Most teams don’t need “more perks.” They need a benefits structure they can actually defend — to employees and to Finance.
Lifestyle Spending Accounts (LSAs) are built for that reality. They give employees flexibility without turning benefits into an open tab: employers set the rules (categories, budgets, eligibility, and tax handling), and Finance gets reporting that holds up.
In our 2026 Annual Lifestyle Benefits Benchmark Report, we found 64% of Compt customers offered an all-inclusive LSA (up from 55% in 2024), with 93% participation and 89% utilization. The median all-inclusive LSA was funded at $1,200 per employee per year, and across all stipend programs, employers averaged $850 per employee annually.
TL;DR: What is a Lifestyle Spending Account (LSA)?
A Lifestyle Spending Account (LSA) is an employer-funded reimbursement benefit for lifestyle expenses. Employees submit receipts for approved purchases and are reimbursed through payroll with the appropriate tax treatment. In 2025, 64% of Compt customers used an all-inclusive LSA, with 93% participation and 89% utilization (Compt 2026 Annual Lifestyle Benefits Benchmark Report).
Below, we define what an LSA is, how reimbursement-based programs work, and what 2025 benchmark data suggests about benefits design in 2026.
What is a Lifestyle Spending Account?
A Lifestyle Spending Account (LSA) is an employer-funded program that reimburses employees for approved lifestyle expenses across categories the employer defines (for example: wellness, food, family support, professional development, or cell and internet).
LSAs are not pre-tax accounts like HSAs or FSAs. Most LSA reimbursements are treated as taxable income unless the specific expense qualifies for an IRS exclusion and is documented appropriately.
2025 LSA benchmarks (Compt 2026 Annual Lifestyle Benefits Benchmark Report):
- 64% of employers used an all-inclusive LSA as their primary lifestyle benefits program
- 93% employee participation
- 89% utilization of issued funds
- $1,200 median annual funding for all-inclusive LSAs
- 78% of spend taxable; 22% nontaxable
- 70% of spend across 64,000+ vendors went to local, regional, or independent merchants
What does a Lifestyle Spending Account look like in practice?
In practice, an LSA isn’t a bucket of money employees can spend however they want. It’s a reimbursement program governed by clear policies.
Employers define:
- Which categories are eligible (e.g., wellness, food, learning, or connectivity)
- How much funding is available
- Who’s eligible and when
- How expenses should be treated for tax and payroll purposes
Employees then choose eligible expenses within those rules and submit receipts for reimbursement. Because spending is reviewed against policy and reimbursed after the fact, employers avoid the common issues that come with prepaid cards and vendor marketplaces, such as unused balances, declined transactions, unclear tax timing, and limited reporting.
This structure is why LSAs scale so well. Employees get real-world flexibility without needing to change their habits or vendors, while HR and Finance keep consistent rules, predictable spend, and an audit trail for every dollar.
As programs mature, many companies move to an all-inclusive LSA that combines multiple lifestyle categories into a single framework. That consolidation reduces administrative overhead and allows benefits to adapt as employee needs change — without launching new programs each time priorities shift.
How does an LSA work?
Once an LSA is in place, the most important operational decision is how often it’s funded. Funding cadence has a direct impact on whether employees actually use their benefit.
According to Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, which covers full-year 2025 LSA data from our customer base, quarterly funding produces the strongest utilization outcomes.
LSA utilization by funding cadence (2025)
- Quarterly: 85% utilization
- Semiannual: 70% utilization
- Annual: 65% utilization
- Monthly: 52% utilization
- Overall average: 67% utilization
Quarterly funding tends to work best because it aligns with how employees plan and spend. Amounts are large enough to feel usable, frequent enough to stay top of mind, and structured enough to remain predictable over time.
Annual funding is still common for categories like professional development, where expenses are larger and less frequent. Our data shows that monthly funding, while intuitive, sees less utilization because smaller amounts are easier to forget or deprioritize.
Participation vs. utilization: how Compt measures benefit performance
Participation measures the percentage of employees who submit at least one eligible expense during a funding period. Utilization measures the percentage of issued stipend dollars that are actually spent within that same period.
High participation shows that a benefit is relevant and accessible. High utilization shows that funding levels, cadence, and categories are well aligned with real employee needs.
