105 Wellness Plans vs SIMRP: What Employers Need To Watch For
Snapshot:
A properly structured SIMRP inside ProfitGuard Plus is designed to deliver legitimate medical and preventative benefits while reducing employer payroll tax exposure.
Most 105 wellness plans on the market are built around tax savings first, which is why many designs create compliance risk instead of durable benefit value.
A SIMRP paired with a Section 125 cafeteria plan and group medical coverage can shift part of existing compensation into tax advantaged, clearly defined medical reimbursements.
ProfitGuard Plus is built to plug into existing payroll and benefits workflows so that pre tax deductions and reimbursements run in the background with minimal employer administration.
Employers already in a wellness style 105 program can have the structure reviewed, identify red flags, and transition into a SIMRP based design that is built to last.
Why Most “105 Wellness Plans” Miss The Mark (And What To Do Instead)
If you run a W2 business or Church and you have been pitched a “105 wellness plan” in the last few years, you are not alone. These programs exploded across the market promising easy tax savings, happier employees, and very little change to how you actually run your benefits.
The problem is simple. Many of those arrangements were built as financial plays first and real benefit programs second, which is exactly why the IRS started paying attention and why more owners are getting uncomfortable with what is under the hood.
At Abbott Family Insurance, we build ProfitGuard Plus to go a different direction. Our system uses a Self Insured Medical Reimbursement Plan, or SIMRP, as one component inside a broader structure that is designed to be compliant, sustainable, and actually focused on medical care, not just tax gimmicks.
What People Usually Mean By A “105 Wellness Plan”
Most of the “105 wellness” pitches small employers heard over the last decade followed the same pattern.
You were told that a vendor could run a wellness program through your payroll, reduce taxable wages, route the dollars through a Section 105 structure, and then somehow put most of that money back into your employees’ pockets as if it were tax free income. The “wellness” side often boiled down to answering a few emails, clicking through a portal, or doing a quick monthly check in.
On paper, these programs wrapped themselves in language like Section 105, wellness, and preventative care. In practice, a lot of them shared the same issues:
They were built almost entirely around the financial engineering, not genuine medical benefits.
They tried to handle everything inside a cafeteria plan and then reimburse out of that same structure.
They blurred the line between real medical care and what is really just cash rewards dressed up as wellness.
Over time, IRS guidance called out exactly these kinds of designs. Wellness programs that try to do everything through a Section 125 cafeteria plan and then reimburse employees back through that same structure push into taxable territory. Programs that use indemnity style cash payouts and label them “wellness” while treating them like tax free income also cross the line.
The IRS did not say all wellness programs are bad. They did say certain structures cross the line when they are used primarily as tax loopholes instead of legitimate health related benefits.
Why That Matters For A W2 Employer
Here is the street level version.
If a program is basically “we reduce wages, we run dollars through something labeled 105, and we pay people back as if that money is tax free income,” you are not looking at a real medical plan. You are looking at a tax tactic with a wellness sticker on the front. That is the kind of thing that tends to age badly when guidance or enforcement tightens up.
As an employer, you carry the risk if the structure is not sound. You do not have time to become a tax attorney, but you do need to be able to tell the difference between a benefits strategy and a loophole.
What A SIMRP Is Actually Designed To Do
A Self Insured Medical Reimbursement Plan, or SIMRP, is not a marketing label. It is a formal employer plan designed to reimburse qualifying medical expenses under the tax code. It exists to pay for real medical care, not to create mystery cash rewards.
When properly designed, a SIMRP sits alongside your other benefit structures. It uses long standing tax rules that allow employers to contribute to accident and health plans on a pre tax basis and reimburse defined medical expenses tax free, as long as those expenses qualify as medical care. Employee contributions can be handled through a documented Section 125 cafeteria plan so that salary reductions do not count as taxable wages.
Put simply, the rules were written to support tax efficient funding of legitimate medical care. The job is to stay inside those lines.
How ProfitGuard Plus Uses SIMRP Differently
ProfitGuard Plus uses SIMRP as one compliant component inside a bigger system that is built around three anchors: purpose, substance, and structure.
Purpose: The purpose is to fund real, defined medical and preventative benefits on a tax efficient basis. We are not trying to turn a section of the tax code into a backdoor bonus system. We are reallocating dollars you already commit to compensation and health care into a more efficient structure.
Substance: The benefits that run through the SIMRP component are tied to actual medical care and preventative services, not generic “complete a task, get a cash reward” perks. The program is paired with an ACA compliant medical plan to create an integrated 105 design; it is not pretending that a wellness app alone equals health insurance.
Structure: There are formal plan documents, clear eligibility rules, defined reimbursable expenses, and specific reimbursement procedures. The SIMRP coordinates with your Section 125 cafeteria plan rather than trying to live inside it, and tax treatment depends on who contributed the dollars under the applicable regulations.
Because of that structure, employers can reduce payroll tax exposure through pre tax salary reductions and plan funding, while employees receive tax free reimbursement for qualifying medical care. The result is a strategy that aims to be revenue positive and legally sound rather than a fringe benefit gimmick.
Three Questions To Ask About Any “105” Pitch
You do not need to memorize all the code sections to protect your business or Church. You just need a simple filter.
When someone pitches you a 105 wellness or reimbursement style program, ask three questions:
Is this actually about medical benefits, or is it all about the spreadsheet?
If ninety percent of the conversation is tax savings and ten percent is the actual benefit design, that is a clue. Real SIMRP based strategies start with what medical value your employees are getting and then show you how to fund it in a more efficient way.How clean is the separation between the cafeteria plan and the medical reimbursement plan?
If contributions and reimbursements are all happening in one undifferentiated bucket, with no clear distinction between Section 125 salary reduction and Section 105 reimbursement, you are taking risk you do not need.Does this sit on top of a legitimate medical plan and broader benefits strategy, or is it a bolt on magic trick?
A good SIMRP based approach is integrated with your group medical plan and your overall benefits design, not slapped on the side as a standalone gimmick.
If a program fails those tests, you should be cautious, no matter how attractive the projected savings look.
Where ProfitGuard Plus Fits For W2 Employers
For W2 employers, especially service based businesses or Churches watching every payroll dollar, the goal is straightforward. You want to lower tax drag, improve the value of your benefits, and keep implementation simple and automated.
ProfitGuard Plus is built to do that by:
Using established tax rules that have been in place for decades rather than chasing untested loopholes.
Requiring pairing with ACA compliant medical coverage so the structure functions as part of a complete benefits package.
Documenting the SIMRP and cafeteria plan clearly, with reimbursement rules that line up with current guidance and regulations.
Integrating with payroll so pre tax deductions and reimbursements happen automatically inside your normal process.
The result is a benefits strategy that aims to be revenue positive, compliant, and aligned with how you actually run your business or Church, instead of a standalone “tax trick” that keeps you up at night.
Next Step If You Already Have A Wellness Style 105
If you are already in a wellness style 105 program and you are not sure how solid it really is, or you walked away from a pitch but still wonder if you are leaving smart tax savings on the table, that is where a review makes sense.
We can look at your current setup, compare it against the framework that governs SIMRP and related plans, and give you a straight read on your risk and your options. From there, we can talk about whether layering in ProfitGuard Plus, with a properly structured SIMRP component, would make sense for your specific employee base and payroll profile.
You do not have to become an expert in tax code. You just need a partner who treats this as benefits strategy and compliance, not as a parlor trick. That is the lane we stay in.
