"Designating Justin with the franchise tag is a procedural move that allows us to continue working on a long-term deal," General manager George Paton said.
"We are completely focused on making sure Justin remains a big part of the Denver Broncos for many years to come."
It marks the second straight year Denver's used the one-year franchise tender on Simmons.
The 27-year-old will earn $13.73 million in 2021 if he doesn't eventually agree to an extension, according to 9 News' Mike Klis. He'd receive a 20% raise after playing on the tag last season.
Simmons is one of the NFL's premier safeties, operating as a deep-lying playmaker in Vic Fangio's defense. The 2020 Pro Bowler intercepted five passes this past season after picking off four in 2019.
Paton said this week that extending the safety is one of his team's main priorities this offseason.