In 2025, Compt LSAs achieved 93% participation and 89% utilization, indicating both broad adoption and enthusiastic use — not just enrollment on paper.
What are typical stipend funding ranges by category?
Stipend funding varies widely by category, company size, and program goals. To give a realistic picture of how employers are budgeting, it’s more useful to look at medians alongside minimums and maximums, rather than extremes alone. Note that these are examples, not goals.
Below are observed minimum, median, and maximum annual funding levels per employee from our 2026 Annual Lifestyle Benefits Benchmark Report, based on 2025 program data.
Why medians matter:
Maximum values often reflect outliers (such as executive-only programs or highly specialized use cases). Median funding shows where most employers actually land.
Stipend funding ranges by category (annual, per employee)
| Stipend category | Minimum | Median | Maximum |
|---|---|---|---|
| All-Inclusive LSA | $50 | $1,200 | $33,000 |
| Cell and Internet | $240 | $1,080 | $1,800 |
| Charitable Giving | $100 | $300 | $1,000 |
| Commuter | $600 | $2,400 | $4,080 |
| Coworking | $1,200 | $1,800 | $3,600 |
| Culture | $25 | $28 | $200 |
| Experiences and Entertainment | $70 | $180 | $200 |
| Family and Caregiving | $1,000 | $2,500 | $12,000 |
| Food | $160 | $480 | $5,020 |
| Office Equipment | $100 | $250 | $2,400 |
| Out-of-State Care | $1,000 | $3,500 | $4,000 |
| Pets | $150 | $150 | $150 |
| Professional Development | $50 | $800 | $10,000 |
| Sabbatical | $1,000 | $4,750 | $6,000 |
| Safety Equipment and Uniforms | $100 | $150 | $250 |
| Team Recognition | $200 | $220 | $240 |
| Wellness | $12 | $735 | $36,000 |
Most employers use these benchmarks as a starting point, anchoring budgets near the median and adjusting up or down based on workforce needs, priorities, and geography. Even modest funding levels can drive strong participation when benefits are tied to everyday expenses and funded on a predictable cadence.
What categories can be covered in lifestyle stipends?
Lifestyle stipends can cover a wide range of employer-defined categories, depending on how the program is structured. Common categories include wellness, food, family and caregiving support, professional development, cell phone and internet, office equipment, charitable giving, pets, and travel or experiences.
Because LSAs are reimbursement-based and policy-governed, employers define eligibility rules upfront. This allows companies to tailor categories to their workforce while maintaining compliance, reporting clarity, and budget control.
What categories do employers include in LSAs?
Lifestyle Spending Accounts are intentionally flexible, which means no two programs look exactly alike. Some employers focus on a few targeted stipends, while others consolidate multiple categories into a single all-inclusive LSA.
To understand how your peers and other companies are structuring programs in practice, it’s helpful to look at which stipend categories employers actually offer, not just what’s theoretically eligible.
Percent of companies offering each stipend category (2025)
Rooted in Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, here’s how often each stipend category appears across employer programs:
| Stipend category | Percent of companies offering |
|---|---|
| All-Inclusive LSA | 64% |
| Health and Wellness | 37% |
| Office Equipment | 25% |
| Professional Development | 20% |
| Cell and Internet | 15% |
| Commuter | 8% |
| Food | 7% |
| Caregiving and Family | 4% |
| Out-of-State Care | 4% |
| Team Recognition | 4% |
Source: Compt 2026 Annual Lifestyle Benefits Benchmark Report (full-year 2025 data)
The chart below visualizes how often each stipend category appears across employer programs. (For those of you who prefer it this way!)
What this data shows
Rather than expanding benefits one category at a time, employers are increasingly consolidating support into all-inclusive LSAs. While individual stipends like wellness or office equipment are still common, the dominant trend is toward fewer one-off programs with broader coverage.
This approach simplifies administration, improves participation, and allows benefits to adapt as employee needs change, all without launching new stipends every time priorities shift.
Common stipend categories employers include
Employers don’t add categories at random. The most common LSA categories are those that combine broad relevance with predictable spend and clear eligibility rules. These categories consistently appear across programs of all sizes and are often bundled into all-inclusive LSAs.
