How to find the budget for Lifestyle Spending Accounts (LSAs)

How to find the budget for LSAs

Finding the budget for employee benefits programs can be a challenge, especially with limited financial resources. You want to offer competitive benefits that meet the diverse needs of your workforce while staying within budget constraints.

As an HR professional, you balance employee expectations and company goals. This delicate dance requires strategic thinking and creative solutions.

Enter Lifestyle Spending Accounts (LSAs). LSAs are a flexible, personalized approach to employee benefits that can help you optimize your budget and deliver value to your people.

What are Lifestyle Spending Accounts (LSAs)?

Lifestyle Spending Accounts (LSAs) are employer-funded accounts that give employees a flexible way to spend money on various wellness and lifestyle expenses. With LSAs, you can offer personalized benefits catering to your workforce’s diverse needs and preferences.

LSAs typically cover a wide range of categories, such as:

• Physical fitness (gym memberships, fitness classes, home exercise equipment)
• Mental health (therapy sessions, meditation apps, stress-relief programs)
• Financial wellness (financial planning, educational resources, student loan repayment assistance)
• Professional development (courses, conferences, certifications)
• Family care (child care, elder care, pet care)
• Travel and experiences (vacation stipends, cultural events, outdoor activities)

The flexibility of LSAs allows you to design a benefits program that aligns with your company culture and values while supporting your employees’ overall well-being. Employees can choose how to allocate their LSA funds based on their individual needs and preferences, leading to higher engagement and satisfaction with their benefits.

Administering LSAs is straightforward with the right technology platform. Through a user-friendly interface, you can set up customizable spending categories, define eligibility criteria, and manage reimbursements. This streamlines the benefits administration process and reduces the workload for your HR team.

By offering LSAs, you demonstrate your commitment to employee well-being and work-life balance. This innovative approach to benefits can help you attract and retain top talent, boost employee morale, and foster a positive company culture.

The benefits of offering LSAs

When you offer Lifestyle Spending Accounts (LSAs) to your team, you open the door to a wealth of advantages for both your employees and your organization. These benefits contribute to a healthier, more vibrant workplace culture and bolster your company’s reputation and competitive edge in the market.

Some of the main benefits include:

Improved employee well-being

LSAs directly impact your employees’ well-being by providing them with the means to invest in their health, happiness, and overall life satisfaction. These accounts offer a broad spectrum of wellness and lifestyle options, from gym memberships to mental health support, aligning with individual needs and preferences. 

The flexibility to choose how to spend their LSA funds empowers employees to take charge of their well-being, leading to a healthier, more balanced lifestyle.

Increased employee engagement and retention

The personalization aspect of LSAs significantly boosts employee engagement. When employees feel their employer genuinely cares about their well-being and offers benefits that resonate with their personal lives, their connection to the company strengthens.

This heightened sense of loyalty and appreciation often translates into increased retention rates, as employees are more likely to stay with a company that values and invests in their well-being.

Explore the 2024 Lifestyle Spending Accounts Benchmark Report for insights into how LSAs are shaping employee engagement and retention strategies.

Enhanced employer branding and attractiveness

In today’s competitive job market, standing out as an employer of choice is paramount. LSAs can significantly enhance your employer brand by showcasing your commitment to employee well-being and flexibility. 

A strong employer brand attracts top talent and positions your company as a leader in employee benefits innovation.

How to find the budget for LSAs in 2024

When it comes to financing LSAs, it can be challenging to balance resources to ensure cost-effective solutions without sacrificing the quality of employee benefits. HR professionals need to optimize their existing resources to overcome this challenge. 

Here are five things that can help you achieve this goal:

1. Consolidate various employee benefits vendors

Consolidating multiple benefits vendors into a single LSA platform reduces administrative costs and simplifies benefits management. The savings from consolidation can be reallocated to fund the LSA program.

Here’s how you can do it:

• Identify current vendors: Make a list of all your current benefits vendors, including health insurance, wellness programs, and other perks.
• Evaluate vendor performance: Assess each vendor’s effectiveness, cost, and employee satisfaction. Determine which vendors are essential and which can be replaced or consolidated.
• Research LSA platforms: Look for LSA platforms that offer a wide range of benefits categories and can integrate with your existing HR systems. Compare features, pricing, and user reviews to find the best fit for your organization.
• Calculate potential savings: Estimate the cost savings from consolidating vendors, considering factors such as reduced administrative fees, simplified billing, and improved negotiating power.
• Reallocate savings to LSAs: Use the savings from vendor consolidation to fund your LSA program. This allows you to offer more flexible and personalized benefits without increasing your overall benefits budget.

