What Is a SIMRP (Self Insured Medical Reimbursement Program)?

A Self Insured Medical Reimbursement Program (SIMRP) is an employer-sponsored benefit plan that reimburses employees for qualified medical expenses as defined under IRC §213(d). Unlike traditional health insurance, a SIMRP does not involve an insurance carrier underwriting risk. Instead, the employer self-funds the reimbursement of specific preventive care expenses, and those reimbursements are excluded from the employee's gross income under IRC §105(b). For employers, a properly structured SIMRP generates average FICA tax savings of $1,119.96 per employee per year with no out-of-pocket expenses.

How a SIMRP Works Under IRC §105(b)

The legal foundation of a SIMRP rests on Internal Revenue Code Section 105(b), which excludes from gross income any amounts paid to an employee to reimburse medical care expenses as defined under §213(d). Section 106(a) further provides that employer contributions to an accident or health plan are not included in the employee's gross income. Together, these code sections create a mechanism where medical reimbursements flow through the plan tax-advantaged for both parties.

In practice, the employer establishes a SIMRP plan document that specifies the covered preventive care expenses. Employees enrolled in the program receive reimbursements for qualifying expenses — including prescription medications, telemedicine consultations, mental health services, and preventive screenings — without those reimbursements counting as taxable wages.

How a SIMRP Differs from HRAs, FSAs, and Traditional Insurance

While SIMRPs share some similarities with Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs), the structural differences are significant:

  • Unlike an FSA, there is no “use-it-or-lose-it” provision. The SIMRP operates as an ongoing reimbursement mechanism rather than an annual election with forfeiture risk.
  • Unlike an HRA, the SIMRP is specifically structured to generate employer FICA savings through its Section 125 cafeteria plan integration. Standard HRAs do not produce the same payroll tax reduction.
  • Unlike traditional group health insurance, the SIMRP does not involve underwriting, premiums, or carrier risk. The employer is self-insuring specific preventive care benefits, not purchasing a health insurance policy.

The Section 125 and WIMPER Mechanism

The SIMRP achieves its tax efficiency through integration with a Section 125 cafeteria plan. Here is how the payroll flow works: each enrolled employee takes a $1,220 pre-tax deduction per month through the Section 125 plan. This deduction reduces the employee's taxable wages, which in turn lowers both the employer's and employee's FICA obligation by 7.65% of the deducted amount.

The employee then receives a WIMPER (Wellness Incentive Medical Plan with Employer Reimbursement) reimbursement of the same amount post-tax. Because the reimbursement qualifies under IRC §105(b), it is excluded from gross income. The net effect: the employee's take-home pay remains the same, while the employer saves $93.33 per month ($1,220 × 7.65%) per employee.

Why SIMRPs Save Employers Money

The math is straightforward. For each enrolled employee, the $1,220 monthly pre-tax deduction reduces the employer's FICA-taxable payroll by $14,640 per year. At the employer FICA rate of 7.65% (6.2% Social Security + 1.45% Medicare), that translates to:

  • $93.33 per month in employer FICA savings per employee
  • $1,119.96 per year in employer FICA savings per employee
  • $55,998 per year for a company with 50 enrolled employees

These are real payroll tax savings that appear on each pay cycle — not tax credits that require annual filing. And the employer pays nothing out of pocket to implement or maintain the program.

Benefits Included in the PCBP's SIMRP

Through the Preventive Care Benefits Program, enrolled employees gain access to a comprehensive suite of benefits funded entirely through the pre-tax/post-tax payroll restructuring:

  • Over 1,000 generic and brand-name prescription medications
  • 24/7 telemedicine with unlimited consultations
  • $150,000 group term life insurance plus $150,000 AD&D coverage
  • Mental health and behavioral health support services
  • Hospital bill reduction and medical bill negotiation
  • Preventive lab work and diagnostic screenings

Compliance and Legal Authority

The SIMRP structure within the Preventive Care Benefits Program is supported by multiple provisions of federal law. IRC §105(b) authorizes the exclusion of medical reimbursements from income. IRC §106(a) excludes employer contributions to health plans. IRC §125 permits pre-tax salary reductions for qualified benefits. IRC §213(d) defines the eligible medical expenses. The Affordable Care Act's wellness incentive provision under 42 U.S.C. §300gg-4(j)(3)(C) permits wellness program incentives. IRS Chief Counsel Advice 202323006 further affirms the treatment of similar plan structures.

Each plan is administered by IronGate Business Advisors with full plan documentation, compliance oversight, and annual nondiscrimination testing to ensure ongoing adherence to federal requirements.

See How a SIMRP Reduces Your Payroll Taxes

Schedule a complimentary discovery call to learn exactly how much your business can save with a Self Insured Medical Reimbursement Program.

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