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Is SIMRP Right for Your Business? A Decision-Making Guide for Employers
As healthcare expenses continue to rise, many business owners and HR leaders are exploring alternative solutions to provide meaningful benefits to their employees while maintaining control over costs. One such option gaining traction is the Self-Insured Medical Reimbursement Plan (SIMRP). But is SIMRP right for your business?
This decision-making guide is designed to help employers evaluate whether SIMRP aligns with their company size, workforce composition, budget, and overall benefits strategy. We’ll walk through key factors like cost, compliance, employee needs, and risk tolerance to help you make an informed choice.
Understanding SIMRP: What It Is—and What It Isn't
A Self-Insured Medical Reimbursement Plan (SIMRP) is an IRS-compliant, employer-sponsored reimbursement plan structured under Section 105 of the Internal Revenue Code. It allows employers to offer wellness benefits to employees at no net cost and reduce payroll tax expense at the same time. Importantly, a SIMRP is not primary medical insurance—it doesn’t cover hospital stays or medical treatments.
Instead, it can complement an existing health plan or help employers fund Minimal Essential Coverage (MEC) plans. MEC plans typically include one annual in-person doctor visit and required blood tests but do not provide the broader coverage found in traditional health insurance. SIMRP may also cover out-of-pocket expenses, provide additional benefits, and offer financial advantages for both employer and employee.
Key Benefits of SIMRP for Employers
Is SIMRP a Fit for Your Business? Key Considerations
1. Company Size
SIMRP can work for a wide range of employers, but it is especially effective for small to mid-sized businesses looking for flexibility. These companies often struggle to afford traditional group health plans but still want to offer competitive benefits.
Larger businesses can use SIMRP to supplement existing plans by using employer tax saving to help pay for the employer share of the employee benefits. This allows large employers to extend more complete benefits without taking on the full cost burden of expensive benefits options.
2. Healthcare Budget
If your company’s healthcare budget is tight or inconsistent, SIMRP offers a predictable, controllable cost structure. Traditional healthcare cost tend to rise each year. The SIMRP has no net cost so you won’t have to deal with annual cost increases.
It’s an ideal fit for companies that:
- Have limited budgets for benefits
- Are recovering from financial setbacks
- Want to control annual healthcare cost increases
3. Employee Demographics
Understanding your workforce helps determine if SIMRP is a fit. It tends to work best for:
• Younger or generally healthy teams with fewer ongoing medical needs.
• Lower income employee typically decline health benefits to increase net pay, which can lead to potential health problems that could be prevented if they had access to speak with a doctor regularly.
• Employees that do have health insurance and would like additional benefits.
• Employees that are paying for benefits out of pocket (Disability, Life, Accident, etc) who could have their benefits paid for by the SIMRP Program instead.
If your team includes many individuals who currently lack access to affordable health insurance, SIMRP plus MEC can be a powerful, affordable solution.
4. Existing Benefits Structure
Ask yourself:
- • Are you currently offering group health insurance?
- • Do you provide no benefits at all?
- • Are you offering MEC or limited plans only?
SIMRP is most powerful when it’s part of a tiered strategy. If you already provide a traditional health plan, SIMRP can offset out-of-pocket costs. If you’re not offering anything currently, SIMRP can serve as an affordable entry point to giving your team something valuable.
Comparing SIMRP to Other Health Benefit Options
| Feature | SIMRP | Traditional Insurance | MEC + SIMRP |
|---|---|---|---|
|
Cost to Employer
|
No Net Cost
|
High
|
No Net Cost
|
|
IRS Compliance
|
Yes |
Yes |
Yes |
|
Employee Tax Savings
|
Yes |
Limited |
Yes |
|
Covers Hospitalization |
No |
Yes |
No |
|
Provides Annual Physical & Blood Test With Doctor
|
Yes (via MEC)
|
Yes |
Yes (via MEC) |
|
Reduces Payroll Tax Liability
|
Yes |
No |
Yes |
|
Customizable Plan Design
|
High
|
Low |
High |
Risk Tolerance and Compliance
Because SIMRP is self-insured, employers should be aware of plan design compliance and documentation requirements. Working with a trusted partner like Fidelity Professional Relief Services ensures:
- • All reimbursements meet IRS criteria
- • Proper recordkeeping is maintained
- • Plan documents are legally sound
It’s important to note that SIMRP does not expose employers to the same financial risks as traditional self-insured medical plans that must cover large claims like hospital stays. Since SIMRP has capped expenses that are lower than the tax savings so there is no net cost.
