As an HR leader or benefits specialist, you know that today’s workforce is diverse, mobile and ever-evolving. Traditional benefit models simply don’t resonate the way they used to. Employees expect choice, personalization and support for the lives they lead — both in and out of the workplace.
A well-designed Lifestyle Spending Account (LSA)—or more broadly, a lifestyle benefit—offers a compelling solution. But before you decide to implement one, there are critical considerations to ensure the program aligns with your organization’s goals and your employees’ needs.
In this article, we’ll walk you through the key decision points HR leaders should ask when evaluating whether an LSA is right for your company — and how to design a program that truly delivers value.
What is a Lifestyle Spending Account (LSA)?
In simple terms: a Lifestyle Spending Account (LSA) is an employer-funded benefit account that gives employees the freedom to spend on lifestyle and wellness-related categories that matter to them. These are not restricted to traditional health or insurance benefits, but instead empower employees to choose what enhances their life and well-being.
Here are a few core features:
- It’s post-tax, and the funds are taxed as income when spent — so clear communication is essential.
- You define the allowance amount, funding cadence (monthly, quarterly, annually) and eligible expense categories.
- It complements — rather than replaces — foundational benefits (health, dental, retirement), by adding flexibility and personalization.
Why Consider an LSA? The Strategic Value for HR
When done well, LSAs become a powerful lever in your total rewards strategy. Here’s why:
- Flexibility & Personalization: Employees are as unique as your organization. An LSA allows them to spend on what matters. This translates into higher relevance, which drives usage and satisfaction.
- Attraction and Retention: In a competitive talent market, offering lifestyle benefits signals you value more than standard coverage — you value the person. That can become a differentiator when recruiting and retaining.
- Cost Predictability with Value: Many LSA programs allow you to set a fixed budget per employee. You control liability while boosting perceived value.
- Inclusive Culture & Employee Experience: By offering choice, you align with diverse employee needs (remote workers, young professionals, caregivers, multi-generational teams) and foster a culture of empowerment.
That said — LSAs are not without considerations. They must be implemented thoughtfully to ensure they work.
Key Considerations Before You Launch an LSA
Here are five core questions HR leaders should work through before implementing an LSA:
1. What’s the purpose and scope of the program?
Define what you aim to achieve — attracts top talent? Boost engagement? Support remote/hybrid employees? Tailor the LSA to your objective. Choose eligible categories that reinforce your company values and employee needs.
2. How will you structure the allowance?
Decisions here include:
- Fixed vs tiered allowance (same for everyone vs varying by role/level)
- Funding cadence (monthly, quarterly, annually)
- Rollover policy (use-it-or-lose-it vs carry-forward)
- Eligibility (full-time only? Part-time? Contractors?)
For example, benchmarking indicates annual allowances often range from a few hundred to over a thousand dollars depending on company size and industry.
3. Which expense categories will you include?
One of the biggest advantages of LSAs is flexibility — but too much ambiguity can cause confusion. Choose categories aligned with your workforce’s needs and company culture (e.g., fitness, mental wellness, home office, caregiving, personal development).
But also consider what you will not fund and make that clear.
4. What are the tax and administrative implications?
Because LSA funds are typically taxable to employees, you’ll need clear communication.
On admin: Choose a platform or process that simplifies claims and reimbursement, tracks spending, and provides insights. Complex or manual workflows can undermine the benefit’s experience and value.
5. How will you measure and iterate the program?
Define success metrics: participation rate, average spend per employee, satisfaction survey data, impact on retention or internal mobility. Use insights to adjust allowance levels, eligible categories, communication strategy. LSAs should evolve with your workforce — not remain static.
Is an LSA Right for Your Organization? Quick Self-Assessment
Use this mini checklist to evaluate readiness:
- Does your current benefits offering struggle to address diverse lifestyles or remote/hybrid work needs?
- Do you have a workforce with varied life stages and priorities (e.g., parents, single professionals, caregivers)?
- Are you seeking to differentiate your employer brand in talent acquisition and retention?
- Is your HR/Benefits team equipped (or partnered) to administer a flexible spending account and communicate effectively?
- Are you comfortable introducing a taxable benefit and fully communicating the implications?
If you answered “yes” to multiple items — then an LSA likely makes strategic sense. If you answered “no” to several, you may want to address those gaps first before launching broadly.
Implementing Your LSA with LIVD
At LIVD, we make launching and managing lifestyle benefits simple, efficient and aligned with your total rewards vision. Here’s how we help HR teams deliver an LSA program that drives real impact:
- Streamlined setup and enrollment: Configure allowance levels, categories and eligibility in one intuitive platform.
- Employee-centric experience: Employees access a marketplace of lifestyle benefits (wellness, food, travel, learning) that align with their life.
- Seamless reimbursement & tracking: Dashboards give you real-time insights on how employees are using the program.
- Communication and adoption support: We partner with you to craft messaging, rollout plans and training for employees to maximize uptake and usage.
With LIVD, you’re not just adding another benefit — you’re elevating how you reward, engage and recognize your people through meaningful lifestyle benefits.
The Bottom Line
A Lifestyle Spending Account isn’t just another perk. When designed and implemented thoughtfully, it becomes a strategic component of your total rewards strategy — one that adapts to your people, supports their lives, and reinforces your company culture.
Before you dive in, ask the right questions, align the program with your objectives, and partner with a platform that supports adoption and scalability. With the right approach, an LSA can help you attract top talent, retain valued employees and build a more engaged, empowered workforce.
Ready to get started? Book a demo with LIVD and explore how an LSA can be tailored for your organization — and your people.
