Beyond the basics: 7 topics to level up your LSA knowledge
Master the advanced topics of Lifestyle Spending Accounts that top benefit leaders are exploring.
In this piece
Must-know topics about Lifestyle Spending Accounts
As more companies explore Lifestyle Spending Accounts (LSAs), total rewards and benefits leaders want to delve deeper into LSAs to uncover their full potential beyond the basics.
Here are some questions that the best benefit leaders ask about Lifestyle Spending Accounts, along with their answers.
7 advanced LSA questions
1. How do LSAs work with pre-tax benefits like HSAs and FSAs?
HSAs and FSAs have specific rules about eligibility and funding. LSAs offer more flexibility, allowing funds to be used more freely. Leading LSA providers often offer integrated solutions, where employees can find their LSAs and their pre-tax benefits in one place. This drastically improves the employee experience and simplifies administrative overhead. Benefit teams often encounter the question "are stipends taxable" and the answer depends on what's covered.
2. How do companies save by using LSAs?
Companies can save in multiple ways with Lifestyle Spending Accounts. Organizations often reallocate funds from underutilized benefits and reduce the number of point solutions. This leads to streamlined administration. LSAs improve cash flow through notional funding, where money is only spent when employees use their benefits, avoiding wasteful subscriptions or gift card programs that pay for unused services. This approach allows organizations to expand benefits offerings while optimizing their budget, making LSAs an efficient alternative to traditional benefit structures.
3. Do you see companies scaling back on flexible benefits like LSAs in the current economic climate?
While some might think it’s best to scale back on benefits due to economic pressures, many market leaders recognize the value and criticality of flexible benefits like LSAs. LSAs help companies save costs by consolidating programs, enhance employee satisfaction and engagement by offering choice, and realize a higher ROI. Companies stay ahead of their competitors by maintaining an edge in their benefits offerings.
4. Is it advantageous to use a calendar year plan for taxation purposes?
Some employers find it advantageous to align their LSA plans with the calendar year for simplicity in taxation and reporting. However, the plan year for LSAs is up to the employer. There are great reasons to launch LSAs off-cycle, including greater employee attention on the program and more mindshare from the benefits team. Flexibility in plan years can also help align with the organization's overall strategic goals and operational timelines.
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5. Does an employer get to determine the LSA contribution amount at a set cadence?
Yes, employers determine how much to contribute on a cadence they wish (monthly, quarterly, biannually, or annually). Best practices around funding frequencies and amounts can help optimize the use of LSAs. Employees will receive meaningful and timely benefits while employers maintain budget control. One example is how employers use maximum account balances so that LSA funds don’t accrue to large amounts. Setting a limit encourages employee usage. The more funds they use, the more they invest in their well-being.
6. Do LSAs integrate with wellness challenges or initiatives that require activities for earning funds?
Yes, LSAs can integrate with wellness challenges or initiatives. Employees can earn LSA funds by completing wellness activities, encouraging healthy behavior and engagement. These earned funds are typically added to existing or dedicated LSAs and are generally considered taxable income. This integration allows employers to incentivize wellness participation while providing flexible rewards to employees.
7. Are fitness accessories covered by an LSA?
It depends. Many companies do cover fitness accessories, though ultimately it’s up to the employer. You can partner with your modern TPA to collaborate and determine what's eligible or not under their LSA given their goals and employee needs.
Use Forma's Fitness & Wellness Spending Account eligibility standards to uncover what the account is, how it works, what to include categorically, and the top items to cover - plus compliance protips!
Find answers to your LSA questions with Forma
Forma revolutionizes benefits with a user-friendly platform that consolidations pre- and post-tax benefits under one roof.
With a comprehensive suite of benefits programs including Lifestyle Spending Accounts (LSA), Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), and Health Reimbursement Arrangements (HRA), Forma caters to a diverse range of employee needs.
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