How to Know If You’re Ready
You may be ready to implement a SIMRP if:
- You’re struggling with rising payroll taxes and health benefit costs
- You want to offer employee benefits but can’t afford traditional plans
- Your workforce would benefit from MEC-level coverage
- You want more flexibility in designing your benefits offering
If you check two or more of the above, SIMRP may be an excellent fit for your organization.
Real-World Example: How One Business Cut Costs with SIMRP
Let’s say a construction firm with 40 employees couldn’t afford to offer full health benefits. The majority of their employees are meet the 30+ hours per week average to qualify for the SIMRP. After implementing SIMRP along with MEC plans:
- The employer saved over $500 per enrolled employee per year on employer payroll taxes. 40 X $500 = $20,000+ Savings Annually
- Workers gained access to basic preventive care for them and their immediate family.
- Employee satisfaction improved, leading to better retention and lower turnover costs.
- Employee get quick access to speak with doctors through telemedicine, resulting in fewer missed workdays.
This strategy allowed the company to offer meaningful support to its workforce without blowing the budget—and it stayed fully compliant with IRS guidelines.
Implementation: What to Expect
Implementing a SIMRP is straightforward when done with expert help. At Fidelity Professional Relief Services, we handle the setup, compliance, and ongoing plan administration so employers can focus on running their businesses.
Our process includes:
- • Initial needs assessment and eligibility evaluation
- • Custom SIMRP plan design
- • Integration with MEC or existing coverage
- • Employee education and onboarding
- • Ongoing support and reporting
Final Thoughts: SIMRP as a Strategic Advantage
Offering benefits doesn’t have to mean choosing between affordability and value. SIMRP provides a compliant, tax-advantaged, and flexible solution that works for companies across various industries and sizes. It helps employers reduce costs while improving employee well-being, morale, and retention.
If your business is looking for a smarter way to provide benefits without the financial strain of traditional insurance, SIMRP may be the right move.
Ready to explore how SIMRP can fit into your business strategy? Contact Fidelity Professional Relief Services today for a personalized consultation.
Top 5 IRS-Compliant Ways to Lower Business Healthcare Costs in 2025
Healthcare expenses continue to be one of the most significant and unpredictable costs for businesses in the U.S. In 2025, business owners and HR professionals are under increasing pressure to provide valuable health benefits while keeping costs manageable. Fortunately, there are several IRS-compliant, tax-efficient strategies to help employers control healthcare spending without compromising employee satisfaction.
In this blog, we’ll break down the Top 5 legal ways to lower business healthcare costs in 2025, including one of the most underutilized yet powerful tools available today: the Self-Insured Medical Reimbursement Plan (SIMRP). If you’re a business leader looking to save money while still taking great care of your team, this guide is for you.
1. Implement a Self-Insured Medical Reimbursement Plan (SIMRP)
A Self-Insured Medical Reimbursement Plan (SIMRP) is one of the most effective IRS-compliant strategies to reduce healthcare costs. Under IRS Section 125, 105, and 213(d) SIMRPs allow employers use this tax code strategy to create payroll tax savings which can cover the cost of wellness benefits and minimal essential coverage.
Rather than paying inflated monthly premiums to an insurance carrier, business have no net cost, while achieving the required coverage for qualified employees. When properly structured, SIMRPs provide significant savings on FICA, FUTA, and SUTA payroll taxes, in addition to employer costs being 100% tax-deductible as a business expense.
Key Benefits:
Here’s how SIMRP compares to traditional group health insurance:
| Feature | SIMRP | Traditional Health Insurance |
|---|---|---|
|
Cost Structure
|
Reimburse actual expenses |
Pay fixed monthly premiums |
|
Payroll Tax Savings
|
Yes |
Limited |
|
Customization Options |
High |
Low |
|
Provider Flexibility |
Limited to network |
Limited to network |
|
Ideal for
|
Small to mid-sized employers
|
Medium to large employers |
By partnering with a provider like Fidelity Professional Relief Services, employers can ensure their SIMRP is fully IRS-compliant and optimized for maximum tax efficiency.
