A Lifestyle Spending Account (LSA) is a flexible benefit offered by employers to employees, designed to cover a wide range of personal well-being expenses that are not typically included in standard benefits packages.
Unlike traditional benefits like health insurance or retirement contributions, LSAs give employees the freedom to use a set budget for a variety of wellness-related or lifestyle-related activities, often beyond what’s covered by conventional benefits.
Common Uses for an LSA
- Fitness and wellness: Gym memberships, fitness classes, personal training, or wellness apps.
- Healthy eating: Subscriptions to healthy food delivery services or nutritional counseling.
- Home office supplies: Desk chairs, ergonomic equipment, or other home office setup needs.
- Travel: Fitness retreats, wellness vacations, or even transportation-related costs like commuting.
- Professional development: Courses, seminars, or subscriptions for educational resources.
Key Features
- Flexible: Employees can choose how to spend the funds within certain categories.
- Annual or quarterly allowances: Employers may allocate a set amount of money each year or quarter for employees to spend on these approved services or products.
How Is an LSA Different From an HSA or FSA?
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) can only be used for IRS-approved expenses such as medical copays, eyeglasses, or dental care, whereas Lifestyle Spending Accounts have fewer restrictions. The main difference, however, is that expenses submitted for reimbursement through a Lifestyle Spending Account are taxable to you. What does that mean? The reimbursed amount is considered income and is therefore subject to the same taxes as your normal wages. (In other words, your reimbursement will be the amount of the expense minus taxes.)
