Cash Or Deferred Arrangement - CODA

AAA

DEFINITION of 'Cash Or Deferred Arrangement - CODA'

The method of funding any type of qualified profit-sharing or stock bonus plan. Cash or deferred arrangements allow employees to contribute a portion of their salaries to the plan so that their savings can grow tax-deferred. The most common type of CODA is a cash bonus which is paid into their 401(k) plan, but it could also be a salary reduction.

INVESTOPEDIA EXPLAINS 'Cash Or Deferred Arrangement - CODA'

Employees who participate in cash or deferred arrangements may still contribute to traditional or Roth IRAs as well. However, they may not receive the full deduction from a traditional IRA contribution if their incomes are above a certain level. CODA plans allow the individual to fund their retirement and avoid immediate taxation on the diverted contributions.

RELATED TERMS
  1. Roth 401(k)

    An employer-sponsored investment savings account that is funded ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  4. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  5. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  6. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
Related Articles
  1. Introduction To SIMPLE 401(k) Plans
    Retirement

    Introduction To SIMPLE 401(k) Plans

  2. Business Owners: A Guide To Qualified ...
    Entrepreneurship

    Business Owners: A Guide To Qualified ...

  3. 3 Reasons To Use An Employer-Sponsored ...
    Retirement

    3 Reasons To Use An Employer-Sponsored ...

  4. If a company undergoes an acquisition ...
    Retirement

    If a company undergoes an acquisition ...

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center