While these accounts are often used for wellness related expense reimbursement, employers are also able to use these accounts to reimburse a number of other expenses not covered by other benefits, such as office supplies and equipment to facilitate hybrid work arrangements, help with financial planning and student loans, aid in adoptions or additional support for child and elder care. In short, LSA's are incredibly flexible – they can be designed as narrowly or widely as the employer chooses and offer a broad solution for employers looking to provide robust and tailored benefits to their employees.

LSAs give employers an additional opportunity to improve relationships with their employees, promote healthy workplaces, play a role in encouraging employees to maintain healthy, active lifestyles and provide support for unique employee situations. Employees, in turn, get a sense of control over how they manage their own health and wellness.

A huge benefit of LSAs is that unlike other benefit accounts LSAs are not covered under the Employee Retirement Income Security Act (ERISA) and are not regulated by the IRS. Employees do pay state and federal taxes on their reimbursed amounts, but for the employer, LSAs represent a business expense tax deduction that a cash bonus might not, and it increases compensation without increasing base pay.

Employers are in the driver seat for laying out the structure of these accounts and have enormous flexibility to do so. They decide which employees can participate, how much to put in the accounts, what expenses are eligible and what documentation employees must provide and how employees will be reimbursed. Employers can tailor how employees use the LSA according to their needs — financial, social, emotional or physical.

LSAs also can help consolidate and add flexibility to existing benefits, reduce administration costs, and eliminate having to manage additional reimbursements.

Related: How brokers can help clients win the benefits budget battle

Do LSAs make a difference in employee retention and satisfaction? A recent Gallup poll shows that 61% of employees value wellbeing, right behind competitive pay in importance. The 2022 HSA Bank Health & Wealth Index^TM survey shows that overall wellness remains a high priority among workers, giving employers an opportunity to engage their employees in new ways. The survey also shows that 80% of respondents are making meaningful lifestyle changes to improve their physical and mental wellbeing. An LSA can bolster those efforts and reinforce the idea that the company cares.

LSAs are relatively easy to set up at any time of the year and can position employers to better recruit and retain employees in today's labor market.

Kevin Robertson, HSA Bank CRO