Lifestyle spending accounts (LSAs) and health reimbursement arrangements (HRAs) are customizable plans you can offer your employees. Both can help you retain and recruit the best talent, and both will improve the wellbeing of your employees. The latter is particularly top of mind right now. And one study found employers actually benefit more from employee wellness than employees do. 

An LSA versus a wellness HRA: Which is right for you? There are distinct differences. We’ll break down the basics of each account, including the benefits for you and your employees in this blog post.

Lifestyle spending account

An LSA is an employer-funded, post-tax plan that lets your employees be reimbursed for purchases of eligible physical, emotional and financial wellness expenses. Since these are post-tax, you determine:

• What expenses are eligible.
• The annual reimbursement limit.
• How often funds are made available in accounts.

These accounts have become an important recruiting and retention tool for employers in a tight job market, which is particularly important following the Great Resignation. 

You can customize your LSA’s eligible expenses to fit all sorts of employee needs. For example, many employers may turn to an LSA to help their employees transition to a work-from-home model. You could offer an LSA that helps these employees cover the costs of last-minute daycare needs, transportation or household products that prevent/treat illnesses.

Wellness HRA

Employers fund HRAs, but they do so with pre-tax dollars. HRAs are customizable, but only specific types of HRAs are allowed through IRS regulations. One type of HRA is the wellness HRA, which lets your employees purchase only eligible expenses as determined by the IRS, which may include tobacco cessation programs, weight-loss programs (with a prescription), and more. 

It’s important to remember that, in order to enroll in an HRA, an employee must be enrolled in the group health plan that the HRA is integrated with.

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel. 

Source: Wex, Inc.