Lifestyle Spending Accounts (LSAs) are rapidly transforming the world of employee benefits, offering unprecedented flexibility and personalization. As organizations compete for top talent and prioritize holistic well-being, LSAs have emerged as a vital tool for supporting employees’ diverse lifestyles. But what exactly qualifies as an eligible expense? How do LSAs differ from traditional benefit accounts? And what trends are shaping their adoption?
In this definitive guide, we’ll explore everything you need to know about lifestyle spending account eligible expenses—backed by the latest research, regulatory insights, and real-world examples. Whether you’re an HR professional, a business leader, or an employee eager to maximize your benefits, this blog will empower you with actionable knowledge
What is a Lifestyle Spending Account?
A Lifestyle Spending Account (LSA) is an employer-funded, taxable benefit account designed to support employees’ well-being beyond traditional health and dental plans. Unlike Health Spending Accounts (HSAs) or Flexible Spending Accounts (FSAs), which are strictly regulated and limited to medical expenses, LSAs offer broad flexibility, allowing employees to claim a wide range of wellness and lifestyle expenses.
Key Features:
- Funded by the employer (amount and frequency vary)
- Employees choose how to spend their funds from a list of eligible expenses
- Reimbursement is typically taxable to the employee
- Designed to enhance physical, mental, and financial well-being
Fact: According to a 2024 survey by the International Foundation of Employee Benefit Plans, 41% of North American employers now offer LSAs, up from just 18% in 2021.
How LSAs Differ from HSAs and FSAs
It’s crucial to distinguish LSAs from other popular benefit accounts:
| Feature | LSA | HSA/FSA |
|---|---|---|
| Funding | Employer only | Employer and/or employee |
| Eligible Expenses | Broad lifestyle and wellness | Medical and dental only |
| Tax Treatment | Taxable to employee | Tax-free (if used for medical) |
| Regulation | Employer-defined | Strictly regulated (CRA/IRS) |
Key Takeaway: LSAs offer far more flexibility but are taxable, while HSAs/FSAs are tax-advantaged but limited in scope.
The Philosophy Behind Eligible Expenses
LSAs are designed to recognize that well-being is multi-dimensional. Eligible expenses typically fall into categories such as:
- Physical wellness: Fitness, nutrition, preventive care
- Mental wellness: Therapy, meditation, stress management
- Financial wellness: Coaching, debt counseling
- Personal development: Courses, hobbies, skill-building
- Family and social wellness: Childcare, eldercare, pet care
Employers define eligible expenses based on their values, workforce needs, and budget. This flexibility is what sets LSAs apart and makes them so attractive.
Comprehensive List of Eligible LSA Expenses
Below is an authoritative, up-to-date list of common eligible expenses for LSAs, curated from leading providers (League, Sun Life, Mercer, Alight, LifeWorks, and more) and current employer policies. Each employer may customize their list, but these categories are widely accepted:
Fitness and Physical Activity
- Gym memberships and fitness classes (yoga, pilates, spin, martial arts)
- Personal training sessions
- Sports league fees (soccer, tennis, golf, etc.)
- Home exercise equipment (treadmills, bikes, weights, resistance bands)
- Wearable fitness trackers (Fitbit, Apple Watch)
- Race or event entry fees (marathons, triathlons)
- Virtual fitness subscriptions (Peloton, Daily Burn)
Mental Health and Wellness
- Counseling or therapy (in-person or virtual)
- Meditation and mindfulness apps (Headspace, Calm)
- Stress management workshops
- Life coaching or executive coaching
- Retreats focused on well-being
Nutrition and Healthy Living
- Nutritionist or dietitian consultations
- Healthy meal delivery services
- Cooking classes focused on health
- Grocery delivery fees (for healthy foods)
- Supplements and vitamins (if not covered by health plans)
Family, Child, and Elder Care
- Childcare expenses (daycare, after-school programs)
- Elder care services (adult day programs, respite care)
- Babysitting or nanny services (for work-related needs)
- Adoption or fertility support (where permitted)
- Pet care (pet insurance, dog walking, pet daycare)
Personal Development and Education
- Tuition for non-degree courses (language, art, coding, etc.)
