As employers consider 2024 and the employee experience they want to create, companies are considering everything.
Employee retention continues to be an issue as unemployment remains low. Attracting new talent is challenging for the same reason.
Improving the employee experience and driving better engagement is an evergreen challenge that companies face. How are organizations addressing these issues?
One approach is taking a fresh look at their benefits offerings. And a Lifestyle Spending Account (LSA) might be the freshest idea.
LSA — next big thing in benefits
Flexibility and choice are the reasons why companies are considering offering an LSA to their employees.
An LSA is an employer-funded account that enables employees to apply post- or pre-tax dollars toward the benefits they appreciate most.
Unlike traditional FSA or HSA offerings, employees have much more flexibility regarding the types of products and services they can use the funds for. LSAs are increasing in popularity.
In 2023, 70% of employers considered adding them to their benefits offering because employees are asking for them. But they don’t just benefit employees. They allow HR and benefits teams to consolidate budgets, integrate multiple point solutions, and drive positive business outcomes.
Since these are employer-funded accounts, every dollar that is spent by employees is appreciated, and every dollar that isn’t spent won’t be wasted.
LSAs can improve employee experience
Because LSAs are flexible, there’s no single way employers configure their programs. Instead, they typically include a broad range of eligible expenses that matter most to employees based on their individual needs.
There are a few examples of categories that organizations will typically choose when creating an LSA for employees:
- Physical health and wellness. This can include gym memberships, yoga classes, fitness equipment, workout apps, nutritional supplements, fitness classes and more.
- Emotional wellness expenses. Have an employee with a favorite meditation app? They can use it for mindfulness classes or online talk therapy.
- Home office equipment for remote employees. Funds can be used for ergonomic needs, sit-stand desks, standing desks or treadmill desks.
- Family care. Employees can use them for much broader uses like child care, fertility, reproductive health, gender-affirming care, adoption support, kids activities and pet care.
- Financial well-being services. Whether it’s paying student loans, financial planning or retirement planning, LSAs can be used for that.
- Commuter benefits. For employees still making their way into the office, these funds can be used for public transportation passes, bikes, cars and rideshare.
- Education and tuition. These accounts can fund continuing education courses, tuition reimbursements, professional development workshops, and more learning and development opportunities.
- Consolidation of wellness budgets. Some LSAs allow employer contributions via wellness incentives, earned allowances, wellness challenges, community participation and charity.
Regardless of what an organization chooses, this offers the flexibility and convenience needed to meet your employees’ unique needs.
How to get started
For most organizations, the issue isn’t that they don’t want to offer LSAs. Instead, the hurdle is often finding the funding for these accounts to get them launched.
After finding the right partner to offer an LSA, companies can figure out the right amount to fund these accounts for employees.
Organizations often have the budget for a better benefit offering already, though. They can use their existing budget in three ways:
- Optimize existing spending and use the savings to fund LSAs. This can include anything from looking at rarely used benefits that could be covered under an LSA or reallocating budget from HSAs, onsite perks or real estate savings.
- Repurpose existing incentives. If an organization has a rewards or incentive program or a well-being incentive, they can incorporate that into an LSA and give people a more meaningful benefit too.
- Consider usage from existing benefits. Allowing employees to exchange unused PTO for LSA benefits or to consider health benefits choices that offer savings are better suited for an environment with an LSA.
It doesn’t have to be complicated or expensive to bring a benefit that everyone can use to an organization.
Focus on what matters
No company has an unlimited benefits budget, but we know the benefits with the most impact are the ones that employees use and love. Research shows that 85% of employees participate in LSA programs compared to 20% in an FSA program.
What drives high usage? Flexibility. That same research shows that while low-flexibility programs received 63% utilization (still pretty great), high-flexibility programs drive 96% utilization. That’s ultimately what matters to employees and employers.
LSAs drive better results, make the best use of precious benefit dollars, and ensure a better experience for all employees. 2024 is the time to add one to every company’s benefits offering.