Compliance Checklist For Cafeteria Plan Administration
Compliance Checklist For Cafeteria Plan Administration
This page starts with an overview of the Cafeteria Plan compliance requirements, continues with a list of some common administrative mistakes, then concludes with a Cafeteria Plan compliance checklist to help your organization comply with the requirements under Section 125 Cafeteria Plans so your organization can avoid common mistakes and lawsuits.
What Is A Cafeteria Plan?
A "Cafeteria Plan", also known as a Section 125 plan, is an employee benefits plan that allows employees to choose from a menu of pre-tax benefits. Employers also benefit in that they pay reduced matching payroll taxes on any pre-tax amounts.
Overview Of Cafeteria Plan Compliance Requirements
The key components of Cafeteria Plan administration include:
Plan design
Benefit options
Communication and Education
Employee enrollment
Compliance and regulatory oversight
Claims processing and reimbursement
Recordkeeping and Reporting
Common Cafeteria Plan Areas With Administrative Mistakes
Failure to comply with IRS regulations
Incorrect plan documentation
Nondiscrimination testing Failures
Inadequate communication
Dependent eligibility verification
Poor Recordkeeping
Employers should note that any of the above items could cause the plan to lose its pre-tax status and be subject to fines and penalized.
The information below is a draft checklist for compliance with Cafeteria Plan administrative requirements. Feel free to add or delete as needed to meet your organization's needs.
Coverage & Eligibility Determine employer coverage thresholds for each law Track employee eligibility for each law Identify applicable state/local leave laws
Leave Policies & Documentation Written leave policies in employee handbook Policies include:
FMLA
ADA accommodations
PWFA accommodations
PTO / sick leave
Policies are up to date and clearly written Employees acknowledge receipt
Leave Request Intake Process Employees can request leave verbally or in writing No “magic words†required (especially under ADA/PWFA) Centralized intake system (HR, portal, or manager escalation) Requests logged and timestamped
Required Notices Eligibility Notice sent within 5 business days Rights & Responsibilities Notice provided Designation Notice issued after sufficient info received All notices documented and retained
Medical Certification Management Certification forms provided timely Employees given at least 15 days to return forms Follow-up allowed for incomplete forms No excessive or improper medical inquiries Certifications stored confidentially
Leave Tracking & Time Accounting Track leave usage accurately. Remember that FMLA leave can be taken Continuously or Intermittently Use consistent increment tracking (e.g., hourly) Maintain running balance of leave entitlement Prevent overuse or undercounting
Job Protection & Benefits Continuation Maintain health benefits during FMLA leave Restore employee to the same position or an equivalent position No interference with leave rights
Coordination Across Laws Evaluate every leave request under other laws, such as the FMLA, ADA (leave as accommodation), and PWFA (pregnancy-related limitations) Avoid automatic termination after leave exhaustion Consider extended leave as reasonable accommodation
Pay & Benefits Coordination Determine whether leave is Paid (PTO, sick leave) or Unpaid (FMLA) Apply substitution rules consistently Coordinate with disability insurance (STD/LTD) Track employee premium payments
Return-to-Work Process Fitness-for-duty certification required only when appropriate Policies applied consistently No "100% healed" requirements Evaluate need for accommodations upon return
Manager & HR Training Managers trained to recognize leave triggers, and how and when to escalate to HR HR trained on multi-law compliance and documentation standards Training refreshed regularly
Documentation & Recordkeeping Maintain records for:
Requests
Notices
Certifications
Leave usage
Retain records for at least 3 years (FMLA) Medical records stored separately
Anti-Retaliation & Non-Interference No retaliation for taking leave No discipline tied to protected leave Performance issues handled separately and documented
Vendor / TPA Oversight (If Applicable) TPA responsibilities clearly defined Your Service Level Agreement (SLA) should include notice timing and documentation standards Employer audits TPA regularly
Compliance Monitoring & Audits Regular internal audits conducted Calendar alerts for deadlines Standard operating procedures (SOPs) documented Legal updates tracked and implemented
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