- Professional development workshops
- Conferences and seminars (not reimbursed by employer)
- Hobby classes (music, painting, photography)
- Books and educational materials
Financial Wellness
- Financial planning or coaching
- Debt management counseling
- Credit score monitoring services
- Tax preparation assistance
Transportation and Commuting
- Public transit passes
- Ride-sharing credits (Uber, Lyft)
- Bike-sharing memberships
- Parking fees (work-related)
Workspace and Ergonomics
- Home office equipment (desk, chair, monitor, ergonomic accessories)
- Standing desks or treadmill desks
- Blue light blocking glasses
Other Popular Eligible Expenses
- Smoking cessation programs
- Weight management programs
- Sleep improvement tools (white noise machines, sleep trackers)
- Sunscreen and personal protective equipment
- Massage therapy (if not covered by health plan)
Pro Tip: Always check your employer’s specific list, as eligibility may vary.
Ineligible Expenses: What’s Not Covered
LSAs are generous, but not everything qualifies. Common exclusions include:
- Cosmetic surgery or procedures (unless medically necessary)
- Luxury goods (designer handbags, jewelry)
- Alcoholic beverages or tobacco (except cessation programs)
- General entertainment (movies, concerts, theme parks)
- Vacation travel and hotels (unless part of a wellness retreat)
- Regular groceries (unless part of a nutrition program)
- Medical expenses already covered by health or dental plans
- Illegal activities or substances
Employers are responsible for clearly communicating what is and isn’t eligible.
How Employers Define LSA Eligibility
Employers have wide latitude in defining eligible expenses, but best practices include:
- Aligning eligible expenses with company values and wellness goals
- Soliciting employee feedback to ensure relevance
- Reviewing legal and tax implications with advisors
- Updating the list annually to reflect new trends (e.g., digital wellness, remote work tools)
Fact: According to Mercer’s 2024 Global Benefits Report, 62% of employers update their LSA eligible expense list at least once per year.
Tax Implications and Compliance
Unlike HSAs and FSAs, LSA reimbursements are considered a taxable benefit in Canada and the US. This means:
- Employees pay income tax on the amount reimbursed
- Employers must report LSA reimbursements on T4 (Canada) or W-2 (US) forms
- Some expenses (e.g., tuition, transit) may have special tax rules—consult a tax professional
Compliance Tip: Always keep detailed records of claims and receipts. Employers should work with benefits administrators to ensure proper documentation and tax reporting.
LSA Trends: Data and Insights for 2025
LSAs are evolving rapidly. Here’s what the latest data reveals:
- Adoption Rates: Over 40% of large employers in North America now offer LSAs, with projected adoption reaching 60% by 2027 (IFEBP, 2024).
- Average Funding: The median annual LSA allowance is $600 per employee, with a range from $250 to $2,000 (Mercer, 2024).
- Most Popular Expenses: Fitness (81%), mental health (67%), and home office equipment (54%) are the top three categories claimed (League, 2024).
- DEI Impact: Companies with LSAs report a 23% higher employee satisfaction score on diversity, equity, and inclusion (Alight, 2024).
- Remote Work: 38% of employers added home office and digital wellness tools to their LSA eligible list since 2020 (Sun Life, 2024).
PR-Worthy Fact: A 2024 survey by the Employee Benefit Research Institute found that 72% of employees say LSAs make them feel more valued at work, and 59% would choose a job with an LSA over one with only traditional benefits.
How to Maximize Your LSA
For Employees:
- Review your employer’s eligible expense list and plan your claims early in the year.
- Combine LSA funds with other benefits (e.g., health plan, EAP) for maximum coverage.
- Keep all receipts and submit claims promptly.
- Use your LSA for preventive care and personal growth, not just “extras.”
For Employers:
- Survey employees annually to refine your eligible expense list.
- Communicate clearly and often about how LSAs work.
- Highlight unique eligible expenses (e.g., pet care, financial coaching) to boost engagement.
- Track utilization data to measure ROI and adjust funding as needed.
Frequently Asked Questions
Q: Can I use my LSA for medical expenses?
A: Only if your employer allows it, but most medical expenses are better claimed through HSAs or FSAs for tax advantages.
Q: Are LSA reimbursements taxable?
A: Yes, they are considered a taxable benefit in both Canada and the US.
Q: Can I carry over unused LSA funds?
A: This depends on your employer’s policy; some allow rollovers, others do not.
Q: How do I submit a claim?
A: Typically, you submit receipts through your employer’s benefits platform or a third-party administrator.
Q: What if my expense isn’t listed?
A: Ask HR or your benefits provider; some employers allow case-by-case approvals.
Conclusion
Lifestyle Spending Accounts are revolutionizing employee benefits by empowering people to invest in their whole selves—body, mind, and beyond. By understanding eligible expenses, both employees and employers can unlock the full value of LSAs, drive engagement, and foster a culture of well-being.
