Ep #486 Exploring Lifestyle Spending Accounts with Jon Shooshani of JOON | ShiftShapers

Speaker 1: 0:00

What is a lifestyle spending account and how can it help you and help you help your clients? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:11

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shifts. And now here's your host, david Saltzman.

Speaker 1: 0:33

And to help us answer that question, we've invited John Shushani, who is co-founder, at June. John, welcome to the podcast.

Speaker 3: 0:39

It's great to be here, David. Thanks for having me.

Speaker 1: 0:42

Our pleasure, Our pleasure. So first of all, we always start with tell us a little bit about your journey. How did you end up doing what you're doing?

Speaker 3: 0:50

Sure. So ever since I can remember I was very interested in health and well-being, whether it was from the perspective of tinkering what I would eat to feel better, from physically in my body to exercise, that was always a big part of my life. In college I got very into even deeper into nutrition and fasting and things of that nature as a way to optimize my health, and I started to work in the natural foods industry, and in the natural foods industry what I saw were a lot of companies that were doing things a little bit differently, and when I say doing things a little differently, they were really interested in promoting the health of their employees. Through one of my employers I found yoga, which I continue to practice and has been a big part of my movement routine, and through those experiences I started to get really interested and passionate about the, the intersection of well-being and technology. And after college I reconnected with a dear friend of mine who I grew up with here in Los Angeles and we started to throw back and forth some ideas around the intersection of health and wellness and technology. His background was in banking, behavioral science, and he's always wanted to use money and incentives as a force for good, and we found that there was this clear alignment between what we both wanted to do with our careers, which was was improve access to health and well-being. And we reached into our wallets and we said, hey, this thing follows us around everywhere, whether it's Apple Pay or it's actual card. There's this thing that we use to pay for things every day. And how about if that thing in our wallets actually incentivized to live a healthier lifestyle by providing a discovery tool for finding health-promoting brands and by offering a reward system that would incentivize to spend more of our money on our health?

Speaker 3: 3:23

And we did what any 24 and 25-year-old would do at the time we tried to start a credit card, and then we discovered it's very expensive and hard to start a credit card, so we decided to start a prepaid debit card with a digital banking type platform.

Speaker 3: 3:45

We hired someone who invented the prepaid card at Visa and he decided to join us, and together we embarked on this journey of building a digital prepaid card called Avo, like avocado, one of our favorite fruits. And through that experience we learned a lot about how people make purchasing decisions, how people decide or don't decide to sign up for a new financial product, especially when it's named after an avocado. But through that experience we discovered the broken landscape of corporate well-being and lifestyle benefits, and that is what led us to starting the company that we've been building for the last five plus years, where we offer flexible wellness and lifestyle benefits in a way for employers to offer these personalized benefits to employees, where employees get the flexibility and the freedom to choose what works for them when it comes to navigating their health outside of traditional health care benefits.

Speaker 1: 4:53

All right, so let's dial back. For folks who aren't familiar with them, A simple ground level definition. What is a lifestyle spending account? You've given us some hints, but tell us how it all kind of fits as a package.

Speaker 3: 5:06

Definitely so a lifestyle spending account.

Speaker 3: 5:09

The funny thing about them is they don't have to be called lifestyle spending accounts.

Speaker 3: 5:13

They might have a lot of different types of names wellness stipend, wellness reimbursement, gym reimbursement, work from home stipend, learning and development program.

Speaker 3: 5:24

They may go by a lot of different names, but recently, because the consultants and brokers are talking about them more frequently, they've now coined the term lifestyle spending account and an LSA I'm going to refer to it as an LSA for short is an employer funded fund where the employer designates what employees can spend on in a given amount in a given month or a quarter or a year. They'll choose the parameters of the LSA and then they'll choose the stipend allowance and then the employee can use those dollars in a truly flexible way on items and experiences that contribute to their well-being. And I say truly flexible way because many of us and many of your listeners might be familiar with pre-tax benefits such as HSAs and FSAs, and those typically have a lot of parameters around what is eligible and what is not eligible, and since there is no tax advantage for the most part, with LSAs, the employer can be very customized and very flexible with what they decide to include in an LSA.

Speaker 1: 6:34

So if I'm an employer, john, and my benefit advisor brings me this idea, do you often hear, geez, I'm already spending a ton of money on healthcare on our core plan. What's the return on this?