For instance, if your LSA includes a wellness category, employees can use it for a broad range of purchases, such as:
- Gym memberships (Equinox, Planet Fitness)
- GLP-1 support (where permitted by employer policy and administered appropriately)
- Personal training sessions
- Exercise equipment
- Yoga, Pilates, and spin classes
- Fitness apps, and subscriptions (Peloton, ClassPass, Apple Fitness+)
- Nutrition counseling or weight loss programs
- Meditation and mindfulness apps (Calm, Headspace)
- Coaching
- Therapy and counseling services, including online options
- Financial planning
- Personal trainers
- Biometric screening
- Massage therapy and acupuncture
You can then add other spending categories to make your LSA more comprehensive and inclusive, including:
- Professional development
- Company swag
- Meals and food
- Family
- Commuting
- Pets
- Equipment
- Cell phone
- Internet
- Charitable giving
- Travel and experiences
What unusual or creative perk categories can be included in an LSA (pet care, donations, etc.)?
Beyond standard categories like wellness or professional development, LSAs can include more creative or values-driven perk categories. Employers commonly add pet care, charitable donations, cultural experiences, travel stipends, sabbaticals, “Treat Yourself” allowances, and company swag.
Because categories are employer-defined, LSAs allow organizations to reflect company culture, employee feedback, and evolving priorities without adding separate vendors or new benefit programs. This flexibility is one reason all-inclusive LSAs have become the dominant operating model for lifestyle benefits.
Other popular reimbursed items from select categories
Professional development
- Online courses (Coursera, LinkedIn Learning, Udemy)
- AI tools and productivity software
- Conferences and industry events
- Certifications and licensing fees
- Tuition for degree or non-degree programs
- Books and learning materials
- Coaching or mentorship programs
- Language learning apps (Duolingo, Babbel)
Family support
- Childcare and daycare expenses
- Babysitting and nanny services
- Fertility treatments and IVF support
- Adoption and surrogacy-related costs
- Elder care and in-home support services
- Parenting classes or support programs
Meals and food
- Meal delivery services (HelloFresh, Blue Apron)
- Grocery purchases
- Office snacks for remote employees
- Restaurant meals during business travel
- Meal stipends for late work hours or shift workers
Travel and experiences
- Museum and zoo memberships
- Theater, concert, or movie tickets
- National park passes or ski lift tickets
- Airbnb or hotel stays
- Airline and train travel for personal enrichment or remote work
- Family passes to theme parks (e.g., Disney, Universal)
- Local experience gifts (via ClassPass, Airbnb Experiences, etc.)
Need help crafting the right LSA for your team? Chat with an expert at Compt.
Benefits of a Lifestyle Spending Account (LSA) from Compt
Lifestyle Spending Accounts perform well because they balance employee choice with clear structure. Instead of scattering budget across one-off perks that are hard to manage and easy to underuse, employers consolidate support into a single program that’s predictable, explainable, and widely used.
LSAs help employers consolidate benefits without sacrificing flexibility.
Traditional perks often grow by addition: a wellness vendor here, a learning stipend there, a marketplace on top. Over time, this creates complexity without improving outcomes.
LSAs reverse that pattern. As shown earlier, 64% of employers on the Compt platform now run lifestyle benefits through an all-inclusive LSA, using one governed framework to support multiple categories. Employees still choose what matters to them, but HR and Finance manage fewer programs with clearer rules.
That’s just good benefits infrastructure.
LSAs address real gaps left by traditional benefits.
Health insurance remains essential, but it doesn’t cover many of the costs that shape employees’ day-to-day well-being. LSAs are increasingly used to support areas health plans don’t adequately address, such as family and caregiving needs, food and everyday wellness expenses, or emerging categories like GLP-1 medication support.
Because categories are employer-defined, companies can offer intention support without turning lifestyle benefits into an open-ended expense.
LSAs drive high participation and utilization.
LSAs consistently outperform traditional perks on engagement. In 2025, LSA programs reached 93% participation and 89% utilization, meaning employees actively used the benefits offered to them.
That performance reflects two core design choices:
- Benefits tied to everyday needs and moments of joy rather than niche perks
- Predictable funding cadences that make benefits easy to plan around and use
LSAs reduce administrative overhead for HR.
Managing perks through multiple vendors requires ongoing maintenance: eligibility checks, annual renewals, employee questions, and manual tracking. That work compounds as teams grow or become more distributed.
