The Evolution of Lifestyle Spending Accounts

Over the years, lifestyle spending accounts (LSAs) have expanded to meet the changing needs and expectations of employees and employers. The post-pandemic world has energized the market for these accounts, as employees now place greater emphasis on work-life balance, mental well-being and personal fulfillment. Today, LSAs are more comprehensive than ever, spanning a range of goods and services that can be customized to meet employees’ individual needs. But how did we get here?

Early days

The notion of employer-sponsored benefits first came into prominence during the 1940s, as a means to attract workers while adhering to WWII wage-stabilization measures. At that time, the focus was on more traditional benefits like health insurance, retirement plans and paid time off. However, as the workforce evolved, so did the benefits landscape.

Tax-advantaged options

A major milestone came in 1978, when Congress created Section 125 of the Internal Revenue Code. This provision allowed employees to pay for health insurance and other group benefits with pre-tax salary deductions, meaning significant savings for both employees and their employers. This spawned tax-advantaged offerings including flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

Personalized & flexible

In the early 2000s, the idea of LSAs started gaining momentum. While not eligible for pre-tax savings, they do provide employers with the flexibility to create personalized benefit programs for employees to spend on what matters most to them. These accounts are a creative way to build a supportive culture and to attract, engage and retain top talent. When employees have access to benefits that support their health and well-being, they are more likely to feel valued and appreciated by their employer. They’re also less likely to leave in pursuit of better offerings.

Whole health

In recent years, LSAs have continued to grow in popularity and diversity. In addition to health and wellness, employers now offer accounts spanning a variety of lifestyle-related expenses. LSAs can be used for spending categories including education and professional development programs, home office equipment and utilities, childcare and eldercare services, hobby shops and museums, pet insurance, healthy groceries and beyond.

Digital possibilities

Further, the rise of digital technology has made it easier for employers to offer and measure the success of a lifestyle savings account program. The Alegeus WealthCare platform enables benefit administrators to provide employers and their employees with an intuitive online portal and easy access to their plan information. Account holders use a custom debit card that can be spent at retailers with Merchant Category Codes (MCCs) approved by the employer and set up by their benefits administrator. This level of control and customization offers considerable advantages over a traditional gift card.

Looking ahead

As the workforce continues to shift and evolve, LSAs will remain a key component of employer-sponsored benefit programs, providing employees with the support they need to thrive both personally and professionally.


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