The ABCs of LSAs: A Complete List of Eligible Expenses
Curious about how employees can spend an LSA? Get inspired with this list of eligible spending categories.
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LSA programs are a popular perk, with a Mercer Insights Survey finding that 70% of companies are considering adding an LSA to their benefits package. A lifestyle spending account, or LSA, is a non-salaried allowance that can be used according to an employee’s personal preferences. Unlike flexible spending accounts (FSAs) and health savings accounts (HSAs), LSAs are fully funded by the employer and considered taxable income when spent. Employers can outline a set of parameters for their lifestyle spending account, including contribution amounts, funding cadences, eligibility rules, rollover policies, and allowed spending categories.
LSAs are a unique way to highlight to your employees that you care about them both personally and professionally, often increasing engagement with HR programs, boosting retention, and improving recruitment. Employers are often aware of some of the most popular categories such as wellness, food, and WFH supplies, but there are endless ways to spend LSA funds.
Let’s dive into the ABCs of LSAs and all the unique ways to use one. But first, we will start with how you can’t use an LSA.
LSAs typically don’t cover medical care items that fall under pre-tax programs your organization may already have, such as FSAs, HSAs, and HRAs. Dependent care FSAs, or DCFSAs, are also a pre-tax benefit. However, DCFSA dollars can only be used on items that directly allow the working party to go to work, such as preschool and summer camp tuition. Anyone who is a parent knows that childcare extends way beyond that, and that’s where an LSA can offer additional financial aid for grocery delivery, supplemental childcare costs, housekeeping, and more.
Commuter benefits also fall under the pre-tax category. The monthly maximum amount set by the IRS that you can deduct pre-tax is currently $280 for transit and $280 for parking. Organizations can decide to offer a pre-tax commuter program, or they can add commuting costs as a pillar of their LSA program (just not both!). With the latter option, organizations can also cover items such as gas or ridesharing services.
With an LSA, companies can support a wider variety of needs and allow employees to personalize their benefits to their unique preferences. Below are 26 ways to spend an LSA.
Adoption assistance is a great LSA perk to consider as only 1 in 5 companies that offer fertility coverage also provide coverage for adoption assistance, according to the 2021 FertilityIQ Workplace Index. The average coverage for adoption assistance is around $8,000 per employee versus $36,000 for fertility. These costs can have an especially negative impact on cisgender men in same-sex relationships, or those considering single fatherhood since the alternative of surrogacy can cost between $100,000 to $200,000. Today, leading organizations such as American Express reimburse employees up to $35,000 of adoption and surrogacy costs for up to two children.
Brooms?! Yes, some organizations add cleaning services as a pillar of their LSA program. Home services stipends allow employees to pay for cleaning services, trash pickup, pet care, and more. These stipends are sometimes rolled up into WFH benefits because they create a better working environment for remote employees. And for employees beginning to go back into the office (and possibly commute long hours), a stipend toward a cleaning service can go a long way in improving work-life balance.
Everything is expensive these days, including gas. We’ve seen leading organizations add gas and other commuting costs to their LSA programs. The Community Group, a private nonprofit organization creating opportunities through education in the Boston area, noticed the rising cost of gas and added it as a new category to their LSA program.
“We want to show that we are aware of current issues,” said Katie Graham, Chief Strategy Officer. “It’s easy to call Benepass and ask, ‘Can we make sure that is covered?’”
Now you are thinking we have gone too far, but organizations are really offering spa and salon services as an LSA pillar. These services often improve employees’ mental health and wellness, leading to a happier and healthier workforce.
Massages and spa days are eligible expenses under Talkspace’s LSA program. Talkspace recently launched a modern wellness plan to give their new fully remote workforce the perks they were looking for. Today, employees receive a $50 monthly stipend they can spend on spa services, haircuts, nail appointments, Instacart for groceries, incense, candles, gaming, and so much more. The program has a 97% engagement rate, with increased utilization among the company’s international employees.
“When we moved to a remote model, we saw that there was a need to take care of people,” said Hallie Griffin, Virtual Office Manager.
Some companies offer employees entertainment or cultural experience funds because they know that when employees feel fulfilled in their personal lives, it’s easier to bring their best selves to work. These funds can help employees pay for concert or movie tickets, streaming services, podcasts, Spotify subscriptions, books, and more.
The average cost of one in vitro fertilization (IVF) cycle in the U.S. today is $23,474, according to FertilityIq. This number doesn’t even include supplemental treatments that physicians often recommend, such as acupuncture, nutrition planning, meditation, and yoga classes. On top of this, many people require two to three IVF cycles, bringing costs to a whopping $50,000.
A flexible family benefits program in the form of an LSA will allow your employees to achieve their dreams of a family, regardless of the path they need to take to get there. With an account like this, you can provide funds for employees to use on family formation while giving them more freedom to spend on the items and services that make the most sense for their unique situation.
