Understanding what counts as eligible expenses in a lifestyle spending account

What is a lifestyle spending account?

How lifestyle spending accounts fit into modern employee benefits

Lifestyle spending accounts (LSAs) are becoming a popular way for employers to support employees beyond traditional health benefits. Unlike health savings accounts (HSAs) or flexible spending accounts (FSAs), LSAs are designed to cover a broader range of expenses that contribute to an employee’s overall well-being. These accounts are funded by the company and can be used for eligible expenses related to physical health, mental health, wellness, and even financial planning.

Employers choose LSAs to reflect company values and offer employees more flexibility in how they use their benefits. This approach recognizes that employees have different needs and lifestyles, so a one-size-fits-all benefits package may not be enough. With LSAs, employees can spend their allowance on services and products that matter most to them, whether it’s gym memberships, wellness apps, or other allowable expenses.

• LSAs are post-tax accounts, meaning the funds are taxed when employees use them for eligible reimbursement.
• They can be tailored to support a wide range of expenses lifestyle, from fitness to mental health services.
• Employers set the plan design, including which expenses are eligible and how much employees can spend.

For companies, offering LSAs can help attract and retain talent by showing support for employee wellness and financial health. It also allows for more personalized benefits, which can improve employee satisfaction and engagement. If you’re interested in how LSAs compare to other types of benefits or want to know more about leave policies, you might find this resource on personal leave policies in California helpful as well.

Common eligible expenses in lifestyle spending accounts

Typical Categories Covered by Lifestyle Spending Accounts

When companies offer employees a lifestyle spending account (LSA), they aim to support a wide range of wellness and lifestyle needs. LSAs are designed to reflect company values and help employees improve their physical health, mental health, and overall well-being. While plan design can vary, there are some common expenses eligible for reimbursement under most LSAs.

• Fitness and Physical Health: Gym memberships, fitness classes, yoga studios, and sports league fees are classic examples. Some plans also cover home exercise equipment or wearable fitness trackers.
• Mental Health and Wellness: Counseling services, meditation app subscriptions, and stress management workshops are often included to support employees’ mental health.
• Nutrition and Healthy Living: Nutritionist consultations, weight management programs, and even cooking classes focused on healthy eating can be eligible expenses.
• Personal Development: Courses, workshops, or seminars that promote personal growth, financial planning, or work-life balance may be covered, depending on the employer’s plan design.
• Family and Lifestyle Support: Childcare, eldercare, and pet care services sometimes fall under allowable expenses, especially for companies prioritizing holistic employee support.

It’s important to note that LSAs are different from HSA FSA accounts. LSAs are post-tax benefits, so the range of eligible expenses can be broader and more tailored to company culture. Employers choose which expenses are eligible, and this flexibility allows them to align the spending account with their unique workforce needs.

For a deeper dive into how LSAs compare to other accounts and how they can fit into your company’s benefits strategy, check out this resource on the benefits of isolved HSA for HR professionals.

Understanding these common categories helps employees make the most of their lifestyle spending accounts and ensures employers provide meaningful, relevant support.

Less obvious eligible expenses you might not know about

Surprising categories that may qualify for reimbursement

When employees think about lifestyle spending accounts (LSAs), gym memberships and fitness classes often come to mind. However, LSAs can cover a much broader range of expenses, depending on how employers choose to design their plans. Some eligible expenses might surprise you and can make a real difference in supporting employee wellness, mental health, and financial planning.

• Mental health services: Beyond traditional therapy, some LSAs allow reimbursement for meditation apps, mindfulness courses, or even stress management workshops. This reflects a growing recognition of mental health as a key part of employee wellbeing.
• Financial planning support: Certain LSAs include expenses related to financial wellness, such as sessions with a financial advisor or access to budgeting tools. These benefits help employees manage their money and reduce stress.
• Home fitness equipment: While gym memberships are common, some plans also cover home exercise gear like yoga mats, resistance bands, or even standing desks, supporting physical health outside the gym.
• Nutrition and healthy eating: Some employers offer employees reimbursement for nutritionist consultations, healthy meal delivery services, or cooking classes, aligning with company values around holistic wellness.
• Childcare and eldercare support: A few LSAs extend to caregiving services, helping employees balance work and family responsibilities. This can include backup care or after-school programs.
• Personal development: Eligible expenses sometimes include courses or workshops unrelated to work, such as art classes or language lessons, supporting overall lifestyle enrichment.
• Transportation and commuting: In certain cases, LSAs may reimburse for bike share memberships or public transit passes, encouraging sustainable commuting options.

Employers have flexibility in defining what counts as an eligible expense, but it’s important to note that LSAs are post-tax benefits, so allowable expenses can vary widely. Employees should always check their company’s plan design and documentation for the full list of eligible reimbursement options.

For HR professionals and employees alike, understanding these less obvious eligible expenses can help maximize the value of a lifestyle spending account. It’s also worth noting that the boundaries between LSAs, HSAs, and FSAs can be complex, especially when it comes to tax treatment and eligible expenses. For more on how HR systems handle these nuances and potential compliance challenges, see this in-depth guide to HR compliance and benefit management.

