How It Works #
An LSA is essentially an employer-funded reimbursement arrangement.
The company allocates a certain allowance amount (say, a few hundred dollars per year) for each participating employee to spend on approved wellness or lifestyle expenses. Employees pay for the eligible services or items out-of-pocket, then submit proof of purchase (receipts) to get reimbursed from the LSA fund. Some employers might alternatively provide a prepaid benefits card or upfront funds, but reimbursement is most common. Employers have a lot of flexibility to customize the LSA design: they decide how much money is provided, what counts as an eligible expense, when/how often the allowance is given (e.g. a lump sum annually or a quarterly stipend), and what happens to unused funds at year-end.
Eligible Uses #
LSAs are extremely flexible in terms of what expenses can be covered, as long as the employer allows it. There is no fixed list by the IRS – each company sets its own eligible categories. Common LSA reimbursable expenses include:
Physical wellness: Gym or fitness class memberships, exercise equipment, sports league fees, yoga classes, personal training, wearable fitness trackers, etc.
Mental health: Meditation app subscriptions, counseling or coaching services, stress management programs, massages, mindfulness or relaxation classes
Financial wellness: Financial planning or budgeting courses, student loan repayment assistance, tuition for personal development classes
Work-life and productivity: Home office equipment, standing desks, ergonomic chairs, internet or cell phone bill stipends for remote workers
Family and life expenses: Childcare or elder care support, adoption or fertility assistance, pet care (pet insurance or dog walking), commuting costs, transit passes, parking fees, even entertainment or hobby expenses in some cases (like museum passes, language lessons, or concert tickets).
Each employer chooses what’s covered. Some companies focus their LSA on specific areas (for example, a tech company might emphasize wellness and continuous learning, while another might include family-care perks). The key is that LSAs cover things to improve your lifestyle, health, or well-being that aren’t typically covered by insurance or other benefit accounts. Always check your own employer’s LSA policy for the menu of eligible expenses.