For CPAs and tax professionals
Your client asked about SIMERP. Here are the answers you need.
You are paid to be skeptical. This page respects that.
01 · The instrument
What your client is looking at.
A self-insured medical expense reimbursement plan. Employees make a pre-tax election under IRC Section 125, the plan reimburses actual medical care as defined in Section 213(d), and those reimbursements are excluded from wages under Sections 105 and 106. IRS Publication 15 states the exclusion plainly, and we quote it in full on the definition page.
The statutes involved: IRC Sections 105, 106, 125, 213(d), and 3121, plus Treasury Regulation §1.105-2. Four of the five have been law since 1954, and Section 125 since 1978.
The question
Which tax code sections govern SIMERP?
Five sections of the Internal Revenue Code and one Treasury Regulation: IRC 105, 106, 125, 213(d), and 3121, plus Treasury Regulation §1.105-2. IRS Publication 15 names the plan type directly. Four of the five have been law since 1954, and Section 125 since 1978.
Nothing here asks for faith. The statute itself is the highest authority, and this page is built to be checked against it.
02 · The test
The question that decides it.
The IRS has warned about wellness arrangements that pay employees cash irrespective of whether medical care occurred. That is the right thing to check, and it is the exact line Treasury Regulation §1.105-2 draws. A compliant design reimburses only actual medical care, documents every interaction with CPT and ICD codes, and can prove it in an audit.
The question
What should a CPA check first?
The irrespective test. Treasury Regulation §1.105-2 excludes amounts paid irrespective of whether medical care occurs, which is exactly what IRS warnings about cash wellness schemes target. A compliant design reimburses only actual medical care, documents every interaction with CPT and ICD codes, and can prove both in an audit.
03 · Due diligence
What to request before your client signs.
We provide the full statutory and regulatory framework and welcome independent legal review. The statute itself is the highest authority, and we would rather you read it than take our word.
Some CPAs stop at due diligence. Others bring SIMERP to the rest of their client base and earn recurring referral revenue for it. If that interests you, the advisors page explains how that works.
The question
What should a CPA request for due diligence?
Two things. The plan documents your client would receive, from the written plan and adoption agreement through the summary plan description and the ERISA claims procedures. And the employee take-home model for your client’s actual payroll, produced in their Recovery Ledger and built from real wage data.
Request these two
- The plan documents your client would receive: written plan, adoption agreement, summary plan description, ERISA claims procedures
- The employee take-home model for your client's actual payroll, produced in their Recovery Ledger
Every item arrives before signature, not after. Judge the program against your client’s real numbers, with the documents on the table.
Judge it against real numbers.
Start your client on the Savings Assessment, then evaluate the program with their actual payroll figures on the table. No cost, no obligation.