Benefits package feeling a bit stale? If so, you’re not alone. Many employers are turning to Lifestyle Spending Accounts (LSAs) as a solution to fulfill their business needs as well as those of their employees.
Whether you’re new to the world of LSAs or just need a refresher, there’s a lot to learn about how to use these plans to your advantage. In a webinar hosted by Sentinel Group, Joni Worrell and Trevor Jensen broke down how employers can enrich their benefits package with LSAs. This article summarizes their insights.
The LSA has surged in popularity over recent years as an addition to modern compensation packages. According to Wex, the number of employers offering LSAs between 2021 and 2022 has increased by 77%. Before getting into the advantages of offering an LSA, it’s important you understand what separates this new offering from other benefits.
An LSA is a post-tax spending account that can be fully customized to meet the needs of a company’s culture and the lifestyles of its employees. The offering is not governed by ERISA or IRS regulations that many other pre-tax benefits are subject to, making it more flexible and open to customization.
One of the most unique parts of an LSA is its customizability. Whereas other reimbursement accounts face a number of limitations, LSAs are far more inclusive and can be customized to accommodate an organization’s unique needs and interests.
To name a few costs that can be reimbursed with an LSA, an employer could offer a physical benefit, financial benefit, work support, food/nutrition, donations, car expenses, etc. The possibilities are extensive and not limited by the same restrictions that accommodate other reimbursement accounts.
Attracting and retaining talent remains a challenge for many employers. In a world where many organizations offer similar health care and retirement benefits, LSAs are a powerful way to stand out in the job market.
87% of employees consider health and wellness packages when choosing an employer. By supporting employee well-being, LSAs also have the potential to help reduce health care costs for employers.
Fringe benefits have seen a surge in popularity among millennials and Gen Z, particularly those concerning mental health and well-being. How employees prioritize mental health in the workplace has changed dramatically in recent years, and the customizability of LSAs allows employers to offer fringe benefits that support this need.
According to Gallup’s meta-analysis, the business or work units that scored the highest on employee engagement showed 21 percent higher levels of profitability than units in the lowest quartile. Companies with highly engaged workforce also scored 17 percent higher on productivity.
Offering customized benefits with an LSA is a powerful strategy for employers to show they care about the well-being of their workforce.
Employers should consider their company’s unique values, goals and initiatives when deciding how to structure their LSA. The accounts can be used to incentivize desired behaviors, so it helps to first have a full understanding of the organization and desired culture. Consider surveying employees upfront, so they have a voice in determining the offered benefits.
Avoid including expenses covered by medical/dental/vision insurance plans in the LSA, such as copays, crowns or contacts. The plan should be left accessible and approachable for all potential users.
While sticking with traditional benefit offerings may be tempting, employers can reap a number of benefits by including a forward-looking LSA in their package. By cultivating support and reinforcing a positive culture within an organization, employers can find growth both internally and externally.
For more insights into the details of offering an LSA, you can watch the webinar recording or contact us.
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