Lifestyle Spending Accounts: Why They’re Becoming Popular

Patrick O'Connor

Lifestyle Spending Accounts Can Ease Financial Pressures on Employees| Patrick O’Connor | Corporate Synergies

While not yet in the mainstream across the U.S., lifestyle spending accounts are beginning to emerge as an employee benefit with a real financial impact.

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Employers are seeking out new ways to enrich employee benefits to compete in the marketplace, enhance medical benefits and help to promote health & wellness. Lifestyle Spending Accounts (LSAs) could help fill this need.

LSAs are an emerging perk that can attract employees and influence healthy decisions. An LSA is an account funded solely by the plan sponsor (and taxable as income to employees), which can be used to make purchases from categories employers choose. Think purchases around physical and mental wellbeing, environmentally friendly goods and childcare. The accounts are popular in Canada and on the west coast of the U.S., and are an emerging trend throughout other parts of the country.

LSAs were developed to help round out benefits, which recruiters can use to attract and hire top talent. Employers can choose to fund a wide range of things that apply to the entire workforce.

While some carriers reimburse employees for gym memberships, not every employee likes to work out in a gym. Employers can support a healthy physical lifestyle by adding workout studios; personal or small group training; workout gear, such as weights, a stationary bike or a treadmill; nutrition counseling; or shoes and workout clothes, in addition to a typical gym membership.

Mental wellbeing is a new focus of many employers. Unfortunately, health plans typically only cover a limited number of counseling sessions. Employers can supplement this benefit by providing funds for therapy or counseling sessions.


Some employers use lifestyle spending accounts to help employees with child-related expenses.

This assistance can start with funds to help with fertility treatments, baby gear, doulas and midwives, and childcare. There’s really no limit to the types of things LSAs can fund, which can also make it difficult for employers to get started.

To figure out what to fund, start by identifying gaps in your current health & welfare benefits offering. For example, offering funds toward gym and studio memberships is an obvious place to start if you don’t already have a program in place. Consider what types of employees you want to recruit and retain, and think about what sort of behaviors you want to influence. LSAs can be offered to an entire workforce, or different fund amounts can be offered to different classes of employees.

Other issues to consider are how you’ll deliver the funds and what happens when an employee leaves or is terminated. These are minor details, but they could leave you with headaches if you don’t address them prior to a lifestyle spending account rollout.

LSAs are typically managed by a third-party administrator that will adjudicate claims and approve purchase reimbursements, removing the hassle of managing a program for large employers.

For employers hoping to encourage certain healthy behaviors and sweeten benefits packages, LSAs can help round out offerings and act as another recruitment and retention tool, similar to voluntary benefits.


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