The definition, in plain English
What is SIMERP?
SIMERP is a Self-Insured Medical Expense Reimbursement Plan: an employer-sponsored plan that reimburses employees for real medical care on a tax-free basis. Because qualifying reimbursements are excluded from wages under the tax code, both the employer and the employees stop paying FICA payroll taxes on those dollars. The savings fund the care, so the program runs at no net cost.
01 · The source
The IRS named it first.
This is not a loophole someone invented last year. The IRS calls the category a SIMRP. We added the E, for Expense, to be more descriptive.
The underlying statutes, IRC Sections 105, 106, 125, and 213(d), have been in place for decades. What changed is that the structure once reserved for Fortune 500 benefits departments is now available to businesses with W‑2 employees.
The question
Where does the IRS name this plan type?
In Publication 15, the Employer’s Tax Guide, which the IRS revises every year. It puts medical care reimbursements paid under an employer’s self-insured medical reimbursement plan outside wages, and outside social security, Medicare, and FUTA tax. The exact sentence is quoted below.
“Generally, medical care reimbursements paid for an employee under an employer’s self-insured medical reimbursement plan aren’t wages and aren’t subject to social security, Medicare, and FUTA taxes, or federal income tax withholding.”
That sentence is the whole mechanism in the IRS’s own words: reimbursements for medical care under this plan type sit outside the wage base that FICA is calculated on.
02 · The boundaries
What SIMERP is not.
It is not insurance. It is service-based medical care. There is no carrier, no policy, and no premium. Your existing group health plan and broker relationship stay exactly where they are. SIMERP sits alongside them.
It is not a cash wellness gimmick. The IRS has warned about programs that pay employees cash whether or not any medical care happens. A compliant SIMERP is the opposite: every reimbursement is tied to actual, documented medical care delivered by licensed physicians.
The question
Is SIMERP insurance?
No. There is no carrier, no policy, and no premium. Your existing group health plan and broker relationship stay exactly where they are, and the SIMERP sits alongside them. It is also not a cash wellness gimmick: every reimbursement is tied to actual, documented medical care delivered by licensed physicians.
03 · The tests
What makes SIMERP compliant.
The question
What makes SIMERP compliant?
Four things, all documented. Reimbursements are tied to actual medical care as defined in IRC Section 213(d). Every interaction is documented with CPT and ICD codes. The benefit is valued by independent actuaries. And the plan runs on written documents: an adoption agreement and a summary plan description.
The four tests, in order
- Reimbursements are tied to actual medical care as defined in IRC Section 213(d), never paid irrespective of care.
- Every interaction is documented with CPT and ICD codes, creating an audit trail that the care occurred.
- The benefit is valued by independent professional actuaries.
- Plan documents, an adoption agreement, and a summary plan description are in place.
The dividing line the IRS actually applies comes from Treasury Regulation §1.105-2, and we explain it in plain English on the compliance page.
04 · The payoff
Why employers say yes.
Three reasons, in the order most owners rank them: the FICA savings are immediate, the program costs nothing on net because the savings fund it, and employees get real medical care with zero copays. The full math, including the employee take-home effect, lives on the savings page.
The question
Why do employers adopt SIMERP?
Three reasons, in the order most owners rank them: the FICA savings are immediate, averaging $640 per enrolled employee per year; the program costs nothing on net, because the savings fund it; and employees get real medical care with zero copays. Your exact figure comes from your own payroll.
- $640average recovery per enrolled employee, per year
- Zeronet cost to your business
- $0copays or deductibles for employees on the plan
See what SIMERP is worth to your company.
The Savings Assessment takes three minutes. You get an estimate on the spot, and a 20 minute Discovery Call if it looks like a fit. No cost, no obligation.