Apr 19, 2023

Investing in Employee Well-Being: The Power of a Lifestyle Spending Account

Discover the benefits of offering a lifestyle spending account as an employee benefit! From boosting productivity and engagement to attracting and retaining top talent, find out why LSAs are becoming increasingly popular among businesses.

Employee benefits are an essential part of any company's compensation package. They can help attract and retain top talent, boost employee morale and productivity, and improve overall job satisfaction. One benefit that is growing in popularity is the lifestyle spending account (LSA) that can be included as part of your overall employee benefits package. A lifestyle spending account is a flexible and cost-effective benefit that can help your employees cover various expenses related to their personal and family life giving them more freedom to choose how their benefit dollars are spent, outside of a more traditional plan.

In this article, we dive into what a lifestyle spending account is and outline its key benefits of it for both employers and employees.

What is a Lifestyle Spending Account?

A lifestyle spending account is an employee benefit that provides a set amount of funds to employees to spend on eligible expenses that promote their overall well-being. Unlike a health savings account (HSA), flexible spending account (FSA), or health reimbursement arrangement (HRA), the LSA is not tied to medical expenses or insurance plans. Instead, it allows employees to use the funds for a wide range of expenses that enhance their lifestyle and well-being. The employer is able to place parameters on acceptable products, services, and expenses—sometimes covering other costs not typically included in a group plan.

Eligible Expenses and Employer Control

One significant advantage of a lifestyle spending account is that the employer decides which expenses are eligible for reimbursement. This is different from an FSA or HSA, which is determined by the Internal Revenue Service (IRS). As such, employers can tailor their LSA program to meet their employees' needs and preferences.

By providing your employees with a range of eligible expenses, you can help them improve their overall quality of life, reduce financial stress, and achieve better work-life balance.

Common Lifestyle Spending Account Expenses Include:

  • Care services (e.g., adult and child care, pet daycare and pet grooming)
  • Financial services (e.g., financial planning and financial education programs)
  • Mental health (e.g., mindfulness or meditation apps and life coaching)
  • Physical health (e.g., gym memberships, fitness classes, athletic apparel and exercise equipment)
  • Professional development (e.g., continuing education courses, certificates and industry conferences)
  • Wellness (e.g., food supplements and nutrition counseling)
  • Work-from-home expenses (e.g., home office equipment and supplies)

Key Benefits for Employers

  • Budget optimization: Employers only need to pay for the actual amounts that is spent by the employee. Therefore, they retain any unused funds, which helps ensure budget dollars are optimized.
  • Attract and Retain Top Talent: Offering an LSA can make your company stand out from competitors and attract top talent who are looking for comprehensive benefits packages. Additionally, it can help you retain current employees who value a company that invests in their overall well-being.
  • Diversity, equity, and inclusion (DEI) efforts: LSAs can strengthen DEI efforts by addressing benefits gaps for marginalized groups and employees with special lifestyle needs.
  • Cost Management: Since LSAs are employer-funded, you have control over the number of funds allocated to each employee, as well as which expenses are eligible. This means you can budget accordingly and ensure that the program is sustainable for your business.
  • Increased Productivity and Engagement: By providing your employees with funds to use towards activities and services that promote their well-being, you can help them feel more engaged and productive at work. This can lead to reduced absenteeism and improved employee morale.

Key Benefits for Employees

  • Flexibility: Unlike traditional healthcare spending accounts, LSAs are not limited to medical expenses or specific insurance plans. Employees can use the funds for a variety of eligible expenses that promote their overall well-being and lifestyle at their discretion.
  • No Contributions Required: Unlike HSAs or FSAs, LSAs are fully funded by the employer. This means employees do not need to make any contributions out of their own pocket to access the funds.
  • Employer-Approved Eligible Expenses: The employer decides which expenses are eligible for reimbursement under the LSA program. This means that employees can trust that their spending will be approved, and it can help them make more informed decisions about how to use their funds.
  • Taxable: Reimbursements are considered taxable income to the employee. Funds are only taxable when reimbursed.  Accounting-wise, they are treated the same as employee bonuses and are written off as a business expense for the employer.
  • Improved Well-being: By providing funds to use towards activities and services that promote overall well-being, employees can improve their physical, mental, and financial health. This can lead to reduced stress, increased job satisfaction, and a better work-life balance.


A lifestyle spending account continues to gain popularity amongst businesses as a cost-effective and valuable offering that goes above and beyond traditional health plans, providing employees with a flexible option to support their everyday needs. It can help attract and retain top talent, control costs, increase productivity and engagement, and promote overall employee well-being.

By offering this unique and valuable benefit, you can demonstrate your commitment to supporting your employees' well-being and set your company apart in a competitive job market.

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