Why Organizations Should Consider Adding Lifestyle Spending Accounts to Their Benefits Tech Stack

HR and benefits leaders have spent the past three years playing catch up to the upside-down world of meeting employee needs. And in most organizations, they still aren’t there.

In 2020, companies went all in on offering benefits built for a remote workforce. It was a year of “at home everything,” from home office equipment to virtual gym classes. Then in 2021 and 2022, businesses turned to the pressing issue of mental wellbeing, tapping apps, talk therapy and better, richer mental healthcare coverage to conquer mounting anxiety, stress and burnout.

This year, we saw companies provide support to help employees find financial wellbeing, as inflation and rising prices squeezed salaries.

Work has changed, too. The traditional office environment that existed for decades is gone. In its place is a more flexible, more remote work environment. That flexibility has, in turn, changed the way people think about their benefits. Commuter benefits are down. Childcare needs have changed. Skills training and tuition reimbursement are surging.

All of this is happening in an environment with below-average unemployment and a challenging recruiting landscape. Employee satisfaction, engagement and retention are still critical issues, and the right benefits can help solve them.

LSAs: Benefits Personalization and Customization

Employees have become smart consumers of benefits, as companies try to lure talent and stand out from the competition with enticing, non-traditional perks. But outside of core benefits like health insurance, retirement accounts and paid time off, some employees may still only see a handful of benefits that are really appealing to them.

New parents may look fondly at on-site daycare or childcare supplements, but those with school-age children — or no children at all — will likely not see much value from that benefit. Similarly, fresh-out-of-college employees might see tuition reimbursement as a cruel joke, as they look at looming student loan payments.

Every employee’s needs are different, so it’s normal that they seek out a variety of benefits that are uniquely important to them. Not only that, their needs will change over time, along with their life situations, so what’s valuable to them today may be irrelevant tomorrow.

None of this is new. These examples have always existed, but the difference is that today, companies have no choice but to pay attention to what employees want if they want to retain their top talent.

This has led to the rise of Lifestyle Spending Accounts (LSAs), employer-funded accounts that enable employees to apply post- or pre-tax dollars toward the benefits they appreciate most.

While it may sound a lot like the better-known FSA or HSA, LSAs aren’t governed by the same restrictive rules, especially for the types of services or products you can purchase with them. For example, an employee can use their LSA to pay for a gym membership, skills training, student loan payments or child and senior care services not traditionally covered by insurance.

While LSAs have been around for a few years, they still aren’t widely recognized by many employees — but they are gaining in popularity.

LSAs aren’t just attractive for employees. They are a better strategy for creating a more flexible benefits offering, at often the same cost as the traditional package.

Where LSAs Fit in With Personalized Technology

For years, benefits technology has primarily focused on health benefits administration and communication. While wellness apps and the like have been added over the years, their integrations have been somewhat tenuous.

Organizations can get LSAs through traditional HSA and FSA providers, but doing so doesn’t include the advantages that tech-forward providers like Espresa or other LSA tech providers offer.

With a tech platform, LSAs become a centralized place for a more personalized benefit experience, enabling employers to fund an LSA for employees to decide what they want — whether it’s tuition reimbursement, pet care, new office equipment or another benefit. It can also centralize incentives for wellbeing initiatives and other rewards, bringing it all into one spot for employees to find and use easily when needed.

For HR and benefits teams, LSAs can be advantageous because they are employer-funded accounts, which means that every dollar spent by employees is meaningful, and every dollar that isn’t can be returned and reinvested in benefits that matter.

Less Health Insurance-Centric Benefits Technology

For more than a decade, companies have been building technology around health insurance. Yet, research has shown that most employees spend less time researching health benefits than they do looking for a new phone or TV. Right or wrong, it’s a set-it-and-forget-it affair. And when they do have to interact with those benefits, it’s typically directly through an insurer or healthcare provider.

That doesn’t mean it isn’t valuable for benefits administrators, but those platforms are not built for the way employees use their benefits today.

LSAs give companies license to reorient their employee-facing benefits technology to the flexible, personalized experience people actually want. Not only that, it gives them control over the benefits that are valuable to them, so employers aren’t paying for benefits people don’t use and employees are getting the most value for every dollar an employer spends.

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