In May 2023, the IRS Office of Chief Counsel released Memorandum 202323006, targeting wellness plans that use “Fixed Indemnity” policies to generate tax savings.
Many vendors sell plans where an employee pays a pre-tax premium and receives a tax-free cash payment simply for completing a health activity, such as filling out a form or calling a nurse line.
The IRS Ruling: The memo clarifies that if a plan pays a fixed amount of cash (e.g., $1,000) for an activity that cost the employee nothing, that payment is taxable income, not a tax-free reimbursement.
The memo states: “Cash rewards received from a wellness program do not qualify as the reimbursement of medical care as defined under IRC 213(d)… and therefore are not excludable from an employee’s income.”
[Source: IRS Office of Chief Counsel Memorandum 202323006, June 9, 2023]
If your current plan pays employees cash for “participation” without a corresponding medical expense, you are likely underwithholding payroll taxes.
To understand why WIMPER is safe while other plans fail, you must distinguish between Indemnity Insurance and Section 105 Reimbursement.
Fixed indemnity plans pay a set amount of money based on a medical event or service, regardless of the actual cost.
[cite_start]As noted in our compliance review, “If premiums for fixed indemnity insurance are made pre-tax, then the benefits are generally taxable… otherwise, it would be considered double dipping.” [cite: 1545-1546]
A WIMPER program uses a Self-Insured Medical Reimbursement Plan (SIMRP) under IRS Section 105(b).
This is the single most critical differentiator for a defensible tax strategy. To be compliant, there must be a direct link between the reimbursement and a qualified Section 213(d) medical expense.
Unlike “cash-for-steps” programs, the WIMPER model reimburses employees for the purchase of Revive Health, a comprehensive digital healthcare platform.
Revive Health provides services that are indisputably Section 213(d) medical care, including:
[Source: Revive Health Benefit Guide; IRS Publication 502]
Because the reimbursement funds the purchase of these diagnosis, cure, mitigation, and treatment services, it satisfies the “Medical Care Connection” requirement. The employee incurs a real cost (the program fee), and the SIMRP reimburses that specific cost.
Finally, a compliant WIMPER program acts as a Participatory Wellness Program under the Affordable Care Act (ACA). It is not a passive tax shelter; it requires engagement.
According to 42 U.S. Code § 300gg-4(j)(3)(C), participatory programs must be available to all similarly situated individuals. However, to maintain the integrity of the tax reimbursement, participation is tracked.
This accountability layer provides further proof that the plan is a legitimate medical benefit, not a “sham transaction” for tax avoidance.
The tax code allows for significant FICA savings, but only when the plan is structured around legitimate medical care.
By utilizing the WIMPER framework—wrapping a Section 125 deduction around a Section 213(d) medical expense like Revive Health—employers can achieve the “Goldilocks” outcome:
Don’t let a vendor sell you a “cash scheme.” Demand to see the Medical Care Connection.
IRS Guidance:
Compliance Documents:
About the Author
Matthew Ragudo, CRPC®, CLTC®, is Director of Finance and Operations at The WIMPER Institute. He helps CFOs and business owners navigate the complex intersection of employee benefits and tax law to implement compliant, high-ROI strategies.
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Author: Matthew Ragudo
Date: 2025-11-26
Compliance, Tax Strategy, IRS Audit, CFO Guide, WIMPER, Fixed Indemnity, Section 105