Speaker 3: 6:49

This past year, this past two years, was a more difficult time because of the rise in healthcare costs. What we oftentimes find with our clients is they are already doing something like this manually, in-house, whether it comes to a work-from-home stipend that they started to offer post-COVID when their team went distributed or remote, or they might offer a point solution that's focused on health and wellness, or they offered something pre-COVID days, maybe a gym membership and then they took it away and they're kind of scratching their heads trying to figure out what they're going to offer next. So the budget is typically there. There's something that employers are doing outside of healthcare and 401k to take care of their employees in a more individualized and thoughtful way, and oftentimes for us it's about redirecting those budgets towards something that has a higher impact and higher utilization. And then, in terms of ROI, what companies are typically looking at is how much time is this going to save me and how high is the utilization going to be with my workforce?

Speaker 1: 8:02

And is there yet a correlation between this and health? Or is it more of an employee satisfaction play or a means to attract and retain employees by just being different and offering something that's kind of a fun sounding benefit?

Speaker 3: 8:18

I would say it fits a little bit into each of those buckets that you spoke about In terms of it actually having an ROI on someone's health.

Speaker 3: 8:28

It has to do with how the employer sets up their program.

Speaker 3: 8:33

So I'd say, out of 200 or so clients that we serve today, about half of them want to be a little bit more prescriptive with health and wellness and they want to make their programs very targeted.

Speaker 3: 8:45

And with those companies we've seen specific metrics and statistics around how it has impacted their workforce's well-being statistics around how it has impacted their workforce's well-being. One example of that is a specific percentage I think it's like a third of employees making a purchase on their health that they otherwise wouldn't have made due to cost. And then we have another half of our employer set employer clients that have intentionally decided to make the benefit a little bit more flexible, where it might include things like family care and family planning, learning and development and professional development, and in those cases it's more difficult to tie the benefit back to their health and it is more so focused on employee satisfaction and making the employer more of an employer of choice, improving the employer's retention with employees, since the benefit is still new enough where employees and it's customized enough, where employees really appreciate it in a different way than they do with healthcare benefits. It's really they can tangibly experience it and every employee will use the dollars a little bit differently.

Speaker 1: 10:05

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Speaker 1: 10:42

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Speaker 3: 11:35

So part of what you might picked up on and when I spoke about our founding story is health and wellness is really in the DNA of our company. It's something that we, as employees of the company, really care very much about. If we weren't doing this podcast, I would typically be walking on calls with a walking pad under my desk. So health and wellness is something that we promote and out of all the LSAs in the market today, I would say that we're the most wellness focused, so all of our clients today have that turned on as a category. Within health and wellness, some of the most popular purchases we see are gyms and fitness studios, at-home equipment, meditation apps, out-of-pocket therapy and then massages as well. Sometimes we find a lot of times employees want to treat themselves with a massage with their monthly wellness stipend. Outside of health and wellness, some of the most popular categories are professional development, and the interesting thing about professional development is that employers can actually it's not pre-tax, but employers can give it on a non-taxable basis to their employees. So you can give up to $5,250 a year to your employees for learning and development, professional development, as well as student loan repayment, so that's a category that's been increasing in popularity for learning and development, professional development, as well as student loan repayment, so that's a category that's been increasing in popularity.

Speaker 3: 13:02

Work from home purchases as I mentioned, a lot of employers have remote workers these days and oftentimes there's certain states we've written about this in our blog that require employers to subsidize specific costs associated with working from home, so that's a popular one.

Speaker 3: 13:16

Other employers just want to do it out of the goodness of their heart and wanting to just make employees more productive at home. So things like webcams or things that make employees' offices at home a little bit more ergonomically friendly or just feel better, like plants and aromatherapy, things like that. And then, last but not least, family care. Things like fertility have been top of mind, as people are staying in the workforce for longer. Family planning and as a fun part of the family care category that we've seen actually growing in popularity, is pet care as well. So a lot of employers will, as an aim to make their family care as inclusive as possible, they'll include pet care as part of their family care programs. So you're really supporting and covering all bases, from an employee who's straight out of college, just entering the workforce, to someone maybe who's a little bit older and taking care of an elder or a parent. They can use their benefit on family care as well.

Speaker 1: 14:18

That's awesome. So obviously this varies employer to employer, but is there a range that you generally see, or a percentage of payroll or salary? How does an employer figure out what that amount is and what do you generally see?

