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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?

Employer Sets Up The Program

The qualified employees have a pretax deduction and offsetting untaxed reimbursement on the employee’s paycheck to create the payroll tax savings to pay for the qualified benefits.
Employees Tax Savings Pays For Benefits

The cost of the wellness program and benefits are paid for by the employee with the tax savings created by the SIMRP.
Employer Processes Benefits Payments

The employer collects the funds from the employees for the cost of the benefits through a post-tax deduction on the employee's paycheck.
Savings Achieved

Every time the employer processes a payroll, the reduced employer tax savings is realized.

Key Benefits of a SIMRP for Employers & Employees

Cost Savings for Employers

The SIMRP Program reduces the employees' gross taxable wages without lowering their net take-home pay. Reducing employees' gross taxable wages also reduced the employer payroll tax costs and workers' comp insurance costs.
Flexibility in Plan Design

Employers can tailor SIMRP benefits to suit their workforce, choosing what extra benefits can be paid to the employee with the tax savings created by the SIMRP Program.
Tax Advantages

Reimbursements are tax-free for employees. Employers lower their employer payroll tax costs.
Improved Employee Satisfaction

The employee wellness program and benefits are very useful and valuable to your employees. This can increase employee productivity and reduce employee turnover costs.

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.

While similar, SIMRP differs in structure and flexibility. Unlike an HRA, SIMRP is entirely funded by payroll tax savings.

Employees have to wait too long for reimbursement.

Employees are simultaneously reimbursed for expenses at the same time that are charged for the benefits payments.

The SIMRP Is Not Compliant

The SIMRP Program tax codes are compliant with all federal and state laws as long as they are paying for qualified benefits with qualified employees.

Who Should Consider a SIMRP?

Ideal for:

May Not Be Suitable for:

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

Is a SIMRP the same as traditional medical insurance?

No, the SIMRP Program creates tax savings for employee wellness benefits, but it is not medical insurance.

Are there contribution limits for SIMRP?

Yes, there is a limit to the amount of employee deductions and reimbursements to stay compliant with federal and state laws.

Can part-time employees participate in SIMRP?

No, the employees must average at least 30 hours per week or more and must be W2 employees.

Is there a risk of IRS penalties with SIMRP?

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!

We have over 20+ years of experience

With our experience and commitment to quality, we can help you achieve your business goals and overcome any challenges you may face along the way.

Contact Info & Business Hours:

Phone: +1-657-373-3777
Email: info@fprscorp.com
Weekdays: Monday to Friday
Hours: 8:00am to 5:00pm PST

What is a Self-Insured Medical Reimbursement Plan (SIMRP) and How Does It Work?

Understanding a Self-Insured Medical Reimbursement Plan (SIMRP)

How Does SIMRP Differ from Traditional Health Insurance?

How Does SIMRP Work?

Employer Sets Up The Program

Employees Tax Savings Pays For Benefits

Employer Processes Benefits Payments

Savings Achieved