You were handed a proposal that says SIMERP. Ten questions to ask before you sign.
Ask ten questions before you sign anything with SIMERP on it. They take one meeting and need no tax background, and the answers tell you whether you’re holding the indemnity plan, which pays fixed cash whether or not there was a medical expense, or the SIMERP methodology, which reimburses real medical care at the value an independent actuary set. The first three decide it.
1. Does the plan pay a fixed amount of cash for an event or an activity, whether or not there was a medical expense?
This is the question the IRS memos answer. Treasury Regulation §1.105-2 says the tax break for medical reimbursements “does not apply to amounts which the taxpayer would be entitled to receive irrespective of whether or not he incurs expenses for medical care.” Each memo is about a fixed payment that was paid even though the employee had no medical expense to reimburse.
2. Where does the monthly number come from?
In the plans the IRS has written about, the number is a fixed amount that has nothing to do with any medical expense. In the SIMERP methodology it is the value of the medical care, set by someone outside the company that sells the plan.
3. Is there an insurance policy inside the plan?
The 2017 IRS memo (CCA 201703013) defined a fixed indemnity plan as one that “pays covered individuals a specified amount of cash for the occurrence of certain health-related events” where “the amount paid is not related to the amount of any medical expense incurred.” If a policy like that is paying the employees, the memo is describing your proposal.
4. What does the plan document say about documentation, and what happens to someone who doesn’t meet it?
A written plan says how care is documented and what happens when it isn’t. A plan that pays cash on an activity has nothing to document, so its paperwork is usually silent here.
5. Who delivers the medical care, and how is each visit documented?
Section 213(d) defines medical care as amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease.” A questionnaire isn’t that. A video isn’t that. A visit with a physician is.
6. Is there a written plan document, and who administers the plan?
Treasury Regulation §1.105-11 defines this category as “a separate written plan for the benefit of employees.” No document, no plan.
7. Does the plan change my group health plan, my carrier, my broker, or my payroll provider?
The SIMERP methodology sits alongside what you have. If a proposal requires you to move your group plan, drop your broker, or switch payroll, it is selling you something else, and you should know what.
8. Does any employee’s take-home pay go down?
The mechanism is a pre-tax election under Section 125, so taxable wages go down while the reimbursement comes back. Done right, take-home pay doesn’t fall.
9. How does the plan handle nondiscrimination under Section 105(h)?
Section 105(h) says a self-insured plan must not favor highly compensated employees in eligibility or benefits. A plan offered only to the owners, or on better terms to the top earners, fails it.
10. What happens if the IRS asks?
The IRS doesn’t approve or certify plans like this one, so “IRS-approved” on a proposal is a red flag, not a credential. What exists is the statute, the regulation, the memos, and your own records.
What do I do with the answers?
If the proposal reimburses real care and you’re happy with whoever sent it, good. This page exists so nobody signs the indemnity plan by accident. If you’d like a second set of eyes, bring the proposal to a Discovery Call and we’ll go through these ten questions against it with you, in plain English, at no cost.
The two plans, named and separated in the regulation’s own words, are on the two plans sold under the SIMERP name, and the terms in the proposal are defined in the glossary.
References
- 26 CFR §1.105-2 and §1.105-11, Legal Information Institute, Cornell Law School, checked September 11, 2026. https://www.law.cornell.edu/cfr/text/26/1.105-2, https://www.law.cornell.edu/cfr/text/26/1.105-11
- 26 U.S.C. §105(h) and §213(d), Legal Information Institute, Cornell Law School, checked September 11, 2026. https://www.law.cornell.edu/uscode/text/26/105, https://www.law.cornell.edu/uscode/text/26/213
- IRS Office of Chief Counsel, CCA 201703013, dated December 12, 2016. https://www.irs.gov/pub/irs-wd/201703013.pdf
Questions this page answers
How can I tell which plan a proposal with SIMERP on it is?
Ask three questions. Is there an insurance policy inside the plan, or a fixed cash payment for an event or an activity? Who delivers the medical care, and does every interaction carry CPT and ICD codes? Where does the monthly number come from: an independent actuary's valuation of the medical care, or a fixed amount that has nothing to do with any medical expense? The indemnity plan has no good answer to any of the three.
Does the IRS approve SIMERP plans?
No. The IRS doesn't approve or certify plans like this one, so the phrase IRS-approved on a proposal is a red flag rather than a credential. What exists is the statute (Sections 105, 106, 125 and 213(d)), the regulation (Treasury Regulation 1.105-2), a series of Chief Counsel memos that can't be cited as precedent, and the plan's own records.
Disclaimer: This article is provided for educational purposes only and does not constitute legal or tax advice. SIMERP LLC is not a law firm or accounting firm. The information presented here reflects our understanding of relevant tax codes and regulations based on research and experience helping businesses implement SIMERP programs. Every business situation is unique, and tax laws can be complex. You should consult with your own qualified tax and legal advisors to determine if SIMERP is appropriate for your specific circumstances.
Bring the proposal to a Discovery Call.
Book through the Savings Assessment, then bring the proposal you were sent. We'll go through the ten questions against it with you, in plain English, at no cost and with no obligation. We won't grade another company's plan for you; we'll show you what to ask.