Founders often end up designing a benefits program sooner than expected. The first few hires might not require much structure, but as the team grows, candidates begin asking more pointed questions about benefits. That’s usually the moment when the variety of available programs becomes clear.

HSAs, FSAs, LSAs, and stipends are some of the most common benefits programs companies use today. They often appear in the same conversations, but they serve different roles. Understanding how each one works, and how they fit together, makes it easier to build a benefits program that supports your team today and stays flexible as you grow.

This guide gives you a practical starting point.

Two Groups to Keep in Mind

Before you dig into the details, it helps to sort these programs into two buckets.

Health-related, tax‑advantaged accounts

  • Health savings account (HSA)
  • Flexible spending account (FSA)

Company‑funded perk programs

  • Lifestyle spending account (LSA)
  • Stipends

HSA: One of the Most Tax-Advantaged Benefits

What it is

An HSA is a tax‑advantaged account employees can use to pay for qualified medical expenses. HSAs are tied to high‑deductible health plans (HDHPs).

How it works

Employees and employers can both contribute pre‑tax dollars. The balance can be invested and grow over time, and employees can use the funds for qualified medical expenses without paying tax on withdrawals. Any unused money rolls over each year and stays with the employee if they change jobs.

Where it fits

Offer an HSA when you include an HDHP in your medical lineup. Employees who want lower premiums and are comfortable with a higher deductible often value an HSA. It works well for team members who appreciate long‑term savings potential.

What to keep in mind

  • You can seed HSAs to encourage adoption of the HDHP.
  • Employees must be enrolled in an HSA‑qualified HDHP to contribute.
  • Many companies offer an HDHP with HSA alongside a PPO to support different preferences.
  • HSA funds can be invested in stocks, bonds, ETFs, mutual funds, and more

FSA: Pre-Tax Spending for Healthcare and Dependent Care

What it is

An FSA is an employer‑established account that lets employees set aside pre‑tax dollars for eligible out‑of‑pocket costs. The company can also contribute if you choose.

How it works

Employees elect an annual amount and use the funds for eligible expenses during the plan year. FSAs come in three forms:

  • Healthcare FSA for medical, dental, and vision expenses
  • Dependent care FSA for eligible childcare or eldercare
  • Limited purpose FSA for employees with an HSA; it covers only dental and vision to maintain HSA eligibility

Plans include either a small carryover or a short grace period. Because funds are “use-it-or-lose-it” (don’t roll indefinitely), elections should align with expected use in the plan year

Where it fits

An FSA supports employees who expect ongoing healthcare or dependent care expenses but may not enroll in an HDHP with an HSA.

What to keep in mind

  • FSAs are available regardless of which medical plans you offer.
  • Clear communication helps employees right‑size their elections amounts.
  • If you offer an HSA, employees can only use a limited purpose FSA for dental and vision.

LSA: Flexible Support for Wellness and Work‑Life Needs

What it is

An LSA is an employer‑funded budget employees can use for approved lifestyle or wellness expenses.

How it works

You choose the spending categories and the allowance amount. Employees submit eligible expenses for reimbursement, and the company pays the approved amount through payroll. Categories often include fitness, mental health services not covered by insurance, home office equipment, learning, or commuting. Because categories are customizable, LSAs adapt well to different team needs and locations.

Where it fits

An LSA works well when you want to support well‑being, productivity, or day‑to‑day needs in a flexible way. It creates a consistent experience for distributed or hybrid teams.

What to keep in mind

  • Reimbursements are taxable, so coordinate with payroll on how they’ll be processed.
  • A platform helps manage documentation and policy rules as your team grows.
  • Clear categories and examples keep the program consistent.
  • Starting with a focused set of categories makes rollout smoother.

Stipends: Straightforward Support for Specific Needs

What it is

A stipend is a company‑funded allowance for a defined purpose such as home office equipment, internet service, wellness activities, or learning.