Food perks at work used to mean free pizza in the kitchen, but today hybrid and remote work has changed the definition of “free food” has changed considerably. Instead of on-site snacks and cafeterias, companies can create a meal allowance so employees can spend their LSA on groceries, food delivery, meal kits, or restaurants. Using an LSA to do this is more cost-effective than a corporate Grubhub or DoorDash account because companies save in delivery fees and service charges. An LSA also provides a wider variety of options for employees so they can choose the food that best fits their lifestyle and creates a more equitable experience for employees who may live in rural areas where there are less delivery options.
Wix, the leader in website creation, experienced these differences firsthand when they moved from a Grubhub account to Benepass. Today, employees receive a biweekly allowance directly into their Benepass account to use on anything food-related, including food delivery, groceries, weekly dinner subscription boxes, and local restaurants. The flexibility empowers employees to choose what type of food perk is most beneficial to them and their families. This also allows employees to change where they spend their dollars each month. By moving away from a Grubhub account, Wix saved an estimated $75,000 in delivery service charges and fees.
“The situation of the pandemic impacted everyone in their unique way,” said Noam Bacharach, Senior Director, Head of U.S. Operations and Workplace Experience. “We found that when we switched to Benepass, we provided much more of a robust solution that can accommodate everyone’s personal needs.”
Jamf, a technology organization that provides management and security solutions for companies using Apple products, carefully thought through what employees needed at home and expanded their work from home stipend to include items such as tea and coffee equipment, under-the-desk treadmills, and mug warmers.
“Benepass helped Jamf employees transform their homes into functional and productive offices. By partnering with Benepass, we engaged 98% of our employees worldwide! We’ve extended this benefit to all new hires, and they love it too!” said Allen Houchins, VP of IT & Facilities.
Employers often struggle when piecing together all the vendors needed to meet individual needs across an employee base. Imagine how challenging and time-consuming it would be to have different vendors for wellness, food delivery, and professional development. Ultimately, point solutions don’t have the flexibility to accommodate a wide range of wants and needs.
With an LSA, employees can customize their benefit to their individual needs. Examples of LSA-eligible items include acupuncture, gym subscriptions, child care, grocery delivery, laundry service, professional coaching, charitable donations, and so much more.
Jackets and other necessary work wear in certain industries can become quite costly for employees, especially when asked to front the costs first before being reimbursed. YorkHoist is recognized as the leader in the overhead crane and material handling industry, and a category of their LSA program is work-appropriate shoes and apparel. The Benepass platform and Visa card eliminate the need for reimbursements and expense report tracking, and once an employee makes a transaction, they can easily track it via the mobile app.
“Employees can manage their accounts themselves, which I love,” said Denise Myers, HR Manager. “It allows them to monitor their transactions and reclassify their transactions as they desire.”
Childcare is often one of a household’s biggest expenses, costing families across the U.S. an average of $8,355 annually per child. And the pandemic has only made it more challenging for parents to find affordable care. In about half of families, one or both parents left the workforce, reduced their hours, or took a leave of absence during the pandemic, according to Cleo’s Working Parents Survey. LSA dollars can be used towards childcare, tutoring, activities for children, and more. Other key LSA pillars such as home services and food delivery can also go a long way in making life easier for parents.
Student loan repayment is a unique employee benefit that can make a big impact on your employees’ lives. PwC offers a benefit where they pay up to $1,200 a year toward student loans. Over time, this may reduce student loan principal and interest obligations by $10,000 and shorten loan payoff by up to three years.
One of the key pillars of wellness is mental health, and highly engaged employees report feeling like their employer offers adequate mental health resources. Mindbody is a global software-as-a-service company that provides cloud-based online scheduling and other business management software for the wellness services industry. Mindbody is committed to supporting employees’ seven dimensions of wellness: physical, emotional, intellectual, spiritual, environmental, social, and occupational. They built a comprehensive wellness program with Benepass that offers mental health and mindfulness support.
“Benepass allowed us to close the gap between ‘meat and potatoes’ benefits like health insurance and offer a new self-care component,” said Mia Valunte, Benefits Manager.
Nutrition often falls under wellness at many organizations. A well-run wellness program is a powerful way to support your employees and provide them with the resources they need to practice healthier lifestyles. Healthy employees are more likely to feel satisfied and motivated in their roles. Workplace wellness programs can improve productivity, company culture, employee morale, recruitment, retention, and absenteeism. They can also help lower health insurance or workers’ compensation costs. An LSA can cover items such as vitamins and supplements, dietitian consultations, healthy food, and more.
Occupational wellness refers to feeling fulfillment in your career. Individuals with strong occupational wellness are enriched by their work and possess job-related skills such as time management that help them reach career goals. With an LSA, you can provide flexible professional development benefits for your employees. What works for one employee may not work for another and the more flexibility a program has, the more likely it is to be utilized. Offering professional development benefits highlights to employees that a company cares about their professional growth. Oftentimes this leads to high performers staying longer and training the people that follow them, building a brighter future for your company. Employees can use their LSA to pay for Masterclass, online courses, conferences, books, certifications, and more.