LSAs simplify this by centralizing lifestyle benefits under one set of policies and workflows. HR teams set budgets and rules once, then manage programs with significantly less manual effort (regardless of whether they support 100 employees or 10,000).
Learn how Jellyvision reduced lifestyle benefits admin time to one day of work per quarter.
Read the case study or this blog from their former CPO.
LSAs reinforce company values in a scalable way.
Because categories are configurable, LSAs give employers a practical way to reflect their priorities. A company that values learning can emphasize professional development. A company focused on well-being can prioritize wellness and caregiving support.
Compt customer ButterflyMX took this approach by surveying employees and launching a single, all-inclusive “Self-Care Stipend” with 12 categories. The result was 94% employee participation, showing that one well-designed program can support diverse needs without creating complexity.
LSAs align with DEI and inclusion strategies.
LSAs support DEI strategies by shifting from one-size-fits-all perks to structured flexibility. Instead of offering benefits that only resonate with a narrow employee segment, LSAs allow individuals across different life stages, cultures, family structures, and geographic locations to use funds in ways that are personally relevant.
For example, caregiving support may matter most to employees supporting children or aging relatives, while professional development or AI tool stipends may resonate with early-career or technical employees. By offering equitable access to flexible support rather than rigid, vendor-specific perks, LSAs help employers design benefits programs that are inclusive by structure.
LSAs are a benefit that works for employees and employers.
For employees, LSAs provide choice, relevance, and fairness — benefits that fit real lives instead of forcing behavior through rigid vendors. For employers, they offer controlled spend, high engagement, and a structure that’s easy to explain internally.
That combination is why LSAs have become a core part of modern benefits strategy infrastructure, rather than another perk layered on top.
Disadvantages of Lifestyle Spending Accounts (LSAs)
Lifestyle Spending Accounts aren’t a fit for every organization in every scenario. Understanding the tradeoffs — particularly around tax treatment and administration — helps teams decide whether LSAs make sense and how to design them responsibly.
LSAs often include taxable benefits.
Most LSAs include a mix of taxable and nontaxable categories. Common examples include:
- Taxable: wellness, family and caregiving support, food, travel and experiences, pet care
- Nontaxable: professional development, student loan repayment (subject to IRS limits, up to $5,250 per year), and internet or cell phone reimbursements when used for work
According to Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, 78% of total stipend and LSA spend is taxable, a ratio that has remained stable year over year. This reflects how employees actually use LSAs: they prioritize what they need, even when some expenses carry tax implications.
Accurate tax treatment is critical.
Tax handling is where LSAs can create risk if they’re poorly administered. Applying tax treatment incorrectly — or too late — can result in unexpected withholdings for employees, which undermines trust in the benefit. On the employer side, covering taxes through gross-ups without clear visibility can introduce unplanned costs that Finance teams aren’t expecting.
The key is transaction-level accuracy. Tax treatment should be applied at the time of spend, based on the specific expense and documentation, not retroactively at year-end.
How Compt mitigates these risks.
The challenges above aren’t inherent flaws in LSAs — they’re implementation issues. With the right platform, taxable and nontaxable expenses can be managed predictably and transparently.
Compt is built to address these risks directly. Its reimbursement-based model automatically categorizes expenses, applies the correct tax treatment at the transaction level, and syncs results into payroll with clear reporting. That structure makes LSAs easier to explain, audit, and adjust as programs evolve.
As a result:
- Employees avoid surprise tax withholdings
- HR teams spend less time on manual review and reconciliation
- Finance gains consistent, real-time visibility into program costs
In practice, what’s often labeled a “disadvantage” of LSAs becomes a manageable design consideration. With proper structure and tooling, companies can offer flexible, high-engagement benefits without sacrificing control or compliance.
Real quotes on how Compt LSAs improve lives
Employees often share with our customers how life-changing their LSA programs have been, helping them feel more supported, balanced, and seen in their everyday lives.
Below are real stories and quotes from Compt users highlighting the powerful impact Lifestyle Spending Accounts can have when people are given the freedom to choose what matters most to them:
- “I exercise regularly, but this gives you extra motivation to go a little more!!”
- “I have never worked for a company that I’ve felt so appreciated.”
