Rethinking Flexibility

The Strategic Role of Lifestyle Spending Accounts in Modern Benefits Design

As benefits leaders prepare for Open Enrollment, many are re-evaluating how to evolve their offerings to better reflect the diverse and shifting needs of today’s workforce. One tool gaining traction in this space is the Lifestyle Spending Account (LSA), an employer-funded, taxable benefit that allows employees to spend on designated programs and services that support their overall well-being.

LSAs offer a high degree of flexibility and personalization, which is especially valuable in meeting employees where they are in their lives and careers. Eligible expenses can span a wide range of categories including mental health services and gymmemberships to caregiving support and family planning. This adaptability makes LSAs a powerful way to support employees across different life stages and priorities.

The benefits of LSAs extend beyond enhancing the employee experience. These accounts often see strong engagement and can serve as a visible signal of an employer’s commitment to inclusion, equity, and modern workforce priorities. From an operational perspective, LSAs also offer predictability, employers set both the eligible categories and contribution levels, enabling clearer budget forecasting.

LSAs are not without challenges. Unlike pre-tax benefits, LSAs are considered taxable income, introducing added complexity for both benefits teams and payroll functions. Additionally, careful attention must be paid to program design, communication, and oversight to ensure these accounts deliver meaningful value to employees.

To support employers navigating these complexities, Forma published its 2025 LSA Benchmark Report, offering data-driven insights into how organizations of varying sizes and industries are designing and administering LSAs. The report indicates key trends including platform consolidation and growing adoption for organizations outside of the tech space.

To explore the full benchmark report and gain insights into LSA design and utilization, visit: www.joinforma.com/resources/lifestyle-spending-accounts-benchmark-report