Use of lifestyle spending accounts increases among businesses

Flexible Lifestyle Spending Accounts (LSAs) have experienced double-digit increases across companies of all sizes, according to a recent Benepass study.

LSAs are non-salaried allowances designed to support employees’ physical, mental, and financial wellness. They are fully funded by the employer and were developed on the basis that flexible and employee-led benefits lead to happier and more productive employees.

"Companies need to meet a wide range of wants and needs with their benefits programs, and they're becoming more aware that traditional one-size-fits-all benefits aren't designed for today's workforce. This year’s findings show that companies are prioritizing benefits that are flexible enough to serve a diverse workforce and adapt to modern stressors," said Jaclyn Chen, CEO, Benepass.

LSAs gain the top spot, other findings

Based on an analysis of benefits data from large, medium, and small U.S. businesses representing 60,000+ employees, the 2023 Benepass Benefits Benchmarking Report found:

• LSAs gain the top spot: This year, LSAs rose to the top spot, with 51% of companies offering this flexible perk, compared to 37% in 2022. The largest jump in percentage of companies offering LSAs came from large companies – a staggering 75% of large companies provide an LSA in 2023 compared to just 40% in 2022. Small and medium-sized companies also were seen to rapidly embrace LSAs, with medium-sized companies experiencing a 33% boost and small companies increasing LSA adoption by 10%. Two industries in the benefits space, technology and healthcare, saw strong growth in the adoption of LSAs, with tech companies seeing a 25% increase, and healthcare and life sciences companies seeing a 21% increase.
• In a post-pandemic workplace, Health Spending Accounts (HSA) become more popular: While Health FSAs remained the most popular type of pre-tax account in 2023, HSAs overtook Dependent Care FSAs (DCFSA) as the second-most popular type of account in 2023, the report said.
• Companies implement perks to support return-to-office initiatives: Transit and parking accounts are more popular than limited-purpose Flexible Spending Accounts (FSAs) in 2023. As more companies implement return-to-office plans, employers may be offering transit and parking accounts to reduce community costs and incentivize employees to return to the office.
• Professional enrichment and food benefits are among the top perks: The largest increases in average contributions were in professional enrichment and food benefits, which grew by 35% and 84%, respectively. These perks help companies stand out as employers of choice and provide employees with more funds, increasing employee engagement and satisfaction, the report said.
• Small and medium-sized companies boost fitness and wellness perks: To remain competitive with larger company offerings, small companies boosted their fitness and wellness perks by 18%, and medium-sized companies increased the perk by 12% in 2023. Small companies also offered the widest variety of perks in 2023, which reflects the need for companies in their growth phase to provide strong perks so they can attract the talent they need to achieve their goals for growth.
• Charitable giving emerges as a new LSA spending category: Companies are harnessing the flexibility of an LSA to spin up eligible categories in response to current events like the war in Ukraine. Millennial and Gen Z employees in particular want to work for values-driven companies with one Deloitte study revealing that 77% of Gen Z respondents consider it important to work for a company whose values align with theirs, according to the report.

"If you're really looking to build an inclusive benefits program, a lifestyle spending account is the way to go. It's that silver bullet if you will. It's really the only benefit that you can truly be 100% inclusive and know that it'll have an impact on everyone. There's truly no other benefit out there that anyone could offer that'll do the same," said Matt Sanborn, senior manager, benefits, Seres Therapeutics.

 

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com. 

© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.