January 2, 2024

Using Lifestyle Spending Accounts to meet remote work reimbursement requirements

Due to the pandemic, a patchwork of state laws emerged to address the increasing need for employees to make purchases related to working from home. To administer reimbursements for eligible expenses, forward-thinking employers are turning to flexible Lifestyle Spending Account (LSA) platforms.

Below is an outline of relevant federal and state laws as of 2023, with various factors to consider. Of course, you should consult your own tax, legal, and accounting advisors before making any decision or implementing any platform. 

Federal and State Laws

For the most part, federal law does not address work from home reimbursements. However, the Wages and the Fair Labor Standards Act clarified in a 2020 letter that an employer must reimburse an employee for business-related expenses that cause the employee’s wages to fall below the minimum wage.

More relevant for employers though is the fact that states are increasingly setting a stricter albeit vague standard. Importantly, California and Illinois have some of the clearest and most robust laws:

  • California: “…remote workers must be reimbursed for the necessary expenses they incur in order to perform their work duties, regardless of who mandates the remote working.”
  • Illinois: “An employer shall reimburse an employee for all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.”

Practically speaking, it’s difficult for larger employers to implement unique policies for work from home reimbursements per state. Further, on an ethical level, HR teams would be wise to consider the implications of making employees incur unreimbursed expenses for work-related activities whether upfront or regularly.

That’s why many employers are implementing technologies to adequately address the needs of their remote workforce wherever they are.

Leveraging LSAs for Work From Home reimbursements

At JOON, we offer a smart benefits category for work from home purchases. It includes purchases made from merchants such as Vari Desk, Herman Miller, Roost Stand, and Spectrum. Further, employers can introduce or combine other benefits (e.g. Wellness, L&D, etc.) into one platform with JOON, and then segment purchases by taxability within reports to differentiate between lifestyle and business expenses.

JOON’s flexibility also enables employers to create benefits for the following situations:

  • A one-time allowance only for new employees that can be used within a given time period
  • An annual allowance for all employees that resets each year
  • A monthly allowance that either resets each month or allows employees to rollover unused allowances

We’re excited to support employers as they offer better and more flexible benefits. If you have any further questions about tax or accounting, we highly recommend the team at Acru.