The Fine Line Between Healthcare and LSAs
As employers explore new ways to support their workforce, Lifestyle Spending Accounts (LSAs) have emerged as a flexible tool for enhancing employee well-being. While LSAs are not tax-advantaged health plans like FSAs or HSAs, they can cover a range of wellness-related expenses. Understanding the compliance landscape–especially regarding ERISA and medical travel–is key to optimizing these benefits.
LSAs and Healthcare: Navigating the Boundaries
Unlike traditional health benefits, LSAs are post-tax and do not qualify as a tax-free medical plan under IRS guidelines. This means they should generally avoid covering expenses classified under Section 213d of the Internal Revenue Code. However, LSAs shine in areas adjacent to healthcare, such as wellness programs, preventative care, and medical-related travel.
What can be covered?
While LSAs should not be structured to reimburse direct medical costs, they can enhance employee well-being by covering:
Compliance considerations and medical travel
For employers considering LSAs for medical travel, compliance with ERISA is a critical factor. While LSAs can assist with travel logistics, they should not be structured in a way that makes them a group health plan. Our legal advisors have developed guidelines to help employers navigate these nuances, ensuring compliance while maximizing the impact of LSAs.
Looking for more guidance?
If you’re exploring LSAs and have compliance questions–particularly around ERISA and medical travel–our legal experts can help. Reach out to us for insights and best practices on structuring LSAs effectively while staying within regulatory guidelines. Our consultant team is ready to discuss strategies and tailored solutions.