As the world of work has shifted over the past three years, so too have the options for benefits employers are using to attract and retain employees. WTW’s most recent Global Benefits Attitudes Survey found that 58% of employees prefer remote or hybrid work. As working arrangements evolve, employers are reevaluating how to meet their employees’ changing wellbeing needs and attract and retain talent with a competitive and robust benefits package.
If you are among the more than 80% of employers that, according to our latest Reimagining Work and Rewards Survey, plan to place more emphasis on employee wellbeing to support a flexible and agile workforce, read on to learn about how lifestyle spending accounts (LSAs) can help.
LSAs enable employers to offer reimbursements to employees for activities that appeal to the modern workforce and promote physical, financial and emotional wellbeing – without the rules and restrictions typically associated with other benefit accounts or “perks.” LSAs are unique because they offer freedom of choice – both to the employer as well as the employee.
Employers are free to choose the benefits they wish to offer – from sports and dance lessons to home office and technology needs to environmental activities – as well as who is eligible and the level of reimbursement. Employees are free to choose from an enticing selection of options that speak to the way they live and work today.
LSAs reflect the diversity of today’s workforce by offering something for everyone; from the recent graduate entering the workforce, to the mid-career colleague searching for work/life balance, to the empty nester defining a new chapter in life.
Unlike other traditional benefit accounts, such as health savings accounts (HSAs) and flexible spending accounts (FSAs), LSAs are not tax-advantaged, and employees only receive the reimbursement if they make an eligible purchase. LSA funds do not go into a benefit account for employees to use by the end of the year like with an FSA, nor do they go into a portable account that employees can take with them if they leave the company like with an HSA.
This chart outlines the key differences between LSAs, HSAs and FSAs:
| HSA | FSA | LSA | |
|---|---|---|---|
| Tax-advantaged? | Yes | Yes | No, employees pay taxes on funds received from their employer for eligible perks |
| Who determines benefits/perks? | IRS determines specific benefits | IRS determines specific benefits | Employer decides which employees and what perks (or categories of perks) are eligible |
| Eligible expenses | Medical, dental and others as mandated by the IRS | Medical, dental and others as mandated by the IRS | Wellness (excluding medical and dental) as determined by the employer |
| Employees receive funds… | Regardless of whether they spend them (they can save for future healthcare expenses) | Only within the benefit year (funds are generally “use it or lose it”) | Only if they make an eligible purchase |
| Minimum/maximum amounts? | Yes, for singles or families | Yes, for singles or families | No, employer decides the amount of the benefit |
| High-deductible health plan required? | Yes | Yes | No |
| Who contributes? | Employer, employee or both subject to an annual maximum | Employee (most common), subject to an annual maximum | Employer, where employer decides the amount of the benefit |
Employers reap many benefits from offering LSAs to employees, including:
Some of the categories of spending employers can consider for LSA perks include:
Business cultures that celebrate diversity and encourage employees to bring their true selves to work are finding higher levels of employee satisfaction and wellbeing. A diverse benefit that fits the employee’s lifestyle and gives them the flexibility to choose what works for them is the key to attracting and retaining employees in today’s modern workforce.
With the Reimagining Work and Rewards Survey revealing that one-quarter of employers are reviewing the mix of pay and benefits they offer to reflect remote/hybrid work or other flexible work arrangements, and 46 percent are considering doing so, LSAs are a good option to meet your employees where they are and how they live now.
WTW can help you design your LSA in a way that suits your company’s budget as well as your employees’ wellbeing needs in changing times.
