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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.
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