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How Employers Can Improve DEI Initiatives with a Lifestyle Spending Account (LSA)

Lauren Hargrave · January 12, 2024 · 6 min read

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If you’re looking to develop a diversity, equity and inclusion (DEI) initiative, or improve your existing one, you likely understand the benefits of having and supporting diverse viewpoints and life experiences within your company. But in order for these initiatives to be successful and truly improve the company from both a cultural and financial perspective, the company itself has to show its support in many ways. One potent way to support your DEI initiatives (and your whole company) is to offer your employees one or multiple Lifestyle Spending Accounts (LSAs). These employer-funded accounts can go a long way towards supporting employees at different phases of their lives and careers. They also allow companies to flexibly meet diverse employee needs and demonstrate their support for employees without adding more money to employees’ paychecks. 

What is an LSA?

An LSA is an employer-funded account into which the company can deposit money for pre-approved lifestyle expenses. These expenses can include costs associated with family expansion, team building, maintaining physical and mental health, experiences like travel or personal development, costs employees might incur as they head back to the office from remote work, and more.

Employers have a lot of control over the design of their LSA(s). They can choose:

  • Whether or not they want to offer one all-encompassing LSA or multiple LSAs focused on specific areas.

  • The exact expenses for which they will reimburse.

  • How much money they will allocate to each employee’s account.

  • The reimbursement standards for the expenses.

  • Who has access to this benefit (as long as the accessibility standards are non-discriminatory).

There are some important rules around how LSAs function:

  1. They can’t cover any medical care that is covered by health insurance or another type of tax-exempt benefit (because that would change the nature of the plan).

  2. Employees must pay income taxes on the expenses for which they reimburse.

  3. There are no annual limits to how much employers contribute to these accounts.

  4. They can be paired with any type of health insurance or other benefits you offer.

How does it work?

First, a company should decide on their goals for their LSA program. They can define the employee challenges they want to address and the values they want to support by offering the LSA. Then decide the types of expenses that can be reimbursed for in order to meet these goals. It should be clear from the list whether or not it makes sense to have one general LSA or multiple accounts that address specific needs.

Once the company has a framework for the needs they’re trying to meet and the way they want to go about meeting them, it’s time for the company to look for an LSA provider that can both structure the plan(s) in a way that works for the company, and can provide cost-effective services. Look for an LSA provider that will help with employee education, communication, onboarding, ongoing customer service, and an easy-to-use platform for both employees and admins. 

Once the company chooses the LSA provider and designs, funds and implements their plan, employees will pay for the covered expenses then submit those expenses for reimbursement. Employees will owe income taxes on the amounts for which they reimburse.

How it can Improve Diversity, Equity and Inclusion efforts?

Having a diverse workplace means more than having employees from different racial or cultural backgrounds. It can include a team made up of people of different ages, people who identify across the LGBTQ+ spectrum, people who come from different socioeconomic situations, and persons with disabilities. A team this diverse is going to have different needs that might not be covered through traditional or “one size fits all” benefits. That’s where offering an LSA comes in.

Depending how they are designed, LSAs can be used for family expansion, gender affirming surgery, physical and mental wellness, and financial literacy support, among many other types of expenses. They can be an important form of support for people who might not have easy access to these services otherwise.

Bridging the gap for many marginalized populations

LSAs can be used to target the specific needs of those that come from marginalized populations that might not be present in the typical benefits package. One of those important benefits an LSA can be used to address is family planning costs, surrogacy, adoption, and gender affirming care if not covered by insurance. Other expenses could include support for financial literacy, wellness coaching or personal training, or professional development, which can help those who may not otherwise have the financial means access these services.

If bridging the benefits gap for marginalized populations is one of your DEI initiative’s goals, then one way to ensure your LSA is effective at addressing your employees’ needs, is to survey them. Ask what they’re struggling with and what they feel would be the most impactful type of support. Then structure your LSA around those reported needs.

Offer support for family planning and expansion

Given the diverse nature of the workforce you’re trying to attract and the fact that family building looks different today than it did 50 years ago, an LSA that supports this emotional and expensive process could go a long way in showing your current and future employees that you support that diversity.

You can offer an LSA to cover family planning for all employees who incur or plan to incur expenses related to family expansion. This can include family expansion via methods such as fertility treatments and counseling, adoption assistance and fees, and surrogacy costs when not covered by health insurance.

Family building expenses can include:

  • Fertility services like testing, advice, drugs and supplies. LSAs can’t cover expenses that are covered by health insurance, but they can bridge the gap between what health insurance covers and what the employee is responsible for out-of-pocket.

  • IUI and IVF-related expenses when not covered by insurance.

  • Surrogacy-related expenses such as agency and legal fees, surrogate base compensation, eggs, sperm, embryo donation or harvesting fee, and freezing, storing and banking fees.

  • Adoption expenses including agency and legal fees, international adoption fees, adoption home study costs, and travel fees for adoptive parents.

Get started today

If you’re looking for a benefits partner who can help you with all of your HR initiatives including DEI efforts, recruitment and retention, and improving overall company culture as well as your bottom line, reach out today. Lively provides a suite of benefits that organizations can use to tailor their packages and achieve their goals.

Lauren Hargrave

Lauren Hargrave

Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. She follows comedians like most people follow bands and believes an outdoor sweat session can cure almost any bad mood. She’s also been writing her first novel for so long, her mom doesn’t ask about it anymore.

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Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

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