If you’re unfamiliar with the concept of a lifestyle spending account you’re not alone in your confusion. Unlike traditional benefit accounts such as Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs), LSAs are primarily designed to cover a broad range of expenses related to employees’ physical, mental, and financial wellness. The lifestyle spending account benefits vary from employer to employer but they all have the freedom to set a range of categories where the funds in the account can be spent. Employees can then expand those funds on a selected category and reap the benefits of working at a generous organization. Let’s take a closer look at how a lifestyle spending account works and why you should consider setting it up for your workers.
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What Is a Lifestyle Spending Account?
A Lifestyle Spending Account (LSA) or Lifestyle Account is a fund reserve that an employer sets up and fills as per a regular schedule determined by the organization. Employees are given the option of using those resources on a range of lifestyle expenses that aren’t traditionally covered by an organization, from paying for their streaming services to the airfare on their next vacation. Unlike the traditional benefits that restrict all the employees to a single benefit that may be of no use to them, an LSA gives them the freedom to a degree to determine the kind of perk they’re after.
What is the Difference Between an LSA and an HSA?
A Health Spending Account (HSA) might be a more familiar concept to you—a workplace benefit account that helps you out with healthcare expenses by drawing from reserves that build up over time. These accounts help cover a variety of medical costs, copayments, medications, and other medical expenses that occur in an employee’s life. These HSA plans are considerably more restricted than the LSA.
Health-related expenses are regulated by the Affordable Care Act (ACA), and they need to be integrated into a high-deductible health plan (HDHP) to be considered valid. Only employees enrolled in the HDHP can benefit from the HSA, making it a more complicated program to follow. HSAs can be funded by both employer and employee.
The LSA is free from such regulations and it’s easy to set it up at any time of the year without too many hassles and restrictions on planning. The main concern here is to ensure that the offered benefits don’t overlap with the areas covered by the health support under the ACA. These benefits are funded by the employer and are considered taxable benefits to the employee. Non-medical expenses such as fitness memberships and other lifestyle benefits are lifestyle spending account-eligible expenses.
How Does a Lifestyle Spending Account Work?
To begin with, an employer has to set up a lifestyle spending account for his employees and determine all the parameters in relation the account. An employer can choose who can avail of the account benefits, what amounts of money will be deposited into it, and where that money can be spent. They can also choose a payment cycle, whether monthly or yearly, to settle how money will be added to the account.
Eligible employees can choose from the list of applications and make the most of the benefits the company is providing them with. There are often limits to what happens to the money if it is left unused. An employer can decide that the money added to the account every month has to be used by the end of the month or it will lapse and be returned to the employer.
In other cases, the employer can decide to have the money carry over to the next month to make it a more lucrative offer for employees. The possible combinations of lifestyle spending account-eligible expenses are limitless, and companies can decide what advantages they want to provide via the account.
Lifestyle Spending Account Benefits and Bonuses
We’ve answered two of the most pressing questions about this topic, ”What is a lifestyle spending account, and how does a lifestyle spending account work?” Another question that often comes up is, “What are the benefits of a lifestyle spending account?” This query is the easiest to answer.
- They’re easier to set up compared to some other benefits
- They attract top talent right to your organization with the promise of flexibility
- They provide a competitive advantage in the market, and they’re easier to scale up when it becomes necessary to offer more to prospective employees
- They give employees a degree of freedom and control which is always appreciated
- It is easy to expand on what services can be accessed via the lifestyle spending account, helping organizations keep up with the shifting times
- Not all employees use 100 percent of the funds deposited in the account. Companies save on their funds more than directly investing in a non-refundable gym membership for employees who rarely use it
- They cater to a wider range of employees with varying needs—accounts for diversity and individuality
- Lifestyle spending account benefits are a great way to win an employee’s loyalty—employees appreciate organizations that go the extra mile
- Well-being in the workplace is more accessible, and employees genuinely benefit from it rather than a generic program that does not address their needs
Exploring the lifestyle spending account eligible expenses is the most fun part of setting it up considering it can apply to anything the organization determines to be worthwhile. From setting up a home office to a home gym, there are various provisions a company can make to improve an employee’s quality of life. Even aspects like daycare centers for children and weekend hobby classes can be included in these LSA plans, making them a truly diverse solution to all the benefit planning activities at an organization.