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What is a Lifestyle Spending Account, and why do I need one?

The concept of a Lifestyle Spending Account (LSA) is not at all new. In fact, corporations in other countries have offered this benefit for years, but it is just recently gaining a foothold in the United States.

Just like some of the more familiar employer-sponsored accounts like HSAs and FSAs, LSAs are a means for companies to help employees support the health and wellness activities in their lives. LSAs can be used to help employers highlight the direct impact that employee lifestyles have on their overall health and wellness. To the employer, that means lowered costs and increased retention rates.

What exactly is a Lifestyle Spending account?

Think along the lines of a Health Spending Account (HSA) or Flexible Spending Account (FSA). Both account types have distinct controls set in place about what is an acceptable purchase on these accounts. With these examples, much of the control is by way of legal requirements. Lifestyle Spending Accounts do not replace either of these accounts, but instead is the perfect complement to them.

An LSA program contributes to the health and wellness of the employees by feeding their mind, body, and soul, which is very different than medical benefits. By taking advantage of the holistic approach of an LSA benefit and taking action toward employee wellness, the employees' needs for healthcare are reduced, thus adding potential savings to healthcare costs to the company and the employee. Add to the health benefits the direct result of fewer sick days from work. There is nothing but winning when you add it all up.

With a Lifestyle Spending Account, the employer has the power to define how their vision of lifestyle spending applies to their corporate vision. There is so much variety to choose from, and you have the opportunity to tailor your program to your company’s specific goals and values.

Lifestyle spending examples

Think body, mind, and soul. What feeds it? We mentioned that you have a significant degree of flexibility as an employer. What rejuvenates you and your employees? What brings them back to the office refreshed and ready to go? Even a weekend retreat to unwind does wonders for morale. Do take time to explore and mull over the possibilities over what will delight your employees and support your values.

LiquidPlanner, a firm out of Seattle, adopted an LSA program targeted to purchases that promoted activity, healthy eating, and experiences that challenge them. Some of the common purchases they noted were exercise equipment, cookbooks, and golf clubs.

Why does my company need a Lifestyle Spending Account program?

Benefits of an LSA program stretch from HR right to the front lines.

Key differences to other health-related benefits

The main similarity is that these are all “accounts” used for specific type purchases. However, there are some significant differences, such as:

  • Usage and restrictions - These are controlled by the employer. Because there are no legal limitations, employers are free to set parameters to augment their corporate goals. They may choose to be very restrictive or leave options open with minimal restrictions.

  • Rollovers – The practice of rolling any outstanding balance to the following year is optional to the discretion of the employer. Choosing the “use it or lose it” approach encourages employees to take steps to enhance their wellness and can also make LSAs more affordable.

  • Taxable income – There are no tax benefits associated with LSAs, so any funds deposited into the employee’s account is considered taxable income.

How do contributions work?

The first step is establishing a budget for lifestyle spending. The next step is deciding how to distribute the funds. Some employers distribute the funds in one deposit, at the beginning of the year. Other employers may select incremental deposits, instead. The choice is yours.

The benefit for employers is that, unlike a cash bonus, an LSA expense can be written off as a business expense. Another employer benefit is that even though funds deposit into every employee’s LSA, not all employees will take advantage. If the rollover is not activated, this leads to the benefit of cost savings to the employer without impacting the morale effect on the employee population.

Another intriguing practice is using the Lifestyle Spending Accounts as a means for a reward. In these examples, nominal amounts are deposited on schedule. Additional funds are deposited to their LSA in place of cash as a reward for hitting a sales goal. A practice like this enables the employer the ability to recognize the achievement and support their employees' well-being at the same time.

How do employees cash in?

Work2Live provides a website filled with products and experiences for employees to browse and select. Every choice has an associated price to purchase. If the amount exceeds the available funds in the employee’s lifestyle savings account, they may elect to pay the difference by credit card.


The biggest drawback is that many companies in the United States are unaware that this LSA benefit even exists. As a company that offers the benefit of a Lifestyle Spending Account, your company is at an advantage over the competition when it comes to acquiring top talent. Your recruiting team will sing your praises with this weapon in their arsenal for attracting talent. With a competitive salary, an LSA might very well be the tipping point your candidate is looking for in their next employer.

Wrap it up

Adopting a Lifestyle Spending Account is multi-faceted. By encouraging employees to take a holistic approach to health and wellness, it is common to see a decrease in unscheduled time off (sick days). Increased employee engagement leads to higher productivity and employee loyalty. Utilizing the LSA for rewards may negate the need for a separate recognition program, and all rewards benefit the employees’ body, mind, and spirit. With the benefit being new in the United States, it sets your company apart from the competition when it comes to attracting top talent.

What’s not to lose? Bring your company to the front of the pack and contact us today for a personal demonstration of Work2Live.

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