Lifestyle Plans: The business case for lifestyle accounts

Lifestyle spending accounts (LSAs) are a popular trend in today’s employee-centered workplace, and they still have significant growth potential. In a recent Mercer study, fewer than 10% of employers who responded said they offer LSAs today, but 70% are considering adding an LSA to their benefits package.

LSAs are all about putting the power of choice in the hands of employees. Employers have the flexibility to set eligibility rules, while employees have the freedom to decide how they want to spend their benefits. This level of customization not only makes sure employees receive benefits tailored to their specific needs, but it also helps them spend the way they want.

However, for account administrators like TPAs, benefit administrators, health plans, and financial institutions, these accounts can be complex to set up and costly to manage. Administration becomes further complicated as employers request more and more customized settings.

This doesn’t mean employers (or administrators) should stay away. They’re popular for a reason. In this article, we’ll discuss LSAs, including what they are, their benefits, and how Elevate can make LSAs work for you.‍

What are lifestyle spending accounts?

Lifestyle spending accounts, also known as lifestyle savings accounts, are a type of benefit program offered by employers to their employees that provide employees with a designated amount of money they can use to cover various expenses related to their well-being.

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Examples of eligible lifestyle spending account expenses include: 

• Adoption and fertility treatment costs
• Mental health such as online talk therapy, counseling services, and meditation apps
• Pet care such as pet insurance and pet costs
• Family care such as childcare and kids' activities
• Student loan repayment and tuition assistance
• Remote work costs like office equipment, internet, and cell phone
• Professional learning & development courses
• Fitness and wellness expenses such as gym memberships, fitness classes, and workout apps

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How does a lifestyle spending account work?

Lifestyle spending accounts typically work through a process where employees receive money from their employers to spend on approved expenses. Here’s how it works:

• Employers will allocate a certain amount of money to each employee's lifestyle spending account. This allocation can be made on a monthly, quarterly, or annual basis, depending on the employer's policy. 
• Employees can then use the funds from their lifestyle spending account to cover approved expenses such as pet care, family care, or professional development.
• When an employee incurs an eligible expense, they pay for it out of pocket using their own funds. 
• They then submit a reimbursement claim to their account administrator and provide documentation (like receipts or invoices) to prove the expense. 
• The administrator then reviews the reimbursement claim to ensure that the expense is eligible according to the company's policy. 
• Once verified, the administrator approves the reimbursement and disburses the funds from the employee's lifestyle spending account to cover the expense. 
• Employees can typically track their account balance and transactions through the account administrator’s online portal or mobile app.

Depending on the employer's policy, unused funds in the lifestyle spending account may either roll over to the next period (i.e. month, quarter, or year) or expire if not used within a specified timeframe. In some cases, the funds contributed by the employer to the lifestyle spending account may be tax-free for both the employer and the employee, but this depends on the specific nature of the benefits provided.

The key benefits of lifestyle spending accounts

LSAs appear under several different names, like lifestyle accounts or life benefits, but they’re all designed for employers to help employees pay for health and wellness expenses, including other costs that aren't typically covered under a group health plan.

 Here are some additional benefits for employers who want to offer LSAs:

1. LSAs enhance employee well-being

Lifestyle spending accounts let employees invest in their well-being beyond just physical health. By covering expenses related to fitness, mental health, childcare, and other aspects of life, employees can lead more balanced and fulfilling lives, reducing stress and increasing overall happiness.

2. LSAs increase employee retention

In a recent Nationwide study, one-third of pet owners said they would be more likely to stay at an employer that offered pet benefits, with Gen Z respondents at 49% and millennials at 45%. The number of Gen Z and Millennials in the workplace is only continuing to grow, and offering lifestyle spending accounts is a great way for employers to improve employee retention rates. 

Lifestyle spending accounts also allow employers to tailor benefits packages to meet the diverse needs and preferences of their workforce. Employees can choose how to allocate their funds based on their priorities, leading to greater satisfaction with their benefits package.

3. LSAs offer a competitive advantage

Offering a lifestyle spending account as part of a benefits package is a great way for employers to set themselves apart from others and attract top talent in a crowded marketplace. Many Gen Zs and Millennials are prioritizing working for employers that can provide exceptional benefits, and lifestyle spending accounts are a great way to attract and retain employees from these generations.

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The popularity of lifestyle spending accounts is two-fold: employers appreciate the control over how benefit dollars are spent, and employees value benefits that directly apply to their lives. And, let’s face it, the appeal of “free money” is quite the employment perk!

Building the business with lifestyle spending accounts

Lifestyle spending accounts don’t only satisfy the demands of employers and employees, but they also can help account administrators stand out in a competitive market. Here are some of the benefits of lifestyle spending accounts for account administrators:

• Grow your offerings without growing costs: LSAs typically are very labor-intensive to administer, with human hours devoted to plan setup and claims processing. But with flexible and automated technology, LSAs become a way to enhance the benefits packages for your clients without straining the admin budget, making LSAs even more attractive.
• Differentiate company and values: LSAs allow your clients to stand out and align tangible benefits with their company's values. By supporting employees' growth through activities that resonate with their employer brand, your clients can demonstrate their commitment to employee well-being. Similarly, by offering LSAs, account administrators are able to demonstrate support of your clients’ unique values simply by having this product in your solution portfolio. LSAs help companies by making them an appealing choice for both current and prospective employees.
• Increase client satisfaction: LSAs provide a variety of options that can align with each company’s culture. With LSAs, employers have the freedom to choose meaningful benefits that meet their population’s needs. This results in increased employee satisfaction, which translates to increased client satisfaction and loyalty.

In fact, 72% of U.S. workers say employee benefits have at least a moderate impact on their decision to stay with their current company in The Hartford’s Future of Benefits Study.

Elevate simplifies LSA administration

Creating and managing LSAs can be complex, but Elevate makes the entire process easier. We provide a standardized yet flexible framework for designing and managing LSAs, which simplifies the entire process of creating and administering LSAs that are customized to clients’ specific needs.

The simplification starts with Elevate’s plan design templates that cover a range of benefit options and provide a foundation for building a comprehensive benefits package tailored to specific client needs.

Beginning client setups with a plan template not only saves time but also eliminates costly errors and rework–automatically making sure administrators don't overlook important details during complex setups.

While templates provide a starting point, Elevate also allows for complete customization at the employer level. Account administrators can easily modify these templates to align with their clients' specific plan design requirements—no custom development needed. This flexibility makes sure that LSAs are quickly and easily tailored to the needs of each client.

How many plan designs are available?

All of them! As many as you want—account administrators have the ability to create any plan design with Elevate. Check out the benefits of Elevate’s plan templates.

Elevate's template system doesn't stop at efficiency and simplicity. As industry trends change and new benefits emerge, Elevate continually updates templates to incorporate the latest offerings.

We offer full branding capabilities, too!

Plus, with our APIs and white-labeling capabilities, it can all be in your branding. With our APIs, there’s just one site and one company for your clients and their employees to work with—yours. This way, account administrators can achieve greater efficiency and consistency in managing LSAs.

Not ready for full APIs yet? No problem, we also offer branded portals and apps that can reflect your brand’s imagery, logo, messaging, and more.

By offering flexible benefits that are easy to set up, aligning with employer values, and making financial sense, LSAs truly meet industry needs. Start today and see the positive impact on your business.

See more. Watch how Elevate’s templates are simplifying plan design.

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