Speaker 3: 14:35

Definitely so. We promote. We have industry benchmarks based off of what we're seeing with our clients. On the highest side that we've seen, we have one employer in the health and wellness space and they offer employees 5% of their salary in terms of a LSA, so pretty generous amount.

Speaker 3: 14:56

You see the executives making a good amount of money every year with their health and wellness benefit and then, on average, the other way that we divide it with our clients or when we're talking to prospective clients, is we divide it up between established corporations, companies that have been around for 15, 25, 50, 100 plus years.

Speaker 3: 15:19

They typically are more focused on cash flow and profitability and therefore are going to be a little bit more risk averse when they're offering this benefit and they're going to start slow at about $25 to $50 a month per employee. And then we have startups, agencies, companies that are in a tight even in this economy, are in a tighter labor market and they want to be more generous with the benefit. Oftentimes they are trying to attract employees who have worked for the Facebooks, amazons, apple, netflix of the world, the FANG companies, and they are giving $50 to $75 a month on average In either of those categories when an employer really wants to level up or supercharge their lifestyle benefits. They will start to be a little bit more prescriptive with the different benefit categories and they'll offer multiple programs through June and through.

Speaker 2: 16:17

LSAs in general.

Speaker 3: 16:19

So they might offer one program focused on health and wellness and they'll offer another program that's focused on continuous learning and professional development and they'll start to compartmentalize what employees can spend on in those different categories, and that is a big value prop of what LSAs are doing in the market today. In the last 5, 10 years there was this huge flood of point solutions that entered the market and employers were picking and choosing these point solutions and the PEPMs were adding up, but the utilization when they looked at it was still pretty low. So many employers are now starting to consolidate their point solutions with an LSA that is more cost effective and has much higher utilization, employee engagement and satisfaction overall.

Speaker 1: 17:10

That's interesting. Now, is this an annual reset use it or lose it benefit, or is it a carryover benefit? How does that work?

Speaker 3: 17:18

That's a great question. The employer can decide and can another value prop for us. I mentioned wellness focus at the top of the call, customization and flexibility. So we pride ourselves on being the most flexible and customizable LSA in the market today. So the employer can decide whether they want a monthly, quarterly or annual allowance and whether they want it to roll over or they want it to use it or lose it.

Speaker 3: 17:45

When it comes to health and wellness, we typically recommend a use it or lose it program that is monthly, and that is because it incentivizes employees to engage with the program every month. One of our most popular features is a purchase called large purchase rollover and, rather than an employee employer running an annual program where an employee could, let's say, get their full $1,000 for the year at the beginning of the year and then leave the company, where then the employer is on the hook for that $1,000, large purchase rollover allows an employee to submit a larger annual purchase, let's say an annual gym membership or a Peloton or a sauna, at the start of the year, and then they'll submit it and then they'll get reimbursed over multiple months in a row until it's paid off, and if they leave the company, the company's no longer on the hook to pay that full $1,000, since it's going month by month. But then there are categories such as family care and learning that oftentimes work better on a quarterly or annual basis.

Speaker 1: 18:52

It sounds like it could be an awful lot of work for an employer or an HR department. Are all of those variables included in your platform so the employer doesn't have to think about it? They just have to set it and forget it?

Speaker 3: 19:04

Yeah, that's a great point because a lot of the companies to date have run a lot of these programs manually and they've administered it with a smaller team and it's worked fine. And then as they get bigger and bigger, it just becomes more complicated. They want to formalize the program. So a big part of our value prop is streamlining the administrative piece for employers and offering them something that they can manage in 15 minutes a month or less.

Speaker 1: 19:35

That's interesting. So if I'm an advisor, what's that conversation initially like? When you talk to an advisor and they say, gee, this sounds like a great idea, I want to bring it to my clients and prospects, what does that conversation with the employer look like? When you talk to an advisor and they say, gee, this sounds like a great idea, I want to bring it to my clients and prospects, what does that conversation with the employer look like? What does that sound like?

