Financing the Program – Monthly Paycheck Comparison
Tax Savings pay for the program, saving your organization thousands of dollars in unmatched FICA, and often increase your employee's take home pay in the process! Below is an example of how this program works for an employee with a Gross Monthly Income of $3,288.46:
| Gross Income (Monthly) |
$3,288.46 |
| Pre‑Taxed Benefits |
| Major Medical |
$(500.00) |
| Taxable Income |
$2,788.46 |
| Taxes |
| Federal Withholding |
$(334.62) |
| Social Security |
$(172.88) |
| Medicare |
$(40.43) |
| State Withholding |
$139.42 |
| Total Taxes |
$(687.36) |
| Final Net Pay |
$2,101.10 |
| Gross Income (Monthly) |
$3,288.46 |
| Pre‑Taxed Benefits |
|
Major Medical
|
$(500.00) |
|
SIMRP Premium
NOTE
|
$(1,173.00) |
|
Taxable Income
NOTE
|
$1,615.46 |
| Taxes |
| Federal Withholding |
$(193.86) |
| Social Security |
$(100.16) |
| Medicare |
$(23.42) |
| State Withholding |
$80.77 |
| Total Taxes |
$(398.21) |
| Net Pay Sub‑Total |
$1,217.25 |
|
SIMRP Reimbursement
NOTE
|
$1,173.00 |
| Administrative Fee |
$(89.00) |
| Final Net Pay |
$2,301.25 |
|
Monthly Pay Increase
NOTE
|
$200.15 |
Employees participating in the program experience a net annual increase of $2,401.80 in take‑home pay. By pre‑taxing the actuarial value of the benefit, taxable income is reduced, which lowers the amount of required taxes. IRS guidelines mandate that a portion of these tax savings be directed toward approved benefits, and those same savings fully cover the program’s cost while still increasing take‑home pay. The total program cost is $129.00 per employee per month, with $89 covered by the employee and $40 by the employer.
How It Works — For Employers
- ✔ We ensure compliance by creating three employer documents: Section 125 Plan Document, Preventative Care Management Plan Document, and SIMRP Plan Document.
- ✔ We handle implementation and ongoing enrollment with no added staff burden.
- ✔ Employers offer employees a wellness plan with $0 copays for virtual doctors, therapists, and more.
- ✔ We can customize SIMRP to include Direct Primary Care and offset costs through tax savings.
- ✔ Pre‑taxing the program saves employers 7.65% in FICA taxes per dollar deducted (or less for Medicare‑only groups).
Employer Tax Savings Per Employee Per Month (PEPM)
| Tax Status |
Tax % |
Gross Monthly Employer Tax Savings
($1,173 × Tax %) |
Employee SIMRP Cost |
Employer SIMRP Cost |
Net Monthly Employer Savings |
Net Annual Employer Savings |
| FICA Taxed Employees |
7.65% |
$89.00 |
$89.00 |
$40.00 |
$49.00 |
$588.00 |
| Medicare Only Taxed Employees |
1.45% |
$17.01 |
$114.00 |
$15.00 |
$2.01 |
$24.00 |
To calculate annual savings: multiply the “Net Annual Employer Savings” by the number of eligible employees. Example: 4,000 FICA‑taxed employees → $588 × 4,000 = $2,352,000 annual savings.
How It Works — For Employees
The SIMRP plan expands access to healthcare for eligible employees and their households while increasing take‑home pay.
- ✔ Employees may participate if they meet eligibility requirements, including having health insurance.
- ✔ The SIMRP plan has an annual value of $14,076 per HHS. $1,173 is deducted pre‑tax each month.
- ✔ Because SIMRP is 213(d) compliant, the IRS allows the $1,173 to be reimbursed in the same paycheck.
- ✔ Employees typically see $1,000–$2,500 in net annual tax savings.
- ✔ Employees must use the program at least once per year to qualify for tax savings. (Enrollment qualifies as employees "using" the program)
SIMRP Facts
The Self‑Insured Medical Reimbursement Plan (SIMRP) was enacted in 2010 under the Affordable Care Act and is compliant with IRC 213(d), 106(a), 105(b), 1.105‑11(i), 104(a)(3), ERISA, HIPAA, and ADA.
- ✔ When paired with health insurance, SIMRP forms an integrated “105 Plan.”
- ✔ Employees can pay for health and wellness plans pre‑tax under IRS Section 106(a).
- ✔ Pre‑taxing reduces taxable income and lowers employer FICA obligations.
IRS Code Sections Applicable to SIMRP
The Self‑Insured Medical Reimbursement Plan (SIMRP) program is built primarily on Internal Revenue Code Sections 105, 106, 125, and 213(D), but several other IRS provisions affect how they are structured, funded, and taxed for both the Employer and the Employee.
| IRS Code |
Topic |
Key Provision |
Relevance to SIMRP |
| 26 U.S. Code 105 |
Accident & Wellness Plans |
105(b) excludes medical reimbursements from income; 105(h) sets nondiscrimination rules. |
Primary authority for tax‑free reimbursements. |
| 26 U.S. Code 106 |
Employer Contributions |
Employer health plan contributions are not taxable income. |
Allows tax‑deductible employer SIMRP funding. |
| 26 U.S. Code 213(d) |
Medical Care Definition |
Defines qualified medical expenses. |
Determines reimbursable expenses. |
| 26 U.S. Code 125 |
Cafeteria Plans |
Allows employees to choose tax‑free benefits. |
SIMRP can be offered under Section 125. |
| 26 U.S. Code 162 |
Business Expenses |
Health benefits are deductible business expenses. |
Employer SIMRP contributions are deductible. |
| 26 U.S. Code 414(t) |
SIMRP Definition |
Provides official IRS definition. |
Confirms tax status. |
| 1.105‑11(k)(1) |
Cafeteria Plan Interaction |
Reimbursements must meet 105(h) rules. |
Ensures nondiscrimination compliance. |
| 1.105‑11(k)(2) |
Benefit Subject to Reimbursement |
Defines reimbursable benefit categories. |
Requires clear SIMRP benefit definitions. |
| 1.105‑11(k)(3) |
Nondiscrimination Testing |
Testing applies to each benefit category. |
Ensures fairness across employee groups. |
| 1.105‑11(k)(4) |
Integration with Other Plans |
Integrated plans are tested as one. |
Applies when SIMRP pairs with DPC or wellness. |
| ERISA |
Federal Oversight |
Provides uniform regulation of self‑insured plans. |
SIMRP operates under federal rules. |
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