service
- Professional development and training
- Family support (childcare, kids’ activities, pet care)
- Grocery and meal delivery
- Charitable donations
- Financial services
- Student debt repayment
Benefits of a lifestyle spending account
Lifestyle spending accounts can be an incredible tool for talent acquisition and employee retention. Only 24% of workers feel that their organization cares about their well-being, according to a recent Gallup poll. Employees who do believe their employer supports their well-being are 69% less likely to search for a new job, 71% less likely to experience burnout, and five times more likely to serve as an advocate for their organization. An LSA is one way to send a clear message to employees that their wellness is important to your organization and stand out from other employers by doing so. LSAs can help you:- Increase employee engagement
- Provide maximum flexibility
- Experience cost savings
As an administrator of LSAs, it’s humbling and rewarding to hear of the impact these benefits can have on employees’ well-being and livelihood. Employees have used their LSAs to help repay student debt, purchase home gym equipment, make monthly charitable donations, cover extracurricular activities for children, offset childcare costs, and more.
What’s more, employee engagement rates for LSAs are typically substantially higher than traditional single-merchant programs since employees can select the merchants and vendors that are most suitable to their location and needs.
Unlike funds contributed to an HSA, employers only pay for the amounts employees actually spend. This can lead to cost savings at the end of the year while providing the employee with 100% of the benefit.
How to get started
Setting up a lifestyle spending account for your employees is a relatively straightforward process compared to tax-advantaged accounts such as HSAs and FSAs.These steps will help you create a successful program:
- Budget: First, you’ll want to budget how much you would like to contribute to the account for each employee, the cadence, and what happens to unspent funds.
- Tailor: Next, you’ll want to determine the lifestyle categories and wellness areas in which the funds can be spent. What matters most to your employees? An employee benefits survey to gather feedback can be incredibly helpful at this stage.
- Select a partner: Depending on the size of your company, you’ll want to select a benefits partner that can scale, track, and administer your programs with ease.
- Educate: Once the program is designed, education is key so that current and prospective employees are aware of the benefit, how it can be used, and what happens to unspent funds. Employee education around your program will increase engagement and reduce administration time by providing answers to frequently asked questions.
- Refine: An adaptable benefits partner will be able to refine and improve the program as you gather feedback from your employees on how it is being used and what is most effective in your workplace. An annual or biannual review ensures the program design is meeting your most current needs.
How to vet lifestyle spending account vendors
A lifestyle spending account vendor can make or break the success of your program. Many wellness programs suffer from low employee engagement and poor utilization, but the right partner can help you overcome the challenges that typically lead to negative outcomes. Here are a few areas you’ll want to explore when you're selecting an LSA partner:- Technology and program design capabilities
- Employee experience
- Customer support
- Implementation and IT support
Check out our resource on four questions to ask when choosing an LSA technology partner for more guidance.
Have questions about how your employees might benefit from an LSA they can manage in one central platform and easily access from a web and mobile app? Drop us a line at hello@plann.ly.
