The term "SIMERP" (Self-Insured Medical Expense Reimbursement Program) is an industry acronym used to describe certain employer-sponsored benefit structures. It is not a specific federally recognized program, nor does the term itself indicate whether a particular design is compliant.

Because multiple vendors use the term differently, understanding how a program is structured is often more important than the label attached to it. To review the bullet points of the SIMERP we recommend due to strict regulatory compliance see the SIMERP Summary page.

No, SIMERPs are not all the same, and the benefits industry marketplace is heavily divided between legally structured programs and highly aggressive tax strategies.

The critical difference lies in how the plan pays out money to employees. The IRS does not object to the concept of a self-insured medical reimbursement plan itself, which is legal under IRC Section 105(b). Instead, the IRS objects to how certain promoters structure the plan to manufacture artificial tax deductions.

The Two Major Types of SIMERPs

Because "SIMERP" is an industry marketing term and not a rigid federal standard, vendors design them differently:

• Service-Based SIMERPs (Compliant Design): These plans use employee pre-tax salary deductions to directly fund legitimate, qualified medical care or preventive health services (such as telemedicine, mental health counseling, or annual physicals) under IRC Section 213(d). The tax exclusion is allowed because the money is strictly spent on actual medical care.

• Indemnity / Cash-Back SIMERPs (Non-Compliant Schemes): These plans are designed primarily to maximize payroll tax avoidance. Employees make a large pre-tax contribution, but the plan automatically pays back a large "cash reward" or "fixed indemnity payment" every month just for doing basic wellness activities (like reading a pamphlet or completing a survey). 

The term "SIMERP" is an industry label, not a detailed description of how a program is structured. Programs marketed under that label can differ significantly in how they are designed, funded, administered, and implemented. For that reason, conclusions drawn about one arrangement should not automatically be applied to every arrangement using the same label.

Many employers have already researched programs that were described as SIMERPs. The challenge is that the term itself does not describe how a particular program is designed, administered, or funded.

Different structures can produce very different compliance, administrative, operational, and workforce outcomes. Before any recommendation is made, we believe it is important to understand your organization's goals, workforce characteristics, and existing benefits so any evaluation is based on your actual circumstances rather than assumptions.

Absolutely. Independent review is encouraged.

Employers are welcome to involve their CPA, attorney, consultant, benefits advisor, or other professional representatives at any stage of the evaluation process. We believe important decisions benefit from informed review and open discussion.

Yes.

If a strategy is ultimately determined to be appropriate for further consideration, employers may review relevant documentation with legal counsel and other professional advisors before making any decision. We welcome questions and believe transparency is an important part of the evaluation process.

No.

Employer Strategy Group does not begin with a predetermined recommendation. Every employer has different workforce demographics, benefit structures, operational considerations, financial objectives, and organizational priorities.

In some cases a particular strategy may be appropriate. In other cases, no recommendation may be made at all.

That is a perfectly acceptable outcome.

The purpose of the evaluation process is not to force a recommendation. It is to determine whether a particular strategy aligns with the employer's objectives, workforce, and operational environment.

If the evaluation indicates any recommended strategy is not a good fit, no recommendation is made and the employer can move forward with greater confidence in their decision.

Every evaluation begins with understanding the employer's unique circumstances. Areas commonly reviewed include:

• Workforce demographics
• Existing benefits and coverage
• Cost structure and funding methods
• Administrative and operational considerations
• Organizational objectives and priorities

The purpose of this review is to determine whether further discussion is warranted before any recommendation is considered.