2. Offer a High-Deductible Health Plan (HDHP) Paired with an HSA
Pairing a High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA) is another popular IRS-approved strategy. HDHPs typically come with lower premiums, reducing the overall cost burden for the employer. Meanwhile, HSAs allow employees to save pre-tax dollars for future medical expenses.
While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.
Employers can also contribute to the HSA, offering a valuable benefit to employees while receiving a tax deduction. Contributions are not subject to payroll taxes and the funds roll over year to year.
Key Benefits:
- Lower insurance premiums
- Employee-owned savings for healthcare expenses
- Triple tax advantage: contributions, earnings, and withdrawals are tax-free
- Enhances employee engagement in managing healthcare
When designed strategically, HDHP+HSA plans reduce costs while maintaining a robust benefits package.
3. Utilize a Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is an IRS-approved, employer-funded benefit that reimburses employees for qualified healthcare expenses. HRAs can be tailored to fit a variety of business models and sizes.
Unlike HSAs, HRAs are owned by the employer, and reimbursements are made tax-free. Employers can set contribution limits, eligible expense types, and rollover policies. HRAs are especially effective for companies that want to maintain control over healthcare budgets while still offering support to employees.
- Fully tax-deductible for the employer
- Tax-free reimbursements for employees
- Highly customizable
- Can supplement or replace traditional insurance
HRAs are a versatile and scalable tool that work well alongside other strategies like SIMRPs or HDHPs.
4. Conduct a Healthcare Plan Audit & Eliminate Wasteful Spending
Many employers are unknowingly overspending on healthcare due to legacy plan features, redundant coverage, or underutilized services. A comprehensive healthcare plan audit can identify areas of waste and help optimize your benefits package for both cost and value.
While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.
This includes reviewing:
- • Premium-to-claims ratios
- • Prescription drug benefit structures
- • Utilization of telehealth services
- • Network adequacy and provider performance
If you’re unsure whether your current plan is delivering the best return on investment, an audit could be the key to unlocking savings.
Key Benefits:
- Identifies cost-saving opportunities
- Eliminates unnecessary or duplicate coverage
- Improves plan performance and ROI
Working with an experienced benefits consultant or SIMRP provider like Fidelity Professional Relief Services can help you uncover hidden inefficiencies and develop a leaner, smarter strategy.
5. Encourage Preventive Care and Wellness Initiatives
Preventive care and wellness programs are long-term cost-control strategies that can significantly reduce healthcare spending over time. Encouraging healthy behaviors can lower claims by reducing chronic conditions and hospital visits.
While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.
Some IRS-compliant wellness initiatives include:
- Annual physicals and biometric screenings
- Tobacco cessation programs
- Mental health support and teletherapy
- Fitness reimbursement or discounts
Key Benefits:
- Improves employee health and productivity
- Reduces high-cost claims
- Supports a culture of wellness
- May qualify for tax incentives and premium reductions
These initiatives complement IRS-approved plans like SIMRP and HRA, enhancing their effectiveness while improving employee morale.
Why SIMRP Stands Out in 2025?
While each of the strategies above contributes to lower healthcare spending, SIMRP stands out as the most direct, flexible, and cost effective option. It gives employers control, cuts costs while still offering benefits, and offers a clear IRS-compliant pathway to improving the bottom line.
At Fidelity Professional Relief Services, we specialize in building custom SIMRP solutions that comply with IRS regulations while helping businesses save money and support their teams. With the right guidance, your business can join the growing number of employers choosing SIMRP over traditional insurance models.
Real-World Impact: How SIMRP Transforms Business Health Benefits
To understand the real power of a SIMRP, consider the case of a mid-sized company with 80 employees that switched from a traditional group health insurance plan to a SIMRP managed by Fidelity Professional Relief Services. Previously burdened with unpredictable premium increases and limited plan flexibility, the company sought a solution that balanced savings with employee satisfaction.
Within the first year of implementation, the company saw a 27% reduction in total healthcare spending. Payroll tax savings alone accounted for thousands in recovered funds, which were redirected into employee wellness incentives and operational improvements. Employees also reported higher satisfaction due to the ability to speak to a doctor in seconds through telemedicine.
