As costs continue to rise, employers are looking for innovative ways to attract and retain top talent while improving employee well-being.
Lifestyle Spending Accounts (LSA) are one solution that has gained popularity in recent years, and over 75% of large employers currently offer them.
The amount of funds and the items they can be used on are set up at the employer’s discretion. LSA offers employers and employees a unique, flexible way to enhance their overall well-being.
What Are Lifestyle Spending Accounts?
LSA are employer-sponsored accounts that support beneficial employee lifestyle expenses.
These accounts help manage eligible expenses. LSA allows employees and employers flexibility in choosing expenses aligned with their needs.
Employers decide the benefit amount to contribute and the program’s expense categories to enhance the package.
LSA is a great way to support employee wellness and engagementand promote a healthy work-life balance.
Unlike other benefit programs, unused LSA funds can roll over into the next year, making them a valuable and versatile employee benefits solution.
How Do Lifestyle Spending Accounts Work?
LSA functions by enabling employees to allocate funds towards eligible expenses.
These accounts allow employees to contribute a percentage of their gross income, which is then used to reimburse eligible expenses, ultimately reducing income that could be legally taxed.
A significant advantage of LSA is that any unused funds can carry over to the following year, preventing loss of benefits.
To facilitate efficient management, employers often provide mobile apps or online platforms for employees to oversee their LSA accounts.
By understanding how LSA works most effectively, employees can maximize their benefits from these accounts.
The Concept Behind Lifestyle Spending Accounts
LSA are flexible spending accounts that provide employees with funds to cover various eligible lifestyle expenses.
These accounts offer a valuable addition to the benefits package, supporting employees’ physical and mental health.
By offering employees this benefit, LSA contributes to a balanced and fulfilling lifestyle.
LSA is an excellent tool for employers to enhance their benefits package and provide employees with the opportunity to support their overall well-being.
What Are the Advantages of Lifestyle Spending Accounts?
Unlike traditional benefits, LSA allows employees to choose how they spend their funds and provide benefits that support individual needs and lifestyle choices.
Offering LSA can differentiate a company from the rest and address benefit gaps, attracting and retaining top talent.
Moreover, LSA supports employee financial wellness, providing a taxable benefit, and unused LSA funds can carry over to the next year, maximizing savings.
Here are the top advantages of LSA:
1. Flexibility and Inclusivity
LSA offers employees the flexibility to use funds for theirpreferred eligible expenses, promoting inclusivity and employee engagement.
This flexibility allows employees to support their wellness needs, work-life balance, and everyday lifestyle expenses, ensuring that the benefit meets their individual needs.
They can be structured as fixed-amount accounts or as a reimbursement model based on company preferences.
LSA also provides tax benefits, as the funds are not taxable income for employees, resulting in cost savings.
Many employers offer LSA as a benefit tofoster employee morale and job satisfaction.
LSA demonstrates a company’s commitment to valuing employees’ diverse needs and cultivating a positive work environment.
Employees appreciate the financial support provided by LSA, leading to higher engagement levels.
LSA acts as employee perks, showcasing a company’s dedication to employee well-being and satisfaction.
3. Encourages Pro-Active Employee Behavior
LSA empowers employees to proactively prioritize their wellness and fitness.
By utilizing funds for wellness programs, gym memberships, and fitness equipment, LSA supports the adoption of healthy habits.
This motivates employees to take charge of their physical and mental well-being.
Additionally, the availability of LSA encourages responsible financial habitsas employees plan and manage their expenses.
KEY TAKEAWAY:LSA fosters employee engagement by promoting a proactive health, wellness, and work-life balance approach.
What Are the Disadvantages of Lifestyle Spending Accounts?
Implementing LSA requires careful planning, education, and program parameters, which can be time-consuming without the help of a professional.
Before implementing, employers must carefully evaluate whether LSA aligns with their company’s goals and values.
1. Potential Limitations and Complications
LSA may come with restrictions on eligible expenses, so budget constraints can limit employee contributions.
Additionally, LSA may not cover all lifestyle expenses, resulting in gaps.
It’s important to consider the tax implications of LSA before implementation. Understanding these potential limitations and complications will help ensure the effective utilization of LSA.
