If you are evaluating a wellness program that claims to cost nothing and add money to your P&L, you have probably run into the acronym SIMRP and wondered whether it is a real thing or something invented for a pitch deck.
It is real. A SIMRP, or self-insured medical reimbursement plan, is an employer-sponsored plan that reimburses employees for substantiated medical expenses, governed by Treasury Regulation Section 1.105-11 under Internal Revenue Code Section 105. The regulation dates to 1980. You have almost certainly never heard the term, and you have almost certainly used its descendants, because HRAs are built on the same foundation. This page explains what a SIMRP is, how it works, how it differs from the HRA and FSA you already know, and why it is the engine inside a wellness program that pays for itself.
The plain-English definition
Strip the jargon and a SIMRP is three ideas stapled together.
Self-insured: the employer sponsors the plan directly rather than buying an insurance policy. There is no carrier in the middle and no premium.
Medical reimbursement: the plan pays employees back for qualified medical expenses, as defined by IRC Section 213(d). That definition is broad by design. It covers amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. Prevention is in the statute, not an interpretation of it.
Plan: it is a formal, documented arrangement. Plan documents, a substantiation process, payroll integration, records that can be produced under audit. Not a policy of handing out cash and calling it wellness.
Under Sections 105 and 106 of the Code, reimbursements from a properly structured SIMRP for substantiated 213(d) expenses are excluded from the employee’s income. That exclusion is what makes the whole mechanism work.
How a SIMRP works inside a wellness program
On its own, a SIMRP is just a reimbursement chassis. It becomes interesting when it is paired with two other pieces.
First, a Section 125 cafeteria plan. Employees make pre-tax contributions toward qualified preventive care. Because those contributions come out before tax, taxable wages drop, and FICA drops with them, for the employee and for the employer’s matching share.
Second, a Preventive Care Management Program (PCMP), which supplies the actual care: the preventive services, screenings, and behavior-change support that qualify as 213(d) medical care. In the program Alively offers, that side of the house is run by our compliance partner, with a decade of experience doing this at scale. Alively’s job is the engagement: one small daily action per person, wearable data onboard, built to reach the frozen 80 percent of employees who never touch traditional wellness.
The SIMRP sits between them, reimbursing employees for those substantiated preventive expenses through payroll. The result of the full stack: the employer’s FICA match is no longer owed on the employee’s pre-tax election ($1,355 per month in the current illustration), which comes to $1,243.89 per year at 7.65%. Less the $36 per month platform contribution, the single-employee illustration nets $811.89 per year, and the planning figure is more than $750 per enrolled employee per year, modeled against the employer’s actual census, at $0 capital outlay. Employees come out ahead on take-home pay, about $108 more per month in the $39,000 worked example, plus the benefit itself. The full math lives in the worked example, and the skeptic’s version of the story is here.
SIMRP vs. HRA vs. FSA
The confusion is understandable because all three reimburse medical expenses. The differences are about who funds them and what rules they run under.
An FSA is funded by the employee through salary reduction, capped annually by the IRS, and famously use-it-or-lose-it. An HRA is funded by the employer, and it is actually a specific type of self-insured medical reimbursement plan, one that Congress and the IRS have wrapped in additional rules over the years. The SIMRP is the older, broader category both of those grew out of: an employer-sponsored Section 105 plan that reimburses substantiated medical expenses.
So when a reviewer says “I have never heard of a SIMRP,” the accurate answer is that they have been working with its offspring for their entire career. The category is not novel. The application to prevention and wellness is what is newer.
Is a SIMRP legitimate? What the IRS actually scrutinizes
This is the right question, and it deserves a direct answer.
The IRS has challenged a wave of arrangements marketed as wellness plans, most notably in Rev. Rul. 2002-3, Rev. Rul. 2002-80, and CCA 202323006. Read those authorities closely and the pattern is consistent: they target programs that pay employees flat amounts without substantiated 213(d) medical care, that route wages in a circle, or that are fixed-indemnity insurance products dressed up as reimbursement. The defining failure in every case is that something is being called medical reimbursement when, on inspection, it is not.
A properly built SIMRP is structured to pass exactly the test those rulings define. Every reimbursement ties to a documented 213(d) expense. There is no automatic return of funds regardless of care. It is not an insurance product. The plan passes Section 125 nondiscrimination testing. The same authorities cited against the abusive programs are the authorities a compliant SIMRP is designed to satisfy.
And the compliant version does not ask anyone to take that on faith. Our partner’s structure travels with a legal opinion letter, an independent CPA opinion, and a peer-reviewed CPA Journal treatment of the SIMRP structure, all available for counsel review, and participating employers are indemnified against audit exposure related to the program.
Why this structure matters now
Federal policy has spent four decades pushing toward exactly this. Section 125 was enacted in 1978. The SIMRP regulation followed in 1980. The ACA built out the preventive-care framework. And in December 2025, CMS launched the ten-year ACCESS Model, reimbursing wearables and tech-enabled chronic care, alongside roughly $100 million in lifestyle-medicine funding. The government’s math has been stable the whole time: about $1 invested in prevention avoids roughly $30 in downstream sick spend.
A SIMRP is the employer-side instrument of that policy. Not a loophole. The structure the rules were written to support. The employers who understand that distinction early are the ones who will be running a benefit that funds itself while everyone else is still defending a wellness line item at renewal.
Frequently asked questions
What does SIMRP stand for?
Self-Insured Medical Reimbursement Plan. It is an employer-sponsored plan under IRC Section 105 and Treasury Regulation Section 1.105-11 that reimburses employees for substantiated Section 213(d) medical expenses.
Is a SIMRP the same as an HRA?
No, but they are closely related. An HRA is a specific, more recently defined type of self-insured medical reimbursement plan. The SIMRP is the broader Section 105 category it belongs to.
How does a SIMRP make a wellness program net-zero cost?
Paired with a Section 125 cafeteria plan, pre-tax contributions toward qualified preventive care lower taxable wages, which lowers employer FICA. That saving funds the program and models to more than $750 per enrolled employee per year for the employer after the platform contribution, at $0 capital outlay.
Is a SIMRP wellness program IRS-compliant?
A properly structured one is built to satisfy the exact tests the IRS applies: substantiated 213(d) expenses, no circular flow of wages, no fixed-indemnity payouts, and Section 125 nondiscrimination compliance. The arrangements the IRS has challenged fail those tests.
This page is educational and is not tax or legal advice. The plan structure and covered care described here are administered by Alively’s compliance partner; the Alively app is wellness software, not medical care. Employers should have the plan documents, the legal opinion letter, and the supporting CPA materials reviewed by their own tax counsel before launch.