The HR team appreciated the transparency and control offered by SIMRP, especially compared to navigating the complexities of insurance networks and rigid benefit structures. And because the plan was designed with full IRS compliance from the start, the company avoided unnecessary legal or financial risks.
This is just one example of how a well-designed SIMRP—backed by expert support—can turn healthcare from a cost center into a strategic advantage. As more businesses seek sustainable, scalable benefits solutions in 2025, SIMRP continues to rise as a smart, forward-thinking choice.
Final Thoughts
Reducing business healthcare costs in 2025 doesn’t mean reducing the quality of your employee benefits. By using IRS-compliant tools like SIMRP, HSA, HRA, and wellness programs, employers can balance cost savings with comprehensive employee support.
If you’re a business owner or HR leader ready to take control of healthcare expenses, contact Fidelity Professional Relief Services today. We’re here to help you build a more efficient and sustainable healthcare strategy.
SIMRP vs. Traditional Health Plans: Which Saves Employers More Money?
As benefits costs continue to rise, employers are actively searching for cost-effective alternatives to reduce employee benefits costs. Among the leading options is the Self-Insured Medical Reimbursement Plan (SIMRP), a lesser-known but powerful strategy for companies looking to control benefit costs while still offering valuable benefits coverage to their employees.
In this in-depth comparison, we’ll explore the cost-effectiveness, tax advantages, and flexibility of SIMRP vs. traditional employer-sponsored plans to help decision-makers choose the smarter option.
What Is a Self-Insured Medical Reimbursement Plan (SIMRP)?
A Self-Insured Medical Reimbursement Plan (SIMRP) is a type of Employee Self-Insured Wellness Plan where tax savings is created to pay for qualified benefit expenses, instead of paying high premiums to an insurance company. SIMRPs are structured under Section 105 of the Internal Revenue Code, allowing them to operate on a pre-tax basis and deliver significant payroll tax savings for both the employer and employee.
Unlike traditional health insurance, which relies on insurance carriers to manage risk and claims, SIMRP gives employers more control over the design and administration of the plan. It can work alongside existing health insurance or the tax savings created by the SIMRP can be used to purchase qualifying coverage.
What Are Traditional Health Plans?
Traditional group health insurance plans are the most common form of employee health benefits. Employers pay some or all of the fixed monthly premiums to a commercial insurer, which in turn pays for covered services based on the policy’s terms. These plans typically include comprehensive coverage, co-pays, deductibles, and provider networks.
While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.
What Benefits Are Included With Our SIMRP Program?
- 24/7 unlimited telemedicine doctor visits for any physical or mental health issue for your employee and their family.
- RX Valet with 37 commonly prescribed medications with zero co pay.
- Discounts on hundreds of other prescription drugs.
- Discounts on Dental and Vision coverage.
- The tax savings created by the SIMRP can be used to purchase a variety of supplemental insurance benefits and/or qualifying coverage if the employee does not have primary health insurance from another source.
SIMRP vs. Traditional Health Plans: Cost Comparison
Tax Benefits Of SIMRP
One of the biggest advantages of SIMRP is its favorable tax treatment. Employers avoid paying payroll taxes on reduced gross taxable wages, and employees receive reimbursements tax-free, increasing their take-home pay. Additionally, all employer costs are more than paid for by the tax savings created by the SIMRP are deductible as a business expense. This triple-tax advantage makes SIMRP one of the most cost-efficient benefit strategies available to employers today.
While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.
Flexibility And Customization
SIMRP offers employers greater control and flexibility than traditional benefits. We work with employers to utilize the tax savings created to give employees the benefits that will be most beneficial for their situation. Moreover, it integrates seamlessly with other health plans and can be used to supplement a high-deductible health insurance plan or function as a standalone benefit. In contrast, traditional health plans have rigid structures defined by the insurer, leaving little room for customization to suit unique workforce needs.
Compliance and Risk Management
SIMRP, when set up correctly, is fully compliant with IRS rules. Partnering with a provider like Fidelity Professional Relief Services ensures that the plan is properly documented, administered in accordance with IRS Section 105, and regularly updated to meet regulatory changes. Traditional plans, while generally compliant by default, do not offer the same strategic flexibility when it comes to cost management.
