When providing employer-sponsored accounts to your employees, customizable settings give you greater control over how funds are used. These tools help ensure benefit dollars are spent as intended, minimize unused balances, and align employee spending with your program’s strategic goals. Here are the key settings to consider:
1. Renewal Period
The renewal period determines how often funds are added to an employee’s account. Common options include:
- Monthly
- Quarterly
- Semi-annually
- Annually
Tip: Using a shorter renewal period—such as monthly—helps distribute funds more evenly throughout the year, avoiding large upfront allocations. This approach can also reduce financial exposure if an employee leaves partway through the year.
2. Reset Period
The reset period determines how frequently unused funds are cleared from the account, promoting consistent usage and discouraging long-term accumulation.
Paired with a defined renewal period, reset settings can significantly influence account utilization. For example:
- A monthly renewal paired with a quarterly reset allows employees to gradually build up funds—up to three months' worth—without letting balances accumulate over the entire year. This structure also places a time limit on when those funds must be used, promoting more consistent utilization.
3. Maximum Balance
Setting a maximum balance limits how much an employee can accrue at any one time, helping prevent large build-ups—especially when funds go unused for extended periods.
Example:
If you offer $100 per month with an annual reset, setting a maximum balance of $300 ensures employees can only accrue up to that limit. Once the cap is reached, future contributions pause until some of the balance is used, encouraging regular spending.
4. Proration for New Hires
To prevent overfunding employees who join mid-year, you can enable proration. This ensures new hires receive a proportional share of the annual benefit, based on their start date.
- For monthly renewal accounts, proration is calculated to the day.
- For quarterly, semi-annual, and annual accounts, proration is calculated to the month.
This approach aligns funding with each employee’s actual time in the program, enhancing fairness and improving overall budget control.
5. Eligible Expenses
The scope of eligible expenses directly affects utilization:
- A more limited list of eligible expenses restricts how funds can be used, often resulting in lower overall spending.
- A broader list of eligible expenses, such as in a general Lifestyle Spending Account, encourages higher usage by offering greater flexibility.
Be strategic in selecting eligible expenses, tailoring the list to align with your program’s objectives and budget.
By fine-tuning settings such as renewal and reset periods, maximum balances, proration, and eligible expenses, you can effectively manage account utilization. Whether your goal is to promote consistent usage, prevent excess accumulation, or align spending with strategic priorities, these tools offer the flexibility to design a program that benefits both your organization and your employees.