How it works

You set the amount, purpose, and frequency, and employees either receive the funds directly or submit receipts depending on your policy. Stipends can be one‑time or ongoing and are processed through payroll as taxable income. The simple rules make them easy to launch and manage.

Where it fits

Stipends are helpful when you want a lightweight way to support specific needs without adding a formal program or platform.

What to keep in mind

  • Clear guidelines reduce exceptions and keep the process manageable.
  • Stipends are taxable, so coordinate with payroll on timing and reporting.
  • Manual tracking becomes harder as your team grows.
  • If usage expands or categories multiply, an LSA usually scales better.

Choosing the Right Set Up for Your Company

These programs often show up together inside a benefits package, which can create the impression that they’re interchangeable. They aren’t. Each serves a different role, and together they can create a well‑rounded experience.

As you choose what to offer, consider:

  • Company stage: Smaller teams can manage fewer programs; larger teams need structure.
  • Team needs: Employees at different life stages value different types of support.
  • Administrative capacity: Some programs require more oversight.
  • Budget per employee: Costs rise as headcount grows.
  • Your talent market: Benefits can influence how competitive you appear to candidates.

What Your Benefits Mix Might Look Like at Different Growth Stages

The benefits you offer will change alongside your company. The stack that works for a 10-person startup will look different from one supporting a team of 150. Here are some examples:

Seed stage (5–20 employees)

The focus here is simplicity and coverage. A common setup might include:

  • One or two health plans
  • HSA eligibility if the plan allows it, sometimes with a modest employer contribution
  • A small LSA for wellness or learning
  • A targeted home-office stipend

At this stage, companies often skip FSAs due to limited demand and administrative overhead.

Early growth (20–75 employees)

As hiring accelerates, benefits begin to influence recruiting outcomes more directly. Companies often expand their stack to include:

  • Two to three health plan options, such as an HDHP, a PPO, and an HMO
  • HSA contributions for employees on the HDHP
  • Healthcare FSA
  • Dependent care FSA
  • LSA with broader categories

This stage is where many companies move away from broad stipends to more structured benefits.

Scaling stage (75–200 employees)

Benefits programs become more comprehensive as headcount grows. Companies often offer:

  • Multiple health plan options, including richer buy-up options
  • Larger HSA employer contributions
  • Healthcare and dependent care FSAs
  • LSAs
  • Commuting stipends

The program starts to resemble the structure seen at larger companies, though many startups maintain flexibility through LSAs.

Pulling It All Together

Building a benefits program for a growing team comes with a lot of choices, but it becomes much more manageable once you understand the purpose of each option. HSAs and FSAs support healthcare spending, while LSAs and stipends offer flexibility for wellness, productivity, and day‑to‑day needs. You don’t need to offer everything right away. Start with the programs that fit your team and budget, then expand as you grow.

A little clarity now saves time later and makes it easier to build a benefits experience that feels supportive, intentional, and aligned with how your company operates.

Talk Through Your Options With a Sequoia Advisor

Every company’s path looks a little different. If you want help evaluating which programs make sense for your stage, a Sequoia advisor can walk you through the tradeoffs and help you design a setup that fits your team today and scales with you. Connect with a Sequoia advisor to get started.

Cris Cafiero — Cris is a Business Consultant at Sequoia, where he advises high-growth, investor-backed companies on people strategy across their total people investment and HR infrastructure. With 10 years of experience working with SMBs in the PEO industry and over five years advising startups at Sequoia, he partners closely with founders, finance leaders, and HR teams to help them scale thoughtfully while navigating compliance and operational complexity. As a licensed health and life insurance producer, Cris is trusted to build competitive healthcare and total rewards strategies for startups vying for top talent. He spent six years of his career in San Francisco and now resides in Southern California with his wife and two dogs. Outside of work, he writes a newsletter on the topics he advises clients on and enjoys travel, golf, reading, and music.