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3 Benefits of a Lifestyle Spending Account

LSAs provide flexible benefits that attract and retain employees. Here are three benefits of implementing one at your org.

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Lifestyle spending accounts (LSAs) are growing in popularity as HR leaders realize that employees and candidates are demanding flexible benefits that better align with their values and priorities. LSAs act as a key recruitment tool while also boosting employee retention by supporting health and wellness and enhancing productivity. With advantages like these, it makes sense that 70% of companies are considering adding an LSA to their benefits package, according to a recent Mercer Insights survey

Below are three key benefits of lifestyle spending accounts.

Recruitment and retention 

The average employee tenure in the U.S. today is four to five years, and organizations must offer a culture built on employee engagement and productivity to increase retention rates. 87% of employees consider health and wellness programs when choosing an employer, according to a study conducted by Virgin HealthMiles/Workforce Magazine. These numbers are even higher for Gen Z and Millennial respondents, with over 50% citing such benefits as a deciding factor. Making employees feel cared for increases retention rates and ensures that you’re attracting top talent in today’s competitive market.  

Employee engagement rates for LSAs are typically substantially higher than traditional single-merchant programs since employees can select the merchants and vendors that are most suitable to their unique location and needs. For example, at health insurance company Bright Health, 93% of employees participated in a new LSA program with an 85%+ employee satisfaction rate.  


Some companies may have limits on how much flexibility they can offer due to the nature of their unique business, the security of highly confidential data, or the safety of workers. Even when there are limits to schedule flexibility, you can still create a positive culture by offering flexible and easy-to-use benefits programs. Unlike flexible spending accounts (FSAs) and health savings accounts (HSAs), LSAs are fully funded by the employer and considered taxable income when spent. 

Programs are designed to fit the unique needs of your workforce, which can include items such as stipends for services that streamline home life after a long workday (like grocery delivery), lunch allowances for in-office workers, and mental health resources.  

Building an LSA is ultimately about offering employees more choice and flexibility to increase the program's usage and create employee goodwill. It’s important to be agile and evaluate your vendors and eligibility policy. For example, with an increasingly hybrid workforce, many organizations opt to get rid of their on-site cafeteria as utilization rates have become much lower. However, employees coming into the office in-person might still be looking for the convenience of lunch on-site, and remote employees might miss the benefit of having lunch provided for them. Using a single supplier for food delivery can severely limit options or coverage for all employees, while also increasing service, management, and delivery costs. Instead, an allowance empowers employees to choose a variety of lunch options for both in-office and remote workdays. It also creates an equitable experience regardless of an employee’s location.  

LSAs are fully customizable. Employers can choose to include spending categories across a broad swath of lifestyle pillars, or dedicate their LSA to an individual pillar (such as mental or physical health). Below are some spending categories typically included within LSAs:

  • Physical fitness (gym memberships, workout apps, fitness equipment)
  • Mental health (meditation apps, online talk therapy, massage)
  • Digital health and virtual care
  • Work from home equipment, including cell and internet service
  • Professional development and training
  • Family support (childcare, kids’ activities, pet care)
  • Grocery and meal delivery
  • Charitable donations
  • Financial services 
  • Student debt repayment

Cost savings 

Unlike funds contributed to an HSA, employers only pay for the amount employees spend with an LSA. If employees choose not to spend their funds, employers keep that money. This can lead to cost savings at the end of the year while providing the employee with 100% of the benefit. With their LSA program, Bright Health saved over $250,000 annually due to voluntary forfeiture. It’s a win-win for employers and employees alike. 

LSAs also help employees save costs in areas that may place financial stress on their lives. A small additional financial contribution by their employer may reduce this stress, leading to a happier and more productive workforce. Employees have used their LSAs to repay student debt, adopt a pet, make monthly charitable donations, take personal or professional development courses, cover the cost of extra-curricular activities for children, offset childcare costs, and more. 

It’s time to move beyond one-size-fits-all

Ever heard the adage “if you try to please everyone, you’ll please no one”? When it comes to employee benefits, a one-size-fits-all approach is likely to leave most feeling unsatisfied. Your employees’ needs and priorities are incredibly varied, so it’s nearly impossible for a standardized benefits package to make everyone happy. What can, though, are flexible, personalized benefits that give employees freedom and choice in how they spend their funds. 

Interested in learning more about how to create an LSA program? Drop us a line at sales@getbenepass.com

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Benepass Team

Our team is committed to sharing stories that help People teams do their jobs and empower employees to get the most out of their benefits.

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