Ideal Use Cases For SIMRP
SIMRP is particularly advantageous for:
- Small to mid-sized businesses seeking better control overall costs.
- Organizations encouraging their workforce to be more proactive with their health.
- Businesses looking to offer competitive benefits without high premiums.
- Employers aiming to reduce payroll tax liability.
Larger companies may also benefit by using SIMRP as a supplemental benefit to traditional insurance, particularly to pay for some benefits they are not getting or replacing benefits the employees or employer are paying for out of pocket.
Employee Satisfaction And Retention
Despite being cost-effective, SIMRP doesn’t sacrifice employee satisfaction. With valuable benefits and not out of pocket costs, employees often feel more empowered and valued. Employers can position SIMRP as a premium benefit that promotes flexibility, wellness, and financial support—all of which contribute to higher retention and morale.
The Bottom Line: Which Plan Saves Employers More?
While traditional plans offer familiarity and full-service coverage, their high costs, limited flexibility, and annual rate hikes make them less attractive for cost-conscious businesses. SIMRP, on the other hand has no net costs, substantial payroll tax savings, workers comp insurance cost savings, and high employee satisfaction.
For employers focused on cost-efficiency, tax optimization, and strategic flexibility, SIMRP clearly emerges as the smarter, more sustainable choice.
Get Expert Help Setting Up SIMRP
At Fidelity Professional Relief Services, we specialize in helping businesses design, implement, and manage Self-Insured Medical Reimbursement Plans tailored to their workforce and financial goals. Whether you’re considering replacing your group health plan or supplementing existing benefits, our experts are here to guide you through every step.
Contact us today to learn how SIMRP can help your business save more while supporting your employees.
How Employers Can Legally Reduce Payroll Taxes with SIMRP
Reducing payroll taxes is a top priority for many businesses looking to optimize costs while staying compliant with IRS regulations. One highly effective yet often overlooked strategy is implementing a Self-Insured Medical Reimbursement Plan (SIMRP). This tax-advantaged plan allows employers to reimburse employees for medical expenses in a way that lowers payroll taxes while offering valuable tax-free benefits to employees.
In this guide, we’ll break down how a SIMRP can help your business save money, how it works, and what compliance requirements you must follow. If you’re looking for a legal, IRS-approved method to cut payroll costs, this article will walk you through everything you need to know.
What Is a Self-Insured Medical Reimbursement Plan (SIMRP)?
A Self-Insured Medical Reimbursement Plan (SIMRP) is an IRS-approved employer-funded health benefit plan that reimburses employees for qualified medical expenses. Unlike traditional health insurance, a SIMRP is self-funded, meaning the employer sets aside money to cover healthcare costs instead of paying premiums to an insurance provider.
Key Benefits of SIMRP for Employers
- Reduces Payroll Taxes – Wages set aside for SIMRP are not subject to payroll taxes (Social Security, Medicare, and unemployment taxes).
- Tax-Free Employee Benefits – Employees receive medical reimbursements tax-free, reducing their taxable income.
- Increases Employee Satisfaction – Helps attract and retain talent by offering a valuable healthcare benefit.
- Flexibility – Employers control the budget and reimbursement limits, making it cost-effective.
- IRS Compliance – A well-structured SIMRP meets Section 105 of the Internal Revenue Code, ensuring legal tax savings.
