Can a Nonprofit Cut Benefits Costs Outside Open Enrollment?
Yes, but usually not by changing the medical plan itself. Once a nonprofit signs its medical contract, the premium is set until renewal. The cost still within reach midyear is what the organization pays in employer FICA on every paycheck.
If you lead a nonprofit's finances or HR, you are probably weighing three questions:
Can we lower benefits costs this year, or do we have to wait for renewal?
Which options work at our size and funding type?
Who has to approve a change, and how long will it take?
In our work with nonprofits, this question usually comes a few months after renewal. The budget is set, the increase has landed, and eleven more months feels like a long time to absorb it.
That timing is exactly when a change outside the medical plan is worth a look. Thrive Benefits Group is able to build a plan around what you already have so you can contain costs mid year. You can take a closer look at what you could be saving here.
Can a nonprofit change its health plan midyear?
Usually not, because two things are set for a full plan year at the same time: the price your carrier quoted and the elections your employees made. Both reset together at renewal.
The price. At renewal, the carrier prices your group for twelve months based on its census and, for larger groups, its claims. A fully insured group gets a rate guaranteed for that contract term. A level-funded group pays a fixed monthly amount, built from expected claims, admin, and stop-loss coverage, that is also set for the year.
The elections. Employees pay their share of premiums pretax through a Section 125 plan. Those elections are generally irrevocable for the plan year unless a permitted event occurs, such as a marriage, a birth, or a significant cost change (26 CFR 1.125-4). Redesigning the plan midyear means reopening elections for everyone.
Switching carriers midyear is possible, but it is rarely worth it. Employees can lose credit toward deductibles they have already met, and a new carrier will quote the group again from scratch.
So the useful question is not how to reprice the medical plan in June. It is which costs sit outside that contract and can move now.
How can a nonprofit lower benefits costs before renewal?
A nonprofit has four realistic options between renewals, and only one of them works the same way for every funding type. Each has a place, so here is what each does well.
Wait and shop at renewal. This is the least disruptive choice. A broker can market the group, adjust plan design, and compare funding types with a full year of data. The limit is timing: nothing changes until the new contract starts.
Raise employee contributions midyear. This closes a budget gap fastest, if the plan document allows it. When an employee's cost rises significantly, Section 125 rules let them change or drop their election (26 CFR 1.125-4(f)).
Add Direct Primary Care or telehealth. These work best for groups large enough to be self-insured. A self-insured group pays claims directly, so any claims it avoids is money saved.
Both add a new monthly fee. That fee has to be weighed against the claims savings it creates.
Add a SIMRP beside the current plan. This works regardless of funding type, because it does not change the medical plan at all. It lowers employer FICA on participating wages, and participants get $0-copay medical care. If you haven't already, you can read our post on SIMRPs here.
For a typical group, employer net savings run about $50 per participant per month after fees, or about $600 a year.
Does a benefits change need board approval?
It depends on who holds that authority at your organization, and that varies from one nonprofit to the next.
Some nonprofits run benefits decisions through the full board or a finance committee. Others give the executive director or CEO authority to act within an approved budget. Many sit in between, where the executive director decides and the board is informed.
Most benefit changes add a cost, so they have to fit an approved budget, and that is often what sends them to the board. A SIMRP works the other way: it lowers an expense you already carry.
How does it show up in the budget?
Because a SIMRP produces net savings starting with the first live payroll, it doesn't require finding "new money" in the budget. Employer FICA savings are designed to exceed the admin fees, which are paid from the tax savings the plan creates.
Lower payroll tax expense. Employer FICA drops starting with the first live payroll, which creates a favorable variance against budget.
Room in the operating budget. That variance can absorb overruns elsewhere or strengthen operating reserves.
No waiting for a budget cycle. A SIMRP runs independently of your fiscal year and your medical renewal.
Why FICA is the lever for a nonprofit
Some cost-saving advice assumes the employer pays federal income tax and can deduct its benefit spending. A 501(c)(3) is exempt from federal income tax, so that deduction doesn't help.
On the other hand, a 501(c)(3) is not exempt from from employer Social Security and Medicare taxes.
That's employer FICA, 7.65% of each covered wage dollar. A lower employer FICA bill is a cash saving the nonprofit keeps.
What does starting midyear look like?
Most groups go live in about 4 weeks from the census to the first payroll. Your existing medical plan, the broker, and the carrier stay as they are throughout.
Census. You send a census with hours, wages, filing status, and any current deductions.
Savings model. Thrive models employer and employee net savings, employee by employee.
Approval. Your team reviews the savings report.
Enrollment. Thrive handles outreach and education so eligible employees can enroll.
Mock payroll and go-live. Deduction and reimbursement lines are set up and tested before any live paycheck. Thrive works with Paylocity, ADP, Paychex, Gusto, Paycor, QuickBooks, and most other major payroll systems. Savings start with the first live payroll.
Boys & Girls Clubs of Greater Augusta started with Thrive in summer 2025, partway through their plan year. Read how it worked
"The program has generated FICA savings, allowing us to reinvest those resources directly into our staff and the young people we serve." Kim Evans, President & CEO, Boys & Girls Clubs of Greater Augusta
When this doesn't fit
A SIMRP is not the right move for every nonprofit. Two situations need a closer look:
Churches that elected out of FICA. Some churches and church-controlled organizations have an elective exemption from FICA (IRS: employment tax exceptions for exempt organizations). With no employer FICA to reduce, the core savings do not apply.
Employees without major medical coverage. Participants need qualifying major medical coverage, but it does not have to come through your plan. Coverage through a spouse, a parent, the marketplace, or TRICARE can qualify.
What should a nonprofit do next?
Start with the cost you can still change. The medical contract is set until renewal, but employer FICA is paid on every paycheck. A SIMRP can lower it this year without touching the plan, the carrier, or the broker.
The first step is a savings model for your census. It shows employer net savings after fees and models every paycheck, so whoever approves the plan sees the numbers first.
But if you want to get a rough idea of what you could be savings without have to share any data, you can see your savings here, to see if it's a good fit.
FAQ
Can a nonprofit start a SIMRP in the middle of its plan year? Yes. A SIMRP can start in any month, independent of your medical renewal and your fiscal year.
Does it change our medical plan, carrier, or broker? No. It sits beside your major medical plan, and your Broker of Record (BOR) stays the same.
Will employees' take-home pay go down? Net pay is designed to hold steady or rise. Every paycheck is modeled first and checked in a mock payroll before go-live.
How are the fees paid? Fees are paid from the tax savings the plan creates.
Is this the same as a wellness incentive program? No. Participants are reimbursed for substantiated §213(d) medical care, not paid for completing wellness activities.
Who has to approve it? Whoever holds benefits authority at your organization: often the board, a finance committee, or the executive director.
