SIMRP Health Strategy Explained
A detailed guide to the Self-Insured Medical Reimbursement Plan and how it reduces taxes for small businesses.
What is SIMRP?
A Self-Insured Medical Reimbursement Plan (SIMRP) is an IRS-recognized employer benefit strategy that allows a business to reimburse employees — including owner-employees — for qualified medical expenses using pre-tax business dollars.
The reimbursements are deductible as a business expense, exempt from payroll taxes (FICA) for both employer and employee, and tax-free income to the employee. This triple tax benefit makes SIMRP one of the most powerful tax reduction strategies available to small businesses.
SIMRP Implementation Requirements
To implement a SIMRP correctly, the business must: Have a formal written plan document, apply the plan consistently to all eligible employees, reimburse only IRS-qualified medical expenses, maintain proper documentation of all reimbursements, and comply with applicable nondiscrimination rules.
SIMRP is most commonly implemented in S-Corporations and C-Corporations with W-2 employees. Sole proprietors without employees generally cannot benefit from SIMRP.