Lifestyle Spending Accounts: FAQs to Help You Decide if this Benefit is Right for You

Lifestyle Spending Accounts: FAQs to Help You Decide if this Benefit is Right for You

In today’s tight labor market, setting yourself apart is essential. And the right benefits package can help. But in addition to standard offerings like health insurance and 401ks, what else can you do to meet workers’ needs?

With the 57% of workers feeling stress on a daily basis, according to a Gallup report, and employees expecting their employers to play a role in their well-being, a benefit you may want to consider is a Lifestyle Spending Account (LSA).

 

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What is an LSA?

An LSA is an account funded by the employer that allows employees to make certain purchases and get reimbursed from the amount that has accrued in their LSA. It’s similar to an HSA, but doesn’t offer any tax advantages. In fact, the funds contributed by the employer are considered taxable income to the employee when spent.

 

What does an LSA cover?

Each employer can design the parameters of the LSA as they wish, but the most common expenses companies choose to reimburse are:

- Gym memberships
- Fitness classes
- Exercise equipment
- Athletic clothing
- Weight loss programs
- Nutritional counseling
- Life coaching

Keep in mind you can make the benefit as broad as you’d like and decide to cover things like pet care or college admissions counseling. No matter what you decide to reimburse, you’ll need to decide whether to handle reimbursements yourself or use a third party for administration.

 

Do LSA funds rollover?

Unlike an HSA, the full contributed amount doesn’t necessarily belong to the employee; that’s optional. So you can set your LSA up to either have a “use it or lose it” feature or allow workers to roll over the unused balance to the next plan year.

 

Sam Slade is Managing Director, Employee Benefits, at The Hilb Group of New England, where he delivers consulting and brokerage services to local employers. He has extensive experience in all aspects of employee benefits, including underwriting, plan design, communications, compliance, and analytics, with a particular focus on alternative funding and self-insurance. Sam lives in South Kingstown with his wife and three sons.