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Finance professionals plotting their company’s spending on employee benefits have a new trend to consider. Lifestyle spending accounts, or LSAs, which might cover an employee’s spending on items ranging from pet care, to fitness, to cleaning services and salon treatments.
LSAs are now being offered by 51% of companies tracked by benefits platform company Benepass, according to their latest Benchmarking Benefits Guide. It’s a bump from 37% last year, and makes LSAs the most popular perk offered by the companies studied for the report, beating out fitness and wellness perks.
In a sense, LSAs are a lot like offering employees a raise, just with a different name and way for employees to access the money. Unlike health insurance and 401(k) plans, which fall under specific regulations and laws, LSAs are perks that have no legal definition, and so can be used to pay for almost anything an employer decides to cover.
Along with that broad set of options for employees’ spending comes the fact that LSAs also don’t offer the tax savings for employees of more traditional benefits, and are typically assumed to be subject to payroll taxes for the employer.
Benepass suggested that LSAs represent a desire to offer wellness stipends to employees “in a way that promotes equity and inclusion.” Since LSAs don’t require the money to be spent on something specific, like children or a gym membership, the perk “allows employees to tailor their benefits to their individual preferences and lifestyle needs.”
Bryce Armbruster, controller at corporate finance platform Rho, told CFO Brew that as he surveyed the landscape of potential perks for employees, LSAs seemed to him like a good idea. LSAs offer “optics over [cost] efficiency” in giving employees more money to spend in specific ways, even though there are no tax benefits associated with them.
“I think it’s a great company perk,” Armbruster said, adding that it sends a message that an employer “invested in what your employees value.” Armbruster pointed to a range of taxable perks he’s seen from other firms, such as vacation stipends, and said, “I love the idea that employers are trying to give their teams an emphasis on work-life balance.”
Other popular taxable perks, according to Benepass, include providing stipends for fitness and wellness (45% of employers in the report) and work from home (43%). The size of these perks can vary widely—from an average of $169 monthly for LSAs, to $10,420 annually for the 5% of companies that offer parental support funds, Benepass found.
Benepass did not say how many companies are included in its data, but spokesperson Annalisa Rodriguez told CFO Brew via email that the companies included in its data range from small to large, and employ more than 60,000 people.