LSAs vs. ERISA: What Every HR Pro Needs to Know about Employee Benefits Compliance

Why Lifestyle Spending Accounts (LSAs) Are Gaining Traction

Lifestyle Spending Accounts (LSAs) are transforming employee benefits by offering flexibility and personalization. Unlike traditional benefits tied to the Employee Retirement Income Security Act (ERISA), LSAs empower HR leaders to support employee well-being without the compliance complexities. Here's your essential guide to how LSAs and ERISA benefits differ and why it matters.

ERISA and LSAs: The Basics

What Is ERISA? The Employee Retirement Income Security Act (ERISA) establishes compliance standards for employee benefit plans like health insurance and retirement accounts. These include:

• Reporting requirements to ensure transparency
• Fiduciary obligations to protect employees
• Non-discrimination testing to maintain fairness

Where LSAs Fit In LSAs aren’t classified as ERISA-regulated plans, meaning they’re exempt from these stringent requirements. This gives employers greater freedom to design benefits that fit their workforce's unique needs.

How LSAs Stand Out

1. Customizable and Employee-Centric LSAs can be tailored to reflect your organization's culture and goals. Popular eligible expenses include:

• Gym memberships and wellness classes
• Professional development and certifications
• Work-from-home tech upgrades
• Childcare, eldercare, or pet care support
• Mental health services outside traditional medical coverage

2. Simpler Administration Since LSAs aren’t subject to ERISA’s reporting and fiduciary rules, HR teams save time and resources. This allows more focus on delivering innovative and engaging employee benefits.

3. Filling the Gaps LSAs excel at addressing areas traditional benefits often overlook, supporting employees' lifestyle and personal development in meaningful ways.

What HR Pros Need to Know

• Clarity Is Key: Clearly define eligible and ineligible expenses and communicate them to employees upfront.
• Align with Goals: Use LSAs to complement ERISA-regulated benefits, creating a holistic strategy that balances compliance and employee satisfaction.
• Plan Ahead: Establish funding limits and guidelines to ensure the program remains sustainable.

By integrating LSAs with your traditional benefits package, your organization can foster a more personalized and inclusive workplace. These accounts offer a modern solution to support your team in the ways that matter most—flexibly, simply, and effectively.

?? Ready to design a standout benefits strategy? Let’s connect!