Lifestyle and wellness Spending Accounts (LWSAs) are a fully customizable, post-tax benefit that gives employers full control to create a plan that promotes healthy habits and overall well-being.

LSWAs are being used by employers to better attract and retain employees. It is common for employers to consider eligible expenses that range from physical wellness (gym memberships, exercise equipment, etc.), financial wellness (student loan reimbursement, financial adviser costs, etc.), emotional wellness (meditation classes, counseling services, etc.) and other expenses that could improve employee well-being (pet care, camping equipment, etc.).

Employers have a number of factors to consider  when customizing their LSWA including the following:

• How much they would like to contribute
• When contributions are available for consumers to use
• Which employees will receive contributions
• What expenses are eligible (more below)
• How funds are handled at the end of each plan year (run out, rollover, etc.)
• How funds are handled for terminated employees (run out period)

There are 3 categories to consider:

• Physical wellness
• Financial wellness
• Emotional wellness

Employers should consider a number of different things including:

• What benefits do you currently offer that could be considered part of an overall lifestyle program (example: Adoption Assistance) and what could add to this?
• What do employees and potential employees care about?  
• What types of behavior do you want to encourage employees to engage in?
• How much do you want to offer, to which employees, and when?
• How can funds be utilized when an employee terminates or the plan year ends?
• If an employee incurs an expense with a future date of service, should the expense be eligible for reimbursement prior to the date of service (example: paying up front for a 12 month gym membership)?

Listed below are common eligible expenses, but these can be customized beyond what is listed based on what  the employer is looking to accomplish:

Physical Wellness:

• Athletic Equipment and Accessories
  • Examples: Basketball, hockey stick, golf clubs, fitness apparel, fitness shoes, stopwatch
• Exercise Equipment
  • Examples: Treadmill, elliptical machine, bicycle, free weights, rowing machine
• Gym, Health Club, Spa and Fitness Studio Memberships
  • Related: Rock climbing, martial arts, tennis, etc.
  • Documentation: An invoice showing the charge and service is ideal but a bank statement with recurring charges could be accepted as long as we can see it’s for a health club membership.
• Fitness Classes
  • Examples: Yoga, Pilates, cycling, etc.
• Lessons
  • Examples: Golf, swimming, tennis, dance, online fitness membership/classes, etc.
• Personal Trainer
• Fitness Trackers
  • Examples: Fitbit, Apple Watch, etc.
• Entry Fees
  • Examples: Marathons, leagues, etc.
• Passes
  • Examples: Ski, snowboard, golf, swimming etc.)
• Nutritional Supplements

Financial Wellness:

• Student Loan Reimbursement
  • Documentation: Need documentation showing the outstanding loan amount due and a due date within the plan year.
• Home Purchase Expense Reimbursement
  • Examples: Down payment, closing costs, etc.
  • Documentation: Need documentation showing the purchase is final with the amount paid and date of purchase.
• Financial Advisor and Planning Services
  • Note: We cannot determine if a financial advisor is certified or not.
• Financial Seminars and Classes
  • Documentation: Invoice, payment slip or registration information.
• Identity Theft Services

Emotional Wellness and Other:

• Meditation Classes
• Non-Medical Counseling Services (marital, parental, etc.)
  • Note: We cannot determine if a counselor is licensed or not
• Retreats
  • Examples: leadership, spiritual, etc.
• Pet Care
  • Examples: Walkers, day care, grooming, etc.
• Camping
  • Examples: Tent, site rental fees, cooking equipment, blow up mattress, sleeping bags, etc.
• Personal Development Classes
  • Examples: Art, cooking, sewing, etc.
• Annual Park Pass
• Hunting and Fishing Licenses

Eligible expenses that only apply to a very small population of employees and are used to supplement health insurance should not be lumped into the LSWA.

If pre- tax  dollars  are contributed by employer/employee for specific eligible expenses, you will need to establish a separate pre-tax benefit plan to take advantage of the tax benefits that are allowed by the IRS. For example, commuter benefits, tuition reimbursement, adoption assistance, etc. are eligible for tax benefits and will be separated from the LSWA so the employer/employee can take advantage of the pre-tax benefits.

Below is some additional detail on a few examples.

• Tuition Reimbursement: Under IRS Code 127, an employer is allowed to provide up to $5,250 pre-tax for these plans. Certain requirements must be met to offer this benefit such as having a written plan document, ensuring the plan does not discriminate in favor of highly compensated employees, and more.

• Adoption Assistance: These plans allow employees to exclude up to $14,440 from their taxable income in 2021 for adoption expenses. Employers may also fund these plans. This amount is adjusted each year for inflation. Certain requirements must be met to offer this benefit such as having a written plan document, ensuring the plan does not discriminate in favor of highly compensated employees, and more.

• Wellness HRAs: If an employer would like to only offer funds to employees enrolled in their group health plan and would like to keep the eligible expenses within what’s allowed by the IRS, they should consider offering a Wellness HRA instead of an LSWA. Examples of wellness related expenses that are allowed through this approach include: tobacco cessation programs, weight loss programs, immunizations, and more.

• Yes. Consolidate all benefit accounts on one debit card. Keep the participant experience simple by easily stacking the LSWA onto the same benefits card they already for their health + commuter accounts. 
• The debit card is only available for post-tax expenses if LSWA is not used in conjunction with an ICHRA.

Since the employer funds an LSWA with post-tax dollars, the dollars a consumer spends  are considered taxable income to employees.

Substantiation requirements are determined by ABS / employers.

No more jumping from screen to screen(and having to remember multiple logins) to keep track of multiple benefit accounts. Participants only need one online account to manage their benefits.

We manage almost all aspects of our lives from the palms of our hands. The ABS mobile app was built with that in mind, and includes a consistent, simple, intuitive and modern experience. When using a desktop, you will encounter the same user-friendly experience