Unveiling the Key Differences between Level Funded and Self Funded Plans
Discover the differences between level-funded and self-funded employee health insurance plans.
Lifestyle Spending Accounts (LSAs) have become one of the hottest new employee benefit programs. LSAs are sometimes referred to by other names, such as Personal Spending Accounts or some even refer to them simply as Wellness Programs. There could be a slew of other names, but we refer to them as LSAs.
LSAs are employer funded programs that reimburse employees for certain personal expenses. Employers define what expenses are eligible, which employees are eligible to participate in the plan, and the maximum reimbursement limits. Employees generally have options on how to use the funds according to their lifestyle preferences. LSAs often promote wellness and wellbeing, but the sky is the limit as to what can be reimbursed, and every LSA is unique and customizable.
LSAs do not currently have any preferential tax treatment under the Internal Revenue Code or state tax laws. That means the reimbursements to employees are included in their gross income and subject to taxes; however, the reimbursements can be written off as a business expense by the employer.
LSAs are popular amongst employees, and they’re usually perceived as a “cool” benefit. Employees generally love that they have flexibility and choice on how they spend the money in their LSA. Consider the Health & Fitness LSA as an example. Employees can use their LSA funds to pay for a membership at any gym or fitness center of their choosing. Alternatively, they may choose to exercise at home and purchase a Peloton bike or treadmill with their LSA funds. Other employees might want to purchase vitamins and supplements from GNC or a similar product provider.
The flexibility of LSAs creates desirability to have them as benefit. Employers looking to offer something new should give LSAs a consideration.
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