How a SIMRP Helps Employers Legally Reduce Payroll Taxes
By setting up a Self-Insured Medical Reimbursement Plan, employers can shift a portion of taxable wages into tax-free reimbursements, effectively lowering payroll tax liabilities. Here’s how it works:
Example of Payroll Tax Savings with SIMRP
| Without SIMRP | With SIMRP |
|---|---|
|
Employee Salary: $50,000 |
Employee Salary: $45,000 |
|
Employer Payroll Taxes (FICA, FUTA, SUTA): $3,825 |
Employer Payroll Taxes: $3,442 |
|
SIMRP Reimbursement: $5,000 |
SIMRP Reimbursement: $5,000 |
|
Total Cost to Employer: $53,825 |
Total Cost to Employer: $50,442 |
Steps to Set Up a SIMRP for Your Business
A Self-Insured Medical Reimbursement Plan (SIMRP) wellness program has a broad range of benefits, including:
Step 1: Create a Written SIMRP Plan Document
To comply with IRS Section 105, a SIMRP must have a formal written plan outlining:
- Eligibility criteria (full-time, part-time, or specific employee classes)
- Types of reimbursable medical expenses (aligned with IRS Publication 502)
- Reimbursement limits and any funding caps
- Claim submission and approval process
Step 2: Determine Reimbursement Limits & Budget
Employers can set reimbursement caps per employee, ensuring cost control. Some common reimbursement structures include:
○ Fixed annual allowance per employee (e.g., $3,000 per year)
- ○ Percentage-based reimbursement (e.g., 50% of out-of-pocket medical expenses)
Step 3: Implement a Claims Submission Process
Employees must submit proof of eligible medical expenses (such as receipts or invoices). Employers should establish a simple reimbursement process to ensure smooth administration.
Step 4: Maintain Proper Documentation for IRS Compliance
To legally claim payroll tax deductions, employers must:
○ Keep records of reimbursement claims & payments
○ Ensure expenses qualify under IRS rules
○ File necessary tax forms and maintain proper accounting
Step 5: Educate Employees About the SIMRP Benefit
For employees to maximize the benefit, they need to understand:
- ○ How to submit claims
- ○ Which medical expenses qualify
- ○ How the plan lowers their taxable income
Clear communication will improve employee participation and increase appreciation of the benefit.
IRS Compliance & Legal Considerations for SIMRP
For employees to maximize the benefit, they need to understand:
- ○ How to submit claims
- ○ Which medical expenses qualify
- ○ How the plan lowers their taxable income
Clear communication will improve employee participation and increase appreciation of the benefit.
IRS Compliance & Legal Considerations for SIMRP
To ensure a Self-Insured Medical Reimbursement Plan (SIMRP) is legally compliant, employers must follow:
- IRS Section 105 Requirements
- Equal Treatment of Employees
- HIPAA & ACA Compliance
- Record-Keeping & Tax Reporting
- The plan must be in writing and meet IRS guidelines.
- Benefits cannot discriminate in favor of highly compensated employees.
- Employers may need to comply with health privacy laws and the Affordable Care Act (ACA) if applicable.
- Employers must maintain detailed reimbursement records for IRS audits.
Consulting with a tax professional or benefits advisor ensures full compliance while maximizing savings.
Is a SIMRP Right for Your Business?
A Self-Insured Medical Reimbursement Plan is ideal for small and mid-sized businesses looking to:
✔ Reduce payroll taxes legally
✔ Offer employees a tax-free medical benefit
✔ Maintain cost control over healthcare expenses
✔ Stay compliant with IRS regulations
If you’re an employer looking for a legal tax-saving strategy, implementing a SIMRP is a smart financial move.
Start Saving on Payroll Taxes with SIMRP
A Self-Insured Medical Reimbursement Plan (SIMRP) is a powerful, IRS-compliant strategy that allows employers to reduce payroll taxes while providing valuable tax-free medical benefits to employees. By lowering taxable wages, companies can cut payroll costs without reducing employee compensation.
Key Takeaways:
✔ Employers save on payroll taxes (FICA, FUTA, SUTA) by reimbursing medical expenses.
✔ Employees benefit from tax-free reimbursements, increasing their take-home pay.
✔ SIMRP is 100% legal under IRS Section 105, as long as proper documentation is maintained.
✔ Setting up a SIMRP is simple, and businesses can control costs while offering a competitive benefit.
If you’re looking for a cost-effective way to manage payroll taxes and enhance employee benefits, implementing a Self-Insured Medical Reimbursement Plan is a proven solution. Consider speaking with a payroll or tax specialist to structure your SIMRP for maximum savings and compliance.
By taking action now, your business can start saving thousands in payroll taxes while improving employee satisfaction.
What is a Self-Insured Medical Reimbursement Plan (SIMRP) and How Does It Work?
When it comes to managing healthcare costs, businesses are constantly looking for flexible and cost-effective solutions. One such approach that has gained traction is the Self-Insured Medical Reimbursement Plan (SIMRP). But what exactly is a SIMRP, and how does it work?
