Step 1: Verify the structural label
Ask the vendor directly: is this plan structured as a SIMERP (reimbursement of incurred Section 213(d) qualified medical expenses) or as a Section 125 cafeteria plan paired with a fixed-indemnity payment? You should get a clear, one-sentence answer. If you do not, that is itself the answer.
Step 2: Ask for the plan document and SPD before signing
Any legitimate ERISA-governed plan provides a Summary Plan Description and a formal plan document. You should be able to review both before adoption. A vendor that resists this request, points only to marketing materials, or claims the plan documents are confidential should be a deal-breaker.
Step 3: Reconcile with IRS CCM 202323006
Ask how the vendor's structure reconciles with the 2023 IRS Chief Counsel Memorandum on fixed-indemnity wellness plans. A SIMERP-structured plan will answer that it is outside the scope of the memo. An indemnity-structured plan will answer something more complicated. Both answers are useful.
Step 4: Verify the network and member experience
The benefits are only valuable if employees actually use them. Ask: who operates the telehealth network, what is the typical wait time for a primary care visit, what states is the network licensed in, what is the prescription pharmacy reach, and what is the family rider structure. Watch out for white-labeled networks that subcontract to multiple downstream providers.
Step 5: Confirm pricing structure
Reasonable PEPPM admin fees in this market run $30-50 per enrolled employee per month, billed in arrears. Be suspicious of programs that demand upfront annual payment, large setup fees, or that charge the employee directly (employee-pay programs do not generate the same employer FICA savings).
Step 6: Hold-harmless and indemnification
Ask if the vendor will indemnify your business if the IRS challenges the structure. A vendor confident in their compliance posture will offer some form of protection. A vendor that flatly refuses is signaling something about their own confidence in the structure.
The 10-minute test
A vendor who can answer all six of these questions clearly in 10 minutes is worth a longer conversation. A vendor who cannot is probably not.