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. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  2. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  5. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  6. Profit-Sharing Plan

    A plan that gives employees a share in the profits of the company. ...
RELATED FAQS
  1. If a company undergoes an acquisition can an employee withdraw 401(k) funds tax free?

    Although the participant may be eligible to withdraw the funds if a plan is terminated as a result of an acquisition or other ... Read Full Answer >>
  2. Do I need to hit my 401(k) contribution limit before I can begin making catch-up ...

    You generally need to reach the limit established by the plan in order to make catch-up contributions; therefore, if the ... Read Full Answer >>
  3. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  4. How does the always be closing (ABC) strategy benefit a salesperson's sales funnel?

    It is good practice in sales to always be closing, because it's common for a salesperson's sales funnel to be leaky. When ... Read Full Answer >>
  5. What are the key differences between pro forma statements and GAAP statements?

    The U.S. generally accepted accounting principles (GAAP) require companies to adhere to uniform reporting standards that ... Read Full Answer >>
  6. What is fiduciary liability insurance, and what are its benefits?

    Under the Employee Retirement Income Security Act (ERISA), any individual who manages a employee benefit or pension plan ... Read Full Answer >>
Related Articles
  1. Retirement