People spend a lot of money on their pets. Research by Finmasters found that Americans spent $124 billion on pet products and services in 2021. Two out of three households own a pet, with the average dog owner spending $1,480 and the average cat owner spending $902. Many companies offer subsidized pet insurance to help employees pay for vet services, but more are beginning to offer flexible pet care stipends through an LSA that covers a wider range of pet expenses, such as toys, food, dog training, and other supplies.
Employees can also use these funds to pay for dog walking or pet sitting, a huge plus for employees who welcomed new pets during the pandemic and may now be returning to the office or working hybrid schedules.
Some perks can be designed to improve coworker relationships which in turn, often leads to more engaged employees. Automox, a technology company, implemented AX Connect, which is designed to foster professional and social connections among employees. A fun feature is built right into Slack called “random coffee” where employees are paired for a physical or virtual coffee date they can pay for with Benepass funds. AX Connect is the most-utilized feature of their perks program with an engagement rate of 49%.
Companies that recognize their employees’ achievements inspire a sense of pride, loyalty, and teamwork. Recognition programs can be around work achievements, tenure, or company values. Many employers struggle with low engagement rates with recognition programs due to poor program structure or rewards that are not particularly motivating or easy to use. Gift cards are often forgotten, and spot bonuses don’t feel particularly special in nature. Companies can instead choose to add flexible monetary rewards to an LSA that employees can use for anything they’d like.
“Employees prefer to have money added to Benepass because it’s permission to spend it on something that isn’t utilities or groceries,” said Elspeth Arnold, Manager of People Experience. “They can spend it on something for themselves.”
With stress and burnout on the rise, it makes sense that companies want to invest in stress management to help curb turnover. Stress management programs often include educational seminars on identifying burnout, improving resiliency, coping with stressors, and maintaining work-life balance. They may also include courses on fitness, yoga, meditation, or nutrition.
LSA programs offer employees a way to reduce stress in their lives through various outlets. It could be through the items we mentioned above, but it could also be from childcare support, a massage, or a cleaning service.
We’re not talking about travel to and from work. We’re talking about personal travel, which helps employees feel well-rested and more present at work. With an LSA, some employers are offering travel and vacation stipends that cover airfare, rental homes, and other vacation expenses. Companies like Airbnb, Calendly, and BambooHR offer employees flexible stipends they can use toward vacation because they recognize the positive impact of stepping away from work to travel and relax.
Okay, so this isn’t exactly an LSA category, but time and time again organizations offer benefits that aren’t what their employees want. Surveys may seem outdated, but they remain one of the best ways to gain real-time data about your population. Surveys give employees a chance to be heard and are a great first step toward providing benefits that employees actually want.
Employee surveys also enable you to benchmark your offerings against companies of a similar size and industry to ensure that your total rewards package is competitive. After conducting a survey, it’s important to share the results with employees and highlight the steps you will take to implement the feedback. Before designing an LSA program, you can use employee surveys to gain insight into the spending categories and eligible expenses that would make the biggest difference in your employees’ lives.
In keeping with the company’s mission to make mental health care more accessible, Talkspace wanted to ensure that employees felt their overall wellness was cared for, too. With the right tools in place from Benepass, Talkspace launched an updated wellness plan. Employees receive $50 each month to spend in the categories Talkspace supports, including video games.
Employees increasingly look to their employers to support their health and wellness: 87% of employees consider health and wellness packages when choosing where to work. Benefits of implementing wellness stipends include physically healthier employees, stronger company culture, lower rates of turnover, and higher rates of employee engagement. There are many pillars of wellness that an organization can support. Physical wellness often comes to mind first, but mental wellness, occupational wellness, and financial wellness are just as important. Once again, a key element here is flexibility.
An LSA program can provide employees with the ability to use funds on items that impact all dimensions of their wellness, including gym memberships, student loan debt repayment, personal or professional development, and so much more.
Personal enrichment programs such as art, music, photography, or cooking classes can add tremendous value to your employees’ lives. Engaging in creative work also encourages us to use different parts of our brain, developing previously untapped problem-solving and thinking skills. Leading organizations are incorporating personal enrichment as a pillar in their LSA programs. Employees can use these flexible funds to pay for creative endeavors or hobbies of their choosing.
Yoga can fall into the buckets of wellness, meditation, and personal enrichment. However, what’s unique about an LSA program is that it offers flexibility on where your employees can use their yoga dollars. Rather than being limited to a yoga class near the office or yoga at a major gym chain, flexible stipends allow employees to try out a local yoga studio.
As Hallie Griffin, Virtual Office Manager at Talkspace said, “Does the catalog know about the local yoga store in Israel? I don’t know. I liked that Benepass was uniquely able to support our global team.” Employees can use their Benepass Visa card at any wellness vendor they want around the world.
Okay, we’ve run out of ideas here. But who is to say zoo tickets aren’t a great LSA perk? You’re encouraging team members to spend time outdoors with family, friends or coworkers. Sounds like a win-win in improving mental health and increasing presenteeism to us.
Need more ideas or want to share some of your own? Contact us at firstname.lastname@example.org.