LSA can help employees manage everyday needs within a fixed amount, providing them the flexibility to plan their spending,but they must be responsible.
Unlike traditional benefit programs with fixed benefits, an employee’s LSA funds provide a fixed amount that they need to effectively manage, which might take time or training.
There is also the risk of LSA funds not being used, although that money will just remain.
What Expenses Are Eligible for a Lifestyle Spending Account?
With LSA, employees have the flexibility to personalize their benefits package and receive money for discretionary spending on eligible items.
Lifestyle Spending Accounts allow employers to offer benefits that address the needs of their employees in the areas of lifestyle and wellness expenses outside of typical health insurance.
Unused LSA funds may roll over to the next year, ensuring that employees can make the most of their accounts.
According to a recent survey by Mercer Insights, LSA is gaining popularity in the U.S. as point solutions within employee benefit offerings.
Eligible expenses generally encompass physical health, mental health support, and lifestyle needs.
Employers who offer an LSA choose which expenses get reimbursed, the amount an employee receives, and the frequency.
This flexibility caters to the diverse needs of an entire workforce in one program.
Can Lifestyle Spending Accounts Improve Employee Retention?
Offering LSA as part of the company benefits can attract top talent and increase employee engagement and satisfaction.
They support employees’ physical and mental health, enhancing retention while demonstrating the employer’s commitment to employee wellness.
Employees value the flexibility and lifestyle benefits provided by LSA, which can further enhance retention rates.
Overall, LSA has been proven to positively impact employee retention by creating a supportive and attractive work environment.
How Do Lifestyle Spending Accounts Attract Talent?
LSA can act as a competitive edge in attracting diverse talent, quickly aligning with employees’ ever-changing needs and expectations.
Offering LSA demonstrates the employer’s dedication to employee well-being on all levels and can be positioned as lifestyle perks to attract top talent.
Employers can also highlight thefinancial wellness benefits of LSA to attract candidates.
By incorporating LSA into their benefits, employers have the opportunity to attract and retain a skilled and diverse workforce.
How Do Lifestyle Spending Accounts Retain Talent?
Promoting balance between work and home, LSA supports employee retention by providing a variety of covered expenses.
Addressing the gaps in the benefits you offer, LSA improves employee satisfaction.
With the freedom to choose their expenses, employees appreciate the flexibility andfeel valued by their employers.
Offering LSA funds as a benefitfosters employee loyalty.
A recent Mercer Insights survey reveals that LSA also aligns with changing employee needs, attracting and retaining diverse talent.
What Is the Difference Between LSAs, HSAs, and FSAs?
Lifestyle Spending Accounts (LSA), Health Savings Accounts (HSA), and Flexible Saving Accounts (FSA) differ in their focus and how they can be used.
Employers fund LSA to cover a range of lifestyle expenses to promote physical fitness, like a gym membership and meditation apps for mental well-being.
LSA offers flexibility in fund usage, rolling over any unused money to the next year or allotted time frame.
Income taxes should be paid on this money.
HSA are specifically limited to medical expenses and health-related costs, allowing employees to put money away and take it out tax-free only for qualified medical expenses like copayments and deductibles.
This type of account has tax advantages, and funds can be used now or in the future.
Unlike other spending accounts, FSA funds in an employee’s account must be spent within the plan year’s end on specific medical/dental items or be forfeited.
They qualify as tax-advantaged accounts, using pre-tax dollars, thereby taxing an employee at a lower gross salary, and increasing take-home pay.
Is Lifestyle Spending Accounts Right for My Company?
Determining if LSA suits a company involves evaluating employee needs and considering the required financial contributions.
Lifestyle Spending Accounts may be right for your company if:
- Your business wants to attract top talent.
- You want to effectively support diverse employee needs.
- Your company offers remote work arrangements, as mobile apps can access funds.
Assessing the benefits of LSA can help create a comprehensive benefits program.
Edenred’s Lifestyle Spending Accounts program is designed to meet the needs of both employers and employees.
It offers employees the flexibility to invest in health and fitness, promoting wellbeing, boosting morale, and enhancing productivity.
For employers, wellness program benefits help reduce healthcare costs and absenteeism, while increasing employee productivity, morale, and loyalty.
Book a meeting with us today to see how LSA could benefit your business.