Streamlining your benefits administration through a single LSA platform can reduce costs, improve efficiency, and provide a better employee experience. This approach maximizes the value of your benefits investment while supporting your workforce’s diverse needs.

2. Utilize wellness funds offered by healthcare providers

Healthcare providers often include wellness incentives as part of their core programs to stay competitive. Access to these funds can be complicated, with highly complex reimbursement policies. 

Rather than struggling with the complexities, shift the wellness incentive funds to a modern, easy-to-use LSA. This will allow you to cover a wide range of options in the benefits package beyond what’s in the group health plan.

Here’s how you can make the most of wellness funds offered by healthcare providers:

• Review current healthcare plans: Examine your current healthcare plans to identify any wellness incentives or funds available. These may include fitness reimbursements, health coaching, or preventive care benefits.
• Assess fund accessibility: Determine how easily employees can access and utilize the wellness funds. Complex reimbursement processes or limited options can hinder participation and engagement.
• Negotiate with healthcare providers: Discuss the possibility of shifting wellness funds to an LSA with your healthcare providers. Highlight the benefits of increased flexibility and employee satisfaction.
• Communicate the change to employees: Explain to employees how the wellness funds will be transitioned to their LSA and the expanded range of wellness options available. Provide guidance on how to access and utilize their LSA funds effectively.

By leveraging the wellness funds offered by healthcare providers and integrating them into your LSA program, you can create a more comprehensive and appealing benefits package. Employees will appreciate the increased flexibility and choice in how they can invest in their well-being, leading to higher engagement and satisfaction with their benefits.

3. Repurpose existing budgets

As companies adapt to the evolving work landscape, there are opportunities to repurpose existing budgets to support a more inclusive and flexible LSA program. 

Here are some areas where you can find additional funds:

Unused caregiving accounts

If your organization offers caregiving benefits, such as dependent care flexible spending accounts (DCFSAs), review the utilization rates. If participation is low or funds remain unused, consider redirecting a portion of this budget to your LSA program. 

This allows you to provide a broader range of support options that cater to the diverse needs of your workforce.

Real estate savings from remote work

Many companies have reevaluated their office space requirements due to the shift to remote and hybrid work arrangements. If your organization has reduced its real estate footprint or renegotiated leases, consider allocating some of the savings to your LSA budget. 

This investment in employee well-being can help maintain a strong company culture and boost morale, even when teams are working remotely.

Gym reimbursements

Traditional gym reimbursement programs often have limited participation and may not cater to the preferences of all employees. 

By redirecting these funds to an LSA, you can offer a wider range of wellness options, such as online fitness classes, mental health apps, or stress-management programs. This flexibility ensures that your wellness benefits are inclusive and relevant to your diverse workforce.

When repurposing existing budgets, it’s important to communicate the changes to your employees and emphasize the expanded benefits of the LSA program. Highlight how the shift towards more flexible and personalized benefits aligns with your organization’s values and commitment to employee well-being.

By strategically reallocating funds from underutilized or less relevant benefits, you can create a more robust and appealing LSA program without necessarily increasing your overall benefits budget. This approach demonstrates your organization’s adaptability and responsiveness to the changing needs of your workforce.

4. Adjust compensation increases

In 2024, you can find additional funds for your LSA program by strategically adjusting annual compensation increases. Rather than allocating the full amount of a planned raise, consider redirecting a small portion to your LSA budget.

Here’s how this approach can benefit both your organization and your employees:

• Immediate impact: LSAs provide employees with tangible and immediate benefits they can use to support their well-being and personal growth. This can be more impactful than a slightly higher salary increase spread out over the year.
• Increased perceived value: Employees often perceive employer-funded benefits as more valuable than an equivalent amount in salary. By allocating a portion of the compensation increase to LSAs, you can boost the perceived value of your total rewards package.
• Improved employee engagement: Employees with access to a wide range of wellness and lifestyle benefits through their LSA are more likely to feel supported and valued by their employer. This can lead to increased engagement, productivity, and loyalty.
• Cost-effective for employers: Redirecting a small portion of compensation increases to LSAs can be a cost-effective way to enhance your benefits offering without significantly increasing your overall labor costs.

