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Lifestyle Spending Accounts — A Growing Workplace Benefit

Updated: Jul 5

According to a 2022 Mercer survey, only 10% of employers offer lifestyle savings accounts, or LSAs. But a massive 70% say they are considering including LSAs in their benefits packages.

What, exactly, are LSAs?

A lifestyle savings account is an employer-funded benefit designed to help employees make positive lifestyle choices. LSAs support employee health and wellness, which improve employee productivity.

In the workplace, LSAs can reduce health risks that cause absenteeism, disengagement, low productivity and turnover. These health risks may stem from smoking, poor diet, physical inactivity, insufficient sleep and other unhealthy lifestyle choices.

LSAs are employer-funded, which means the employer allocates a certain amount of money to the eligible employee's LSA. The employee uses the allocated LSA funds to cover eligible expenses.

What expenses do LSAs cover?

2 people working at a table together in a kitchen

The employer determines which expenses are covered under the LSA plan. Although eligible expenses vary, they typically address employees' physical, emotional and/or financial needs.

Common eligible LSA expenses include:

  • Gym membership.

  • Weight loss programs.

  • Personal training sessions.

  • Nutrition counseling.

  • Life coaching.

  • Food supplements.

  • Athletic wear.

  • Yoga classes.

  • Meditation apps.

  • Pet care.

  • Personal development classes.

  • Commuting.

  • Family activities.

  • Financial planning services.

  • Home purchase expenses.

  • Student loan reimbursement.

What is the typical LSA contribution amount?

Employers decide how much they want to contribute to each employee's LSA. However, Mercer says employer LSA contributions normally range from $500 to $2,000 annually. For instance, the employer may choose to give each eligible employee $800 per year to cover eligible lifestyle expenses.

Additional things to know about LSAs

  • LSAs are not health insurance, but they are spending accounts.

  • Employee contributions are not allowed. Only the employer can fund an LSA.

  • Used LSA funds are taxable to the employee.

  • LSAs are an after-tax benefit. Therefore, they do not have many regulatory requirements — unlike HSAs, FSAs and HRAs, which are pretax and extensively IRS-regulated.

  • LSAs can be established as reimbursement accounts with employees paying for eligible LSA expenses and then submitting a reimbursement claim. Alternatively, LSAs can be funded at the outset, and employees receive the money upfront to spend on eligible LSA expenses.

If you decide to offer LSAs, select a vendor that can meet your LSA needs and budget.

LSA: A growing attraction and retention tool

Although LSAs have been around for some time, they are just now starting to gain momentum. The 2022 Mercer study reports, "Although LSAs have been on the scene for 5 or 6 years now, it took today's low unemployment rates to focus employers' attention on this lever for better attraction and retention."

As stated, the Mercer survey found that most employers are thinking about offering LSAs. To remain competitive, you may want to give this employee benefit some consideration.

FIC Human Resource Partners' Nuance Workforce Solutions can provide HR support to your organization and help you determine the best benefit offers to achieve the culture of support your employees deserve.

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