How human resources information systems track and manage claims

How technology simplifies lifestyle spending account management

Human resources information systems (HRIS) have become essential for managing lifestyle spending accounts (LSAs). These systems help employers and employees track eligible expenses, streamline reimbursement, and ensure compliance with company policies and tax regulations. LSAs can cover a wide range of expenses, from gym memberships and wellness services to less obvious options like financial planning or mental health support. With so many possible benefits, it’s crucial for companies to have a reliable way to monitor what’s being claimed and reimbursed. Key ways HRIS platforms support LSA management:

• Automated claim submission: Employees can upload receipts and supporting documents directly to the system, making it easy to request reimbursement for eligible expenses.
• Real-time eligibility checks: The system can instantly verify if an expense is allowable under the company’s LSA plan design, reducing errors and confusion.
• Customizable rules: Employers choose which expenses are eligible based on company values and goals. HRIS platforms allow for quick updates to these rules as benefits evolve.
• Tax compliance: Since LSAs are post-tax benefits, HRIS tools help ensure that reimbursements are processed correctly and reported as required.
• Reporting and analytics: Companies can review spending trends, see which benefits employees use most, and adjust offerings to better support wellness, mental health, and physical health.

For employees, this means a smoother experience when accessing their lifestyle spending account. They can see what expenses are eligible, track their remaining balance, and get reimbursed quickly for allowable expenses. For employers, HRIS platforms reduce administrative burden and help maintain compliance, all while supporting a culture of well-being and flexibility. As LSAs become more popular, having the right technology in place is key to maximizing the value of these benefits for both employees and the company.

Challenges in defining and updating eligible expenses

Why defining eligible expenses is not always straightforward

For employers offering lifestyle spending accounts (LSAs), one of the biggest hurdles is deciding which expenses are eligible for reimbursement. While some expenses like gym memberships or wellness classes are clear, others fall into gray areas. The challenge is to create a list that supports employees’ diverse needs, aligns with company values, and complies with tax regulations.

Factors that complicate expense eligibility

• Changing employee needs: As workforce demographics shift, so do expectations around benefits. What counts as a wellness or lifestyle expense for one employee may not be relevant for another.
• Tax implications: LSAs are typically post-tax benefits, but certain expenses could have tax consequences if not properly categorized. Employers must stay updated on local and federal tax rules to avoid compliance issues.
• Company culture and values: Employers choose eligible expenses that reflect their organizational priorities. For example, a company focused on mental health might include therapy apps, while another prioritizing physical health may emphasize fitness equipment.
• Overlap with other accounts: Some expenses may be eligible under health savings accounts (HSA) or flexible spending accounts (FSA), but not under LSAs, and vice versa. This overlap can cause confusion for both employees and HR teams.
• Vendor and service diversity: The range of services and products that support wellness, financial planning, or lifestyle goals is constantly expanding. Keeping the eligible list current is a moving target.

How companies keep their lists up to date

Most employers rely on regular reviews of their LSA plan design, often with input from HR, finance, and legal teams. They may also gather feedback from employees to ensure the spending account supports real needs. Human resources information systems (HRIS) play a key role by tracking claims, flagging unusual expenses, and generating reports that help refine the eligible reimbursement list.

Ultimately, the definition of eligible expenses in LSAs is a balancing act. Employers must support employees’ well-being, manage costs, and stay compliant with regulations, all while keeping the spending account relevant and valuable.

Tips for maximizing your lifestyle spending account benefits

Smart ways to get the most from your lifestyle spending account

Maximizing the benefits of your lifestyle spending account (LSA) takes a bit of planning and awareness. Many employees miss out on eligible expenses simply because they aren’t aware of what’s covered or how to make claims efficiently. Here are some practical tips to help you make the most of your LSA:

• Review your plan design regularly: Employers choose different structures for LSAs, so check your company’s documentation or HR portal for the latest list of allowable expenses. This helps you avoid missing out on eligible reimbursement for things like gym memberships, wellness services, or financial planning support.
• Track your spending: Use your human resources information system (HRIS) or the LSA provider’s dashboard to monitor your spending account balance and claims. This can help you plan larger expenses and ensure you don’t leave money on the table at year-end.
• Understand tax implications: LSAs are typically post-tax benefits, unlike HSA or FSA accounts. That means you won’t get a tax deduction, but you also have more flexibility in the types of expenses lifestyle spending accounts can cover.
• Ask about less obvious eligible expenses: Some LSAs cover mental health apps, ergonomic equipment, or even pet care. If you’re unsure whether an expense is eligible, check with your HR team or review the company’s LSA guidelines.
• Align with company values: Employers often design LSAs to support employee wellness, physical health, and mental well-being. Consider using your account for services that align with these goals, such as wellness coaching or fitness classes.
• Submit claims promptly: Don’t wait until the end of the year to submit expenses. Some LSAs have deadlines for reimbursement, and submitting early helps avoid missing out on eligible benefits.
• Leverage support resources: If your company offers webinars, FAQs, or HR support for LSAs, take advantage of these resources. They can clarify what expenses are eligible and how to make the most of your account.

By staying informed and proactive, employees can ensure they’re using their lifestyle spending accounts to their full potential, supporting both their financial and overall well-being.