To implement this strategy effectively, clearly communicate the change to your employees. Emphasize the expanded LSA program's value and how it aligns with your organization’s commitment to employee well-being. 

Provide examples of how employees can use their LSA funds to support their unique needs and interests.

Remember to review and adjust your approach annually based on employee feedback and participation rates. By continuously refining your LSA program, you can ensure that it remains relevant and impactful for your workforce.

5. Bundle pricing for pre-tax and LSA administration

Consolidating pre-tax benefits and LSAs on a single platform eliminates redundancies, reduces software costs, and saves administration time. Use these savings to fund your LSA program.

Here’s how bundling pricing for pre-tax and LSA administration works:

• Identify current pre-tax benefits: Make a list of your current pre-tax benefits, such as Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and commuter benefits.
• Research LSA platforms with pre-tax integration: Look for LSA platforms that can seamlessly integrate with your existing pre-tax benefits. This allows you to manage all your benefits in one place, reducing administrative complexity.
• Negotiate bundled pricing: When discussing pricing with LSA providers, ask about bundled pricing options that include both pre-tax and LSA administration. Many providers offer discounted rates for combining these services.
• Calculate potential savings: Estimate the cost savings from consolidating your pre-tax and LSA administration, considering factors such as reduced software licenses, simplified payroll processing, and streamlined employee support.
• Allocate savings to your LSA budget: Use the savings generated from bundling pre-tax and LSA administration to fund your LSA program. This allows you to offer more comprehensive and flexible benefits without increasing your overall benefits budget.

Bundling pre-tax and LSA administration saves money and improves the employee experience. Employees can access all their benefits through a single platform, making it easier for them to understand and utilize their benefits effectively. 

This increased engagement and satisfaction can lead to higher retention rates and a more positive company culture.

Additional ways to find budget for Lifestyle Spending Accounts

1. Convert wellness challenge dollars

Wellness challenges can be costly and only draw in a small slice of the workforce. Shift these funds to an LSA with a flexible construct, allowing employees to select options that are meaningful and motivating to them.

2. Remove costly expense software

Consolidate and streamline with a holistic solution like flexible LSA benefits technology. Save on cost-per-click charges and staff time spent inputting information.

3. Repurpose 401k match contributions

Studies show employees prefer an employer who contributes to an LSA over a 401k. Take a portion of the money aligned to 401k matches and put it into an LSA, giving everyone a little something.

4. Improve cell phone and wifi reimbursements

Remove expense software fees and repurpose the savings to fund the account. You won’t be charged per click, making it a no-brainer for spending improvements.

5. Look for an ergonomic equipment budget

LSAs can help disseminate ergonomic needs at scale, allowing employees to select and ship items directly to their chosen destination.

6. Create a more inclusive family formation strategy

Reimagine and streamline your approach by defining eligibility rules and letting employees decide how to source these benefits, saving time and making your approach more inclusive.

7. Give renewed purpose to new parent budgets

Shift funds for new parent gifts into an LSA, giving new parents choices to use the funds for something they need most.

8. Draw from the Learning and Development budget

Professional development fits well within LSAs, giving employees choice and flexibility based on their roles, development opportunities, and career stage.

9. Refresh performance and competitions awards

Funding an LSA is much easier than using expense systems or procuring individual gift cards. Rewards can go into specific spending accounts for defined uses that benefit the company.

10. Streamline holiday gift budgets

LSAs solve the challenge of finding a gift every employee will value. It’s easy to administer and fits in with existing accounting.

11. Administer service anniversary bonuses

Similar to holiday gifts, retention and tenure bonuses can be administered in LSAs with all the administrative, tax, and accounting benefits.

12. Allow SWAG to be purchased

Give people the ability to select their SWAG using the budget, and the company only pays for items people want.

Final thoughts

The budget for LSAs in 2024 needs to be managed with innovative thinking, strategic resource allocation, and a focus on return on investment. Offering LSAs has numerous benefits, including enhanced employee well-being and a stronger employer brand, which far outweigh the initial costs.

A commitment to employee well-being through flexible benefits like LSAs fosters a more engaged, productive, and loyal workforce. This strategic approach benefits employees and contributes to your company’s long-term success and growth.

Forma understands the challenges you face in finding the budget for LSAs and is here to help you navigate this journey. Our platform offers the flexibility and support you need to implement a successful LSA program that aligns with your company’s goals and budget.

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