Personalization is key: why employers should consider offering LSAs

As working arrangements continue to evolve, employers are reevaluating how to meet their employees’ wellbeing needs and attract and retain talent with competitive benefits. One benefit that a growing number of employers are expressing interest in is the Lifestyle Savings Account (LSA). In fact, data from WTW’s 2023 Best Practices in Healthcare Survey found while 7% of employers currently offer LSAs, another 38% are either planning to offer them (7%) or considering adding LSAs by 2025 (31%).

LSAs are unique because they offer flexibility – both to the employer as well as the employee. Employers are free to design the LSA benefit as they wish, without the rules and restrictions typically associated with other more common account-based benefits, including who is eligible for the LSA, the level of reimbursement, and how the funds can be used. Many LSAs are designed to support employees’ physical, emotional and financial wellbeing but may also cover items such as home office and technology needs or family planning and support. Employees have flexibility to purchase the items or services that best meet their needs for how they live and work, allowing individuals to truly personalize their benefits. Moreover, employers with diversity, equity and inclusion goals may find LSAs very attractive since they can provide benefits to individuals or populations that are not met as well by other benefit programs.

Unlike other traditional benefit accounts, such as health savings accounts (HSAs) and flexible spending accounts (FSAs), LSAs are not tax-advantaged, and employees only receive the reimbursement if they make an eligible purchase. LSAs are also not portable – employees do not take the money with them if they leave the company like an HSA.

However, employers are finding that personalization is important to their employees. When asked why they offer or are considering offering LSAs, over two-thirds of survey respondents (68%) said to personalize benefits and perquisites while 59% said to differentiate benefits to attract and retain employees.

A critical factor when employers consider adopting an LSA is how to pay for the benefit. Forty-three percent of employers indicate lack of budget as the primary reason they have not yet adopted an LSA. Many employers that have successfully offered an LSA have first assessed their current benefits and programs and have identified opportunities to consolidate benefit programs. They are often redirecting funds from other programs to the LSA instead of adding to their benefits cost.

Related: Why workplace menopause support is overdue and 10 ways an LSA can help

Employers considering an LSA should start with an assessment of their current benefits and programs. Are there benefits and programs that currently have low employee utilization? Are the current benefits providing enough value to employees? Are they delivering the results the organization expected? Could the expense of those programs – such as financial incentives for wellbeing activities – be redirected to the LSA? LSAs have the great potential for employers to consolidate benefit programs yet offer a benefit that appeals to and is used by a much broader employee base. Indeed, LSAs often see utilization in excess of 80% depending on how the benefit is designed and communicated to employees.

LSAs provide a great amount of flexibility and the opportunity to truly personalize benefits. They are an important tool as employers continue to find ways to attract and retain talent.

Sara Taylor, Senior Director, Employee Spending Accounts, WTW