LSA vs. Wellness HRA: Compare and Contrast Them

March 19, 2020

Lifestyle Spending Accounts (LSAs) and Health Reimbursement Arrangements (HRAs) are customizable plans you can offer your employees. Both can help you retain and recruit the best talent, and both will improve the wellbeing of your employees. But there are distinct differences between LSAs and wellness HRAs, which are one type of HRA that’s specifically focused on wellness-related expenses. We’ll break down the basics of each account, including the benefits for you and your employees.

LSA vs. Wellness HRA infographic

LSA vs. Wellness HRA

Lifestyle Spending Account

An LSA is an employer-funded, post-tax plan that lets your employees be reimbursed for purchases of eligible physical, emotional and financial wellness expenses. Since these are post-tax, you have control over:

  • What expenses are eligible.
  • The annual reimbursement limit.
  • How often funds are made available in accounts.

These accounts have become an important recruiting and retention tool for employers in a tight job market, since the U.S. unemployment rate is at its lowest point in decades. Over one-third of organizations increased their benefits offerings in 2018. 

Wellness HRA

Employers fund HRAs, but they do so with pre-tax dollars. HRAs are customizable, but only specific types of HRAs are allowed through IRS regulations. One type of HRA is the wellness HRA, which lets your employees purchase eligible expenses as determined by the IRS, which may include tobacco cessation programs, weight-loss programs (with a prescription) and more.

It’s important to remember that, in order to enroll in an HRA, an employee must be enrolled in the group health plan that the HRA is integrated with.

Would you like to learn more about LSAs? Listen to our Benefits Buzz podcast episode.

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