MERP Definition

MERP (Material and Equipment Release Procedure) is a systematic process for managing the allocation and release of materials and equipment needed for a project or operation.

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What is a MERP?

A Medical Expense Reimbursement Plan is a novel kind of Health Reimbursement Arrangement (HRA). Employees can use MERPS to pay for certain out-of-pocket medical care expenses. While it’s difficult to sum up MERPs with a precise definition, we can review some of their key characteristics. MERPs allow employers to contribute to their employees’ health plan costs.  Eligible costs include coinsurance fees, deductible payments, and copayments. All employer contributions are tax-free, and the money that employees put in the MERP can be used on a pre-tax basis. 

The MERP Process

The MERP process begins when the employer sets the maximum amount that it will reimburse. Employees then choose to enroll in a MERP either when they are hired or during the annual enrollment season.

At that time, employees should estimate how much they plan to pay in regular out-of-pocket health care expenses throughout the year. With that done, they enroll in a MERP and elect to have their estimated health care expenses deducted from their paycheck. When medical expenses arise down the road, the employee pays for the initial cost. The employer then reimburses the employee. An employee can use their MERP funds to pay for both their expenses and their dependents’ expenses. 

MERP — considerations

MERPS are an ideal health care option for some employees and a poor choice for others. Here are some of the advantages and disadvantages of MERPs.

MERP – benefits

MERPs offer several advantages. For one, an employer’s reimbursements to employees are tax-exempt. Similarly, the employee’s contributions are tax-deductible expenses. Another advantage of MERPs is that they offer both employers and employees flexibility. Employees can receive reimbursement for a variety of medical expenses that would not be covered by most health plans. At the same time, employers can control how much they are willing to reimburse their employees.

MERP – disadvantages

MERPs also have disadvantages. First, the employer’s reimbursements will vary from one month to the next, making it difficult to plan ahead. Employers may not be able to tolerate this degree of instability. And employees have to spend additional time filing paperwork related to their health care costs. Doing so can impact their work productivity and increase the employer’s overhead costs. 

MERPs – Examples of eligible expenses

MERPs cover a wide variety of medical, vision, and dental expenses, including:

  • Glasses
  • Sunscreen
  • Face masks
  • Over the counter medications
  • Prescription medications
  • Inhalers
  • Lasik surgery
  • Homeopathic treatments (like acupuncture)

Although common, many of these expenses do not fall under traditional insurance plans. Therefore, MERPS can produce higher quality health care for employees and increase their work satisfaction.

Summary

While MERPs may be a good choice for many businesses, adopting them is just one of many decisions you have to make as a business owner. Individually, these tasks might not seem like much. Collectively, they can take up all of your valuable time as a business owner. 

MERPs are a cutting-edge health insurance plan that offers flexibility and favorable tax treatment to employers and employees alike. 

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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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