Medical Expense Reimbursement Plans (MERPS) enable employers to share the cost of qualified expenses with employees and their families for medical, dental, vision and a variety of other charges on a tax free basis. MERPS are sanctioned under Section 105 of the Internal Revenue Code (IRC).
MERP Plans are often used with higher deductible plan designs, giving the employer greater flexibility to create group benefit programs that are in alignment with their business objectives and company culture. Key advantages to this approach include:
Tax Savings – Reimbursements to employees are tax-exempt, and contributions made by the employer are tax-deductible business expenses. However, a tax deduction can only be claimed by the employer once a claim has been reimbursed.
Flexibility – Funds can be used to pay for a variety of medical expenses not covered by the health plan including deductibles, prescriptions, dental, and vision care. MERPS give employers flexibility in plan design and can be used as a vehicle to target high utilization areas of current health plans and then incent employees to become better consumers.
Control – The employer decides exactly how much money will be available to employees and how it will be disbursed. The employee’s responsibility and cost sharing are completely designed by each employer, no carrier intervention telling you what you can and cannot do.