This comprehensive guide explores the ins and outs of SIMRP, its benefits, implementation, and how it can help employers and employees manage healthcare expenses efficiently.
Understanding a Self-Insured Medical Reimbursement Plan (SIMRP)
A Self-Insured Medical Reimbursement Plan (SIMRP) is a voluntary wellness program that is paid for with employee tax savings created by tax codes in the Affordable Care Act. The wellness program is not health coverage, and primary medical insurance is required for the employee to qualify. If the employees do not have primary medical insurance, some of the employee tax savings can be used to purchase qualifying coverage. The SIMRP also results in reduced employer payroll tax costs, which can lower operating costs.
How Does SIMRP Differ from Traditional Health Insurance?
| Feature | Traditional Insurance | Self-Insured Medical Reimbursement Plan (SIMRP) |
|---|---|---|
|
Premiums |
Fixed monthly payments |
Paid for with employee payroll tax savings |
|
Flexibility |
Limited plan options |
Customizable supplemental benefits are possible |
|
Cost Control |
Higher due to fixed premiums |
Lowers employer payroll tax costs by reducing gross taxable wages. |
|
Compliance & Regulations |
Governed by ACA & state laws |
Is compliant with federal and state regulations. |
How Does SIMRP Work?
Key Benefits of a SIMRP for Employers & Employees
Types of Medical Expenses Covered Under SIMRP
A Self-Insured Medical Reimbursement Plan (SIMRP) wellness program has a broad range of benefits, including:
- Unlimited telemedicine doctor visits without co-pay for the employee and their immediate family
- 37 prescription medications at no cost
- Discounts on other prescription drugs
- Mental health issues including depression, anxiety, addiction, and more through telemedicine
- Discounts on dental and vision care
- Nutrition
- Much More
How to Implement a SIMRP in Your Business?
Step 1: Determine How Many Employees Qualify
We work with you to calculate how many of your employees will qualify for the SIMRP Program.
Step 2: Educate Qualified Employees
We work with you to educate your qualified employees about the benefits of the employee wellness program and other benefits.
Step 3: Ensure Compliance with IRS Guidelines
We keep the wellness program compliant with all federal and state laws.
Step 4: Implementation
We work with your payroll provider to implement the deductions and reimbursements on your employee’s paychecks
Step 5: Collect Savings and Benefits Payment
The employer collects the employee’s tax savings every time they process payroll. The employer will make a payment for the benefits in the following month, with the employee tax savings they collected.
Common Misconceptions About SIMRP
SIMRP is the same as an HRA or FSA.
Employees have to wait too long for reimbursement.
The SIMRP Is Not Compliant
Who Should Consider a SIMRP?
Ideal for:
May Not Be Suitable for:
- Small and mid-sized businesses looking to lower costs
- Companies with full time W2 Employees (30+ hours per week average)
- Employers that are trying to increase employee productivity and reduce turnover costs.
- Companies with independent contractor employees
- Companies that do not have any full-time employees
- Companies with employees don’t get paid consistently every pay period.
How Does SIMRP Impact Employees?
| Pros | Cons |
|---|---|
|
Unlimited telemedicine doctor visit for them and their family. |
Does not cover in person doctor visits. |
|
Tax-free Reimbursements. |
The changes to their paycheck may be confusing if not properly educated about the program. |
|
Increased Employee Net Pay. |
Reduced contribution to Social Security from lower taxable wages. |
Frequently Asked Questions (FAQs) About SIMRP
No, the SIMRP Program creates tax savings for employee wellness benefits, but it is not medical insurance.
Yes, there is a limit to the amount of employee deductions and reimbursements to stay compliant with federal and state laws.
No, the employees must average at least 30 hours per week or more and must be W2 employees.
No, as long as the plan follows IRS Section 105 guidelines, there should be no issues.
Is SIMRP Right for Your Business?
A Self-Insured Medical Reimbursement Plan (SIMRP) is a strategic option for businesses looking to lower operating costs by offering employees compliant voluntary wellness programs. Its flexibility, cost-saving potential, and tax advantages make it an attractive to almost any type of employer.
If you’re considering SIMRP for your company, ensure proper compliance, educate employees, and work with professionals to maximize its benefits.
Want to explore SIMRP options for your business? Contact our team today for expert guidance on implementation!
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