Understanding Self-Insured Medical Expense Reimbursement Program (SIMERP)
In today's workplace, employers are looking for ways to support their employees' health and well-being. One such innovative solution is the Self-Insured Medical Expense Reimbursement Program, or SIMERP. This program is becoming popular because it combines cost savings with health benefits for employees.
What is SIMERP?
SIMERP is a wellness program sponsored by employers and supported by the U.S. government, thanks to the Affordable Care Act (ACA). It enables businesses to offer additional health coverage to their employees while also reducing payroll taxes. By using pre-tax payroll deductions, employers can fund these benefits, which helps create healthier employees and a more successful business.
How Does SIMERP Work?
SIMERP operates as a self-insured reimbursement plan that adheres to federal guidelines, including the ACA, ERISA, and HIPAA. It must be paired with an existing ACA-approved medical plan. The ideal candidates for SIMERP are businesses with at least 10–25 full-time employees, but it can be scaled for larger companies.
Setting Up SIMERP
The setup process is simple:
- Employers provide employee and payroll data.
- A mock payroll run is conducted to show the financial impact.
- Enrollment typically happens every month and includes new hires right away.
Employees must participate in activities like health assessments to maintain tax benefits and avoid taxes on deductions.
Financial Benefits
SIMERP uses pre-tax deductions to lower gross payroll, leading to savings in FICA taxes for both employers and employees. These savings, usually between $500 and $900 per employee per year, fund a "benefit reserve," covering insurance without health underwriting.
Employee Benefits
Employees have access to various health services through a dashboard, including:
- Virtual urgent care
- Mental health support
- Chronic condition management
- Telehealth services
Supplemental policies may include:
- Short-term disability
- Critical illness coverage
- Hospital indemnity
- Accident coverage
- Whole life insurance
These benefits do not reduce take-home pay, as the tax savings offset the deductions.
Advantages for Employers
Employers can see a reduction in workers' compensation premiums by 20–30%, especially in states like California, thanks to a lower gross wage base. Employees gain access to customizable health options, such as dental and stress management services.
Real-World Examples
- A retail company in the Midwest saved $25,560 in FICA taxes and reduced compensation premiums by 20%.
- A manufacturer in the Southeast saved $40,000 in costs with minimal effort.
- An accounting firm on the West Coast improved employee satisfaction by 40%, attracting talented staff without changing existing plans.
Potential Savings with SIMERP
Implementing SIMERP can result in substantial financial benefits for businesses, regardless of their size. Here's a breakdown of the potential savings based on the number of employees:
For a small business with 10 employees, the gross payroll reduction can reach $145,000, which translates to an annual payroll tax relief of $6,300. Additionally, these businesses can offer $12,000 in additional care benefits to their employees.
A medium-sized business with 100 employees could see a gross payroll reduction of $1,450,000. This reduction results in $63,000 in annual payroll tax relief, allowing the company to provide $120,000 in extra care benefits.
Large businesses with 1,000 employees stand to benefit from a gross payroll reduction of $14,500,000. This significant reduction brings about $630,000 in annual payroll tax relief and enables the provision of $1,200,000 in additional care benefits.
These figures clearly illustrate the impressive impact SIMERP can have on businesses of varying sizes, contributing to both financial savings and enhanced employee benefits.
Conclusion
SIMERP offers a balanced approach to employee wellness by combining self-insurance and preventative health tools. While some may have concerns about its tax structure, IRS memos confirm its legitimacy. Overall, SIMERP is a forward-thinking strategy for businesses seeking to enhance employee loyalty and well-being while effectively managing costs.