It’s not always about dollars and cents, but about what you can do with them. That’s the takeaway that flexible benefits company Forma has found working with 280 companies across the globe.

Megan Burns, benefits strategy team lead at Forma, spoke to these findings at a From Day One Webinar titled “How Lifestyle Spending Accounts (LSAs) Revitalize Benefits for the Most Employee.” As a newer benefit in the industry, Lifestyle Spending Accounts (LSAs) are growing. Fast. The biggest reasons?

“The power in these programs is employee flexibility and choice,” Burns said. “Since employees can choose how to spend their money, there’s always something valuable for every employee to use those dollars on, and then no one is left out.”

A Changing Marketplace

It’s no surprise that the cost of employee benefits increases year after year. So benefits leaders need to ensure their dollars are working efficiently without compromising the quality of benefits. Employees are already feeling the pinch financially, Burns says, as the cost of living keeps going up.

“This type of stress is impacting both workplace productivity, and also makes employees more likely to explore alternative positions outside of your organization, directly impacting your overall retention,” she said.

Traditionally, lifestyle benefits solutions relied on a confusing point system, leading to low engagement and low appreciation. Meanwhile, it takes more work for the admin to run these programs. Enter LSAs: this new way of looking at benefits can be a win-win for companies in more ways than one.

An LSA, which can be called by many names, is a customizable spending account that the employer designs and sets up, then the employee decides how to spend those funds within the parameters. LSAs look different from company to company, depending on their goals.

Empowering Employees

Supporting employee wellness is one common way of structuring an LSA, Burns told the audience. You as the employer set the pillars and budget with specific parameters. For example, a company could allot $50 per month for each employee as part of their LSA.

“Once that’s set in place, the employee then gets to decide how to spend that $50. Within those program parameters, those pillars, they may choose to spend that $50 on a local gym membership, or purchasing a bicycle or running shoes because they like to be outdoors.”

But it doesn’t have to stop there. Employers could set up parameters for financial wellness, caregiving support, or other benefits that could help support employee wellness. Forma can help companies set it up and offer employees a debit card to a discounted store with 250 vendors, making each dollar go further.

Dollars are only debited from the company if they are used by the employee, and Burns said a majority of employees don’t always use 100 percent of what’s allotted to them. Not only that, but there is cost savings thanks to lower call volume and admin time required. For one company, Forma was able to save them $500,000 in the first six months, partially because they could use the Forma platform and offload their expensive benefits software.

“We worked cross functionally across a number of different teams to realize what that amount would look like. For this particular client, they did choose to reimburse for gym, home office expenses like internet, cell phone, and other wellness items.”

Gaining Popularity

Employers and employees have both benefited from this program, which is why Burns said LSAs continue to grow. In fact, 70% of employers are currently considering adding a lifestyle spending account. A projected 13% of companies will have them in place by 2024 and 43% by the end of 2025.

“Employers are more diverse and dispersed than ever before. There’s five different generations in the workforce, and the most efficient way to meet their unique needs is to provide them with choice and give them benefit dollars that they can then use towards what matters most to them.” That’s why LSAs also translate well across global populations, since they are customizable and can adapt needs country by country.

According to a Radford analysis, employees ranked their 401k match as the most appreciated and valued benefit program, with LSA as a close second. It’s interesting to note, too, that employees actually ranked less dollars given to them and an LSA as high as having higher value than more dollars put into a program that's specifically designed with strict parameters and less choice, Burns explained.

In Forma’s recent benchmark report of 200 companies with 450,000 members as of December 2023, the broad all-inclusive LSA is the most popular. One likely reason is that it helps companies reach their DEI goals.

“They want to lean into that flexibility of choice where everyone gets the same dollar value, the same dollar amount, and then they get to choose on how to spend that money,” Burns said.

One account some companies have set up is medical travel. Especially for those who are in underserved areas and require medical services in another area, employees can get reimbursed for travel costs associated with medical procedures. Education repayment and other development reimbursement is also high on the list of LSAs for companies, as are home office reimbursements, rewards and recognition, caregiving, and even meal delivery service. The opportunities are endless.

Editor’s note: From Day One thanks our partner, Forma, for sponsoring this webinar.

Carrie Snider is a Phoenix-based journalist and marketing copywriter.