- “The benefits take a bit of the edge off of life’s large purchases — like tires to get safely to work!”
- “They are helpful with heating and cooling bills for my family.”
- “I have used it to cover expenses for my puppy.”
- “I like that my employer does this program. With the inflated prices this is a godsend!”
- “We have had so many fun family outings with this benefit :)”
- “The Compt benefits make me feel more free to book a hotel that’s just a little nicer than usual once in a while :)”
- “Able to obtain protein shakes and supplements that contribute to my overall health, wellness, and weight loss/maintenance.”
- “I am able to afford a membership to the YMCA for my family.”
- “We are already living paycheck to paycheck and this helps to buy essentials for our children. Thank you!”
- “With the high cost of getting groceries, it has helped to almost cover one weekly trip.”
- “It’s easy to upload a screen shot of a receipt to access my benefits through Compt.”
- “I love it — It feels like cash that I can spend on something special for me instead of adding to the family budget.”
- “Its been a great perk! This just feels like a gift every 3 months.”
- “They help offset costs for unexpected needs and offer me the opportunity to enjoy life without the financial worry.”
- “YES! I am able to buy a yoga punch pass. Yoga is my anti-depressant :)”
- “It helped me get a standing desk! About to follow up with a walking pad. Hopefully these will help me get healthier!”
- “They help with little extras here and there that I otherwise would not be able to provide my family.”
- “The benefits inspire you to not only take care of yourself and grow, but that you are appreciated.”
7 companies offering LSAs with Compt today
We’re constantly inspired by the incredible HR and People teams using Compt to offer flexible lifestyle benefits and personalized perks to their employees. Honestly, getting to witness the care and creativity these teams pour into supporting their people? That’s one of our favorite perks.
At Compt, we believe people do their best work when they feel supported and can thrive in inclusive environments — and we see that belief come to life every day through our customers.
One thing that stands out: when a company introduces a Lifestyle Spending Account (LSA), they typically see very high utilization across their team. (By “utilization,” we mean the percentage of stipend dollars actually used. So if a program has 80% utilization, that means employees are using $0.80 of every dollar offered.)
Below are some of the creative and impactful LSA and stipend programs companies are running with Compt, all with utilization rates of 85% or higher:
1. PDI Technologies
Industry: Software technologies
Stipends offered:
- Work anniversary
- Birthday stipend
- LSA program
2. Jenni Kayne
Industry: Retail
Stipends offered:
- $500 per year all-inclusive stipend
- Special callout: Branded the all-inclusive stipend internally as “The Live Well Stipend”
3. TCL Marketing
Industry: Advertising services
Stipends offered:
- $720 annual internet stipend for executives
- $3,120 annual all-inclusive stipend for directors
- $1,920 annual all-inclusive stipend for managers/supervisors
- $1,920 annual all-inclusive stipend for seniors/coordinators
- $1,320 annual all-inclusive stipend for technicians
- $125 per quarter health & wellness stipend
- Special callout: All-inclusive stipend amounts vary depending on the role
4. Cantina (formerly Aircore)
Industry: Software development
Stipends offered:
- $500 per month all-inclusive LSA stipend
- Special callout: Using stipends as a spot bonus
5. Polyvinyl
Industry: Music
Stipends offered:
- Full-time and part-time all-inclusive stipend
- $300 per quarter for full-time employees
- $150 per quarter for part-time employees
- Special Callout: Both full-time and part-time employees get the stipend!
6. StackRabbit
Industry: Advertising services
Stipends offered:
- $500 per quarter for all-inclusive LSA stipend
7. Bovitz
Industry: Market research
Stipends offered:
- Spot bonus – charitable giving
- $860 per quarter all-inclusive stipend
- Special callout: Charitable giving stipend to go along with their Community retreat
Inside one company’s LSA program
Consider Column, a Compt customer. After raising $30M in Series A funding, Column focused on growing its remote-first team, which created the need for flexible, location-agnostic benefits like a Lifestyle Spending Account (LSA) that could meet the varied needs of a distributed workforce.
They partnered with us for maximum flexibility, allowing them to offer stipends that included a one-time new hire tech stipend, quarterly technology productivity stipends, and a comprehensive “healthy and whole” stipend.
After launching Compt, 98% of employees reported being happy with Column’s benefits package overall.
