Rising healthcare costs and increasing compliance requirements are forcing HR and benefits leaders to rethink their strategies. Many organizations still turn to fixed indemnity insurance as a way to offer wellness programs and achieve some payroll tax savings. While these policies have a place, they are limited-benefit products, not ACA-compliant coverage, and can introduce unnecessary risk if relied upon too heavily.
There is a better approach. A Self-Insured Medical Expense Reimbursement Plan (SIMERP) provides the same tax advantages that make indemnity plans appealing, while offering far greater flexibility and full compliance with IRS and ACA guidelines.
What Is a SIMERP
A SIMERP is an employer-funded plan structured under IRS Section 105. Instead of paying premiums for a fixed-payout insurance policy, employers set aside funds to reimburse employees tax-free for approved health and wellness services.
This design allows employers to control costs, customize their benefit offerings, and meet compliance requirements, all while creating measurable payroll tax savings.
How a SIMERP Works
- Funded Through Payroll Tax Savings
A SIMERP is structured so that the tax savings it generates often offset its entire cost. This makes it a low- or no-net-expense option for employers looking to expand wellness benefits. - Wellness Services for Employees
Employees gain access to urgent care visits, primary care checkups, mental health support, weight management programs, and select prescriptions through curated provider networks, increasing access and affordability. - Tax-Free Reimbursements
Reimbursements for approved services are not subject to payroll taxes. This tax-free status is the key to generating savings and funding the program, while allowing employees to receive meaningful benefits without additional taxable income. - Savings for Everyone
Employers save through reduced FICA payroll taxes, and employees enjoy cost-free access to services that support health and well-being. The result is a more competitive benefits package with minimal financial impact on the organization.
Why SIMERPs Are Different
Fixed indemnity insurance policies are simple and inexpensive but limited in scope and flexibility. A SIMERP provides a compliant framework for offering real value to employees while giving employers control over spending. It moves benefits from a one-size-fits-all model to a strategy tailored to workforce needs.
For HR and benefits professionals, this creates a powerful opportunity: deliver more meaningful coverage, maintain regulatory confidence, and turn tax savings into a sustainable investment in employee wellness.
The Takeaway
SIMERPs are already helping employers reduce payroll tax liability, expand access to preventive care, and take control of rising healthcare costs. Yet many decision-makers remain unaware of how these plans work.
Exploring options like SIMERPs is more than a compliance move; it’s a way to create lasting value for employees and strengthen organizational resilience.
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