Speaker 3: 19:50

Sure. So first, maybe taking a step back, with advisors, we like to first break down how June and LSAs are different than pre-tax benefits, since pre-tax benefits is usually what advisors are a little bit more familiar with. And then we like to establish how we've differentiated our technology and we do this with clients as well that most LSA providers, even the more modern ones today, are taking existing pre-tax technology and they've applied the use case towards LSAs, meaning, when you look under the hood, the products operate with prepaid cards maybe to take you back to the Avvo days when we got started as well as marketplaces that limit employees just to the marketplace itself, to the vendors within the marketplace, or they require employees to manually submit receipts to a portal. So we like to share with consultants and advisors and the client that June operates a little bit differently. We're the only platform that integrates directly with the employee's wallet, reducing and removing friction for the employee to make these benefits as delightful and seamless to use as possible. So that's how we really educate the advisor on how June is different, and then, when we're talking to the client, we learn about what type of benefits that they offer today and where those fall short.

Speaker 3: 21:31

Is it a utilization problem. Is it a communication issue in terms of new employees don't really understand what they're receiving because the benefits are all over the place. Do they have an idea of what they want to migrate today to June? What are their goals with the program? What does their workforce make up? Who are their employees and what do they prioritize? Have they done any wellness surveys or benefit surveys in order to understand employees' needs?

Speaker 3: 22:04

And then from there we will walk them through the June experience. We'll try to make that demo as interactive as possible to make sure that we're hitting all the points that they are trying to answer, things like the taxability piece, the integrations, roster management just making sure that we get all those details sorted out and then we will introduce our turnkey implementation. And that's something that we pride ourselves on is that we can get a program like this up and running in hours or days, rather than eight weeks, 10 weeks. The way a lot of HR products work and from there you know we could break it down by how much is this going to cost? Budget wise, who else do we have to talk to on the team? And from there it's pretty smooth.

Speaker 1: 22:53

When you onboard this, do you have an employee education component?

Speaker 3: 22:58

Yes, we do so. We will meet the employer where they're at. If they have a workforce that is very much still in person, we will customize the material so they can do printouts and we can even go there and educate employees in person if the company is large enough, even go there and educate employees in person. If the company is large enough. When it's a more digitally native employer, we will usually join a stand-up or team meeting where we can introduce June for 10-15 minutes, answer any questions employees have and then we will follow up with a bunch of materials and that allows the utilization to be 70% to 80% of employees using their full benefit on average.

Speaker 1: 23:44

And for folks who want to know more, it's not June as in the month, it's June as in J-O-O-N dot I-O correct.

Speaker 3: 23:52

Yes, so June J-O-O-N. Some people think maybe I'm John J-O-N, that I spelled my name wrong and I was trying to name the company after myself or the month. It's neither of those things. Both my co-founder and I are Persian American culture and June is a Farsi word that means love, life, energy. It's used as a form of endearment after someone's name, like David June. And the reason that we named the company June is because of both our families in Iran, both my co-founder and I. They employed lots of people.

Speaker 3: 24:34

Sebastian specifically, my co-founder and our CEO, his great uncle, habib, was very well known in the Persian Jewish community. He was one of, I think, six or seven brothers, big industrialists in Iran. They built the first high-rise building classical building in Iran. They employed tens of thousands of people and 10 or 12 years ago, when Sebastian was in college in DC, cab driver was Persian and what Persians kind of do with each other is they size each other up and they say, hey, what's your last name? Who are you, where'd you come from, what community are you with?

Speaker 3: 25:14

And he says his last name and the cab driver pulls over to the side of the road. He's scared for his life. He's like what's, what's going on. You know, dc post nine, 11, not, not, not the best time.

Speaker 3: 25:27

And the cab driver looks back at him with tears in his eyes and a smile on his face and reaches out into his jacket pocket and goes through to tell Sebastian the various stories of when he spent his years in Iran working for Sebastian's family and the various ways that they were taking care of their employees, whether it was feeding their family every day, giving people refrigerators since they manufactured refrigerators if they didn't have them, building people homes, sending people to get specialized surgery outside of the country. So this idea of a June benefit, it is something that has existed in some shape or form for many since the very beginning, when people had employees or workforces that they wanted to take care of and eventually, unfortunately, sebastian's great uncle was assassinated by the Iranian regime. But this idea of the way that he had treated his employees had withstood the test of time and that's why we named the company June and to bring that to today's dynamic workforce, where companies want to do the same types of things for their people but oftentimes don't know how and where to start.

Speaker 1: 26:48

What a great story and a great place to end our conversation for today. John Shushani, co-founder at June. That's J-O-O-Nio. Thanks for sharing your background and your wisdom with us.

Speaker 3: 26:59

Thanks so much for having me, david, it was a lot of fun.

Speaker 2: 27:03

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