Giving employees control over their spending promotes a healthy work-life balance. Happier employees translate to higher employee engagement and more success within your company.
“Compt helps our team members to be aware of the stipends that we’re offering and empowers them to make the choices that make the most sense for them and their loved ones.”
— Melissa Theiss, Head of People Operations, Column
How to get started with LSAs
Interested in setting up your own Lifestyle Spending Account program? Here are the steps you can take.
1. Identify your number of employees and total budget for LSAs.
Start by counting the number of employees you have and creating a total budget for all of the Lifestyle Spending Accounts you’ll be providing. You can benchmark against what other companies in your industry are doing to ensure your package is competitive.
According to Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, employers fund an average of $850 per employee per year across all stipend programs, with median funding for all-inclusive LSAs at $1,200. Budgets also vary significantly by company size; in 2025, average annual funding per employee was:
- $1,675 at companies with fewer than 100 employees
- $1,055 at companies with 100–1,000 employees
- $649 at companies with 1,000+ employees
Use these benchmarks as a planning baseline, not a target. Most teams anchor near the typical range for their size, then adjust based on workforce needs, chosen categories, and funding cadence.
2. Determine how much to spend per employee and on what timeframe.
Next, decide your funding cadence. How often you fund an LSA influences how employees plan for and use the benefit.
Compt’s 2026 Annual Lifestyle Benefits Benchmark Report shows that quarterly funding is the most reliable default, producing the highest utilization across programs. Quarterly amounts are large enough to feel usable, frequent enough to stay top of mind, and predictable for budgeting.
Annual funding is still commonly used for categories like professional development, where expenses are larger and less frequent.
3. Select categories for employees to spend in.
Choose categories that reflect your company’s values and employee needs. Many employers include wellness, food, and family support, but you can also add professional development (including stipends for AI tool subscriptions), remote work, company swag, or even “Treat Yourself” stipends. All-inclusive LSAs, which bundle multiple categories into one program, are now the single most popular design
4. Select a vendor like Compt, the best overall LSA solution for personalization and compliance in lifestyle benefits.
Compt is a lifestyle benefits platform built to help companies offer personalized, meaningful perks without the complexity. Instead of forcing HR teams to juggle multiple tools or locking employees into a rigid marketplace, Compt gives people the freedom to spend their stipends in ways that fit their lives. Employees have the freedom to use stipends within the categories you define, buying from any merchant that fits.
At the same time, HR and People Ops stay firmly in control with programs that are inclusive, easy to manage, and flexible enough to grow with your team.
Where Compt really shines is behind the scenes, for HR and Finance alike. Designed by a former CFO and COO, it delivers real-time visibility into spending patterns, automated tax classification, seamless payroll integrations, and global currency support. No merchant code issues. No embarrassing card declines. No year-end tax surprises for employees or employers. Just a smart, scalable platform that keeps employees happy, HR confident, and Finance in control.
Some key benefits of Compt:
- 100% tax-compliant: IRS and local tax rules are built in.
- No prefunding: You only pay for actual employee purchases.
- Personalization: Employees can choose what matters most to them, from a local yoga class to groceries for their family.
Psst: Learn more about how to evaluate the pros and cons of LSA vendors.
5. Communicate with your team.
Once you set your LSA up, it’s time to communicate clearly with employees. Include details such as:
- How much each employee receives
- The timeframe for spending and whether funds roll over
- Any maximum rollover or forfeit dates
- Which categories are included
- How to submit expenses
- Any tax implications
- Where to go for questions
Open communication with your team is one of the most important steps in making your LSA program a success.
Ready to explore Lifestyle Spending Accounts? Request a Compt demo today.
FAQs: Lifestyle Spending Accounts (2026)
A lifestyle spending account (LSA) is an employer-funded benefit that reimburses employees for eligible lifestyle expenses within employer-defined categories, budgets, and rules. Employees choose how to use the benefit within those guidelines, and expenses are reimbursed through payroll with appropriate tax treatment.
Unlike pre-tax accounts such as HSAs or FSAs, LSAs are typically taxable unless a specific IRS exclusion applies at the transaction level. This structure allows employers to support a wide range of everyday needs while maintaining clear policies, reporting, and cost control.
