Lifestyle Spending Account (LSA)
Promote healthy habits and overall well-being by creating your fully customizable, post-tax lifestyle spending account.
What is a Lifestyle Spending Account (LSA)?
Lifestyle spending accounts (LSAs) are a fully customizable, post-tax benefit to give employers full control to create a plan that promotes healthy habits and overall well-being. Different from health savings accounts and flexible spending accounts, LSAs are funded by employers with money that is taxed as income to employees when they spend it. The funds in HSAs, HRAs, and FSAs are not taxable when spent on qualified expenses.
As the employer, you can determine which services and products are approved under the LSA. With the ability to limit and direct employee spending, offering an LSA can be a benefit to both you, as the employer, and the participant. An LSA adds flexibility to benefits plans and is easy to control. LSAs are also easy to set up because they don’t carry the same legal or regulatory constraints placed on tax-advantaged accounts.
What can an employer customize?
Employers have a number of things to decide when customizing their LSA including the following:
- How much they would like to contribute
- When contributions are available for consumers to use
- Which employees they contribute to
- What expenses are eligible (more below)
- How funds are handled at the end of each plan year (run out, rollover, etc.)
- How funds are handled for terminated employees (run out period)
Since LSAs are so customizable, employers should consider several different things including:
- What benefits do you currently offer that could be considered part of an overall lifestyle program (example: Adoption Assistance) and what could add to this? What do your employees and potential employees care about?
- What types of behavior do you want to influence in your employees?
- Physical wellness?
- Financial wellness?
- Emotional wellness?
- How much do you want to offer, to which employees, and when?
- How can funds be utilized when an employee terminates, or the plan year ends?
- If an employee incurs an expense with a future date of service, should the expense be eligible for reimbursement prior to the date of service (example: paying up front for a 12-month gym membership)?
What are common eligible expenses?
Smart employers can get quite creative in what is covered in your LSA. Here some common eligible expenses, but this is not an exhaustive list:
Physical Wellness:
- Athletic Equipment and Accessories (basketball, hockey stick, golf clubs, fitness apparel, fitness shoes, stopwatch, etc.)
- Exercise Equipment (treadmill, elliptical machine, bicycle, free weights, rowing machine, etc.)
- Gym, Health Club, Spa and Fitness Studio Memberships
- Fitness Classes (yoga, Pilates, cycling, etc.)
- Lessons (golf, swimming, tennis, dance, online fitness membership/classes, etc.)
- Personal Trainer
- Fitness Trackers (Fitbit, Apple Watch, etc.)
- Entry Fees (marathons, leagues, etc.)
- Passes (ski, snowboard, golf, swimming etc.)
Financial Wellness:
- Student Loan Reimbursement
- Home Purchase Expense Reimbursement (down payment, closing costs, etc.)
- Financial Advisor and Planning Services
- Financial Seminars and Classes
- Identity Theft Services
- Pet Insurance Premiums
Emotional Wellness and Other:
- Meditation Classes
- Non-Medical Counseling Services (marital, parental, etc)
- Retreats (leadership, spiritual, etc.)
- Pet Care (walkers, day care, grooming, etc.)
- Camping (tent, site rental fees, cooking equipment, blow up mattress, sleeping bags, etc.)
- Personal Development Classes (art, cooking, sewing, etc.)
- Annual Park Pass
- Hunting and Fishing Licenses
- House Cleaning Services
What expenses aren't included?
Eligible expenses that only apply to a very small population of employees and are used to supplement health insurance should not be scoped into the LSA. Employers may look to supplement their health insurance with additional funds to help employees with specific needs either because their medical plan does not cover them at all or it does not provide adequate coverage.
Build your custom LSA with isolved
Easily offer a flexible, customizable lifestyle spending account your employees want AND simplify the participant experience, while you let isolved manage the administration. Click here for more details.