According to Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, 64% of employers on the Compt platform used an all-inclusive LSA in 2025, with 93% employee participation and 89% utilization.
Which expenses are eligible vs. ineligible under an LSA?
It’s important to separate eligibility from tax treatment.
Eligible vs. ineligible is a policy decision set by the employer (what the program allows). Taxable vs. nontaxable is a tax treatment decision applied at the transaction level based on IRS rules and documentation.
Eligibility depends on how the employer designs the program. Employers define which categories are allowed, and employees are reimbursed only for expenses that fit those categories.
In most LSA programs, eligible categories usually include a mix of core support (wellness, food, family and caregiving support, professional development, and connectivity like cell phone/internet) and optional add-ons (commuting, pets, charitable giving, and experiences), as long as the purchase matches the employer’s category rules and includes acceptable documentation (like a receipt).
Expenses are typically ineligible when they fall outside the defined categories, lack documentation, or violate program rules. Examples include personal expenses that don’t fit an approved category, items with unclear documentation, or expenses that are explicitly excluded by policy.
How do LSAs align with DEI and inclusion strategies?
LSAs can align with DEI and inclusion strategies because they replace one-size-fits-all perks with structured flexibility. Instead of offering benefits that only serve certain roles, locations, or life stages, LSAs allow employees to use the same benefit in ways that are relevant to them, while the employer maintains consistent rules, budgets, and tax handling.
Examples of how this shows up in program design include:
Geographic inclusion: employees can choose local merchants instead of being forced into a limited vendor network.
Life-stage inclusion: categories like caregiving, food, and wellness support different needs over time.
Role inclusion: employees in different functions can prioritize what’s most useful (e.g., learning, connectivity, commuting).
Net: inclusion through choice, without adding additional vendors or changing vendors when employee needs change.
What unusual or creative perk categories can be included in an LSA (pet care, donations, etc.)?
In addition to common categories like wellness, food, and professional development, LSAs can include creative or values-driven perk categories because eligibility is employer-defined.
Examples of unusual or creative categories include pet care, charitable giving or donations, cultural experiences, travel and experiences, “Treat Yourself” stipends, company swag, and community activities. The key is to define categories clearly, communicate what’s eligible, and apply correct tax treatment at the expense level.
What categories can be covered in lifestyle stipends?
Lifestyle stipends can cover a broad set of categories depending on employer policy. Most programs fall into a few common buckets:
Everyday support: food, commuting, cell phone and internet, office equipment
Well-being and life stage: wellness, family and caregiving support, pets
Growth and values: professional development, charitable giving, experiences
Because LSAs are reimbursement-based, employers can customize categories while keeping spend controlled, auditable, and tied to clear eligibility rules.
Which benefits categories see the highest ROI?
The highest-ROI benefit categories tend to be those that combine broad relevance, predictable funding, and clear eligibility rules.
Compt’s benchmark data shows that LSA programs achieve 93% participation and 89% utilization, indicating that employees actively use benefits when categories align with everyday needs. Categories such as wellness, food, family support, and professional development consistently perform well because they apply across roles, life stages, and locations.
From an employer perspective, ROI isn’t just about spend — it’s driven by consolidation, reduced administrative overhead, predictable budgets, and benefits that employees actually use rather than ignore.
How are companies structuring modern employee benefits programs in 2026?
In 2026, many companies are moving away from fragmented perks and toward consolidated, policy-based benefits programs.
Rather than launching separate stipends or vendors for each need, employers increasingly use all-inclusive LSAs to support multiple lifestyle categories under a single framework. These programs are typically funded on a quarterly cadence, connected to payroll, and governed by upfront eligibility and tax rules.
This structure allows benefits to evolve as employee needs change — without adding new programs, vendors, or administrative burden.
What employee benefits trends should a remote-first company watch if we want to add lifestyle spending accounts next year?
Remote-first companies adopting LSAs in 2026 should focus on flexibility, geographic parity, and operational simplicity — not just adding more perks.
The biggest trends to watch include:
Vendor consolidation: Replacing multiple point solutions (gym, meals, learning, commuter) with one flexible benefits wallet.
Geographic cost variability: Designing stipend budgets that work across different states and countries without overcomplicating tiers.
Hybrid fairness: Ensuring remote and in-office employees receive comparable support (e.g., commuter vs. home office vs. meal stipends).
Everyday cost support: Expanding beyond “wellness” to include groceries, transportation, childcare, and other real-life expenses.
Finance-first reporting: Tracking participation, utilization, and budget predictability to demonstrate measurable ROI.
Compliance readiness: Clarifying taxable vs. non-taxable categories before launch to avoid payroll surprises.
Bottom line: The most successful remote-first LSA programs aren’t built around trendy perks — they’re built around structured flexibility that scales across locations without increasing administrative burden.
What do CFOs care about when it comes to employee benefits?
Finance leaders prioritize predictability, auditability, and clarity. That includes knowing how much is being spent, why it’s being spent, and how benefits are treated for tax and payroll purposes.
LSAs appeal to CFOs because they are reimbursement-based, meaning employers pay only for approved expenses that employees actually use. Spending is governed by defined policies, visible in reporting, and tied directly into payroll, making benefits easier to forecast, review, and defend.
How can I communicate the ROI of an employee stipend program?
The most effective way to communicate ROI is to focus on participation, utilization, and administrative efficiency rather than perceived value alone.
According to Compt’s benchmarks, LSA programs reach 93% participation and 89% utilization, meaning employees actively use the dollars allocated to them. Consolidating multiple perks into a single LSA also reduces vendor sprawl and administrative effort, which lowers operational overhead.
Together, these factors make ROI easier to explain: high engagement, controlled spend, and simpler administration.
Why are employers moving away from traditional perks and point solutions?
Traditional perks often grow by addition — a new vendor here, a new stipend there — without improving engagement or outcomes. Over time, this creates complexity, unused benefits, and administrative burden.
Employers are moving toward LSAs because they consolidate support into fewer programs with clearer rules. All-inclusive LSAs allow companies to offer flexibility without sacrificing control, while adapting benefits as needs change instead of layering on more point solutions.
How do companies decide which employee benefits to consolidate?
Companies typically consolidate benefits that share three characteristics: broad relevance, predictable spend, and simple eligibility rules.
Rather than managing separate programs for wellness, food, connectivity, or learning, many employers combine these into an all-inclusive LSA. This approach reduces administrative complexity, improves participation, and keeps benefits easier to explain internally — especially to Finance and leadership teams.
What employee benefits have the highest participation rates?
Benefits that align with everyday needs and are delivered through simple, predictable structures consistently see the highest participation.
According to Compt’s 2026 Annual Lifestyle Benefits Benchmark Report, Lifestyle Spending Accounts (LSAs) reached 93% employee participation in 2025, significantly higher than most traditional perks and point-solution benefits. High participation is closely tied to how LSAs are designed: employees are given choice within clear categories, benefits are funded on a predictable cadence, and reimbursement removes friction at the point of use.
Participation also tends to be strongest in categories with broad relevance — such as wellness, food, family and caregiving support, and professional development — because these expenses apply across roles, life stages, and locations. When benefits are flexible enough to meet real needs, employees are far more likely to engage.
Just as important, high participation is paired with high utilization. In the same dataset, LSA programs achieved 89% utilization, meaning employees not only enrolled in the benefit but actively used the funds provided. Together, these metrics indicate that LSAs deliver benefits employees actually rely on, not just benefits that look good on paper.
Reimbursement-based benefits require employees to submit expenses for review before being reimbursed, ensuring each purchase aligns with policy and receives the correct tax treatment.
Prepaid cards often introduce challenges such as declined transactions, unused balances, unclear tax timing, and limited reporting. Reimbursement-based LSAs avoid these issues by paying only for approved expenses and maintaining a clear audit trail for every dollar spent.
How can we avoid ERISA issues with an LSA?
Work with counsel and design LSAs so they don’t reimburse medical expenses — that’s the simplest way to keep them out of ERISA scope. Many high-engagement categories (e.g., food, wellness, caregiving, professional development) can be structured and coded correctly inside Compt so your tax/plan treatment stays clean.
If you want to be able to reimburse for medical expenses, consider pairing your LSA with an ICHRA.
Editor’s note: Compt software supports the categorization and proper reporting of benefits according to IRS guidelines, helping businesses maintain compliance. However, Compt cannot provide tax advice, and users should consult their own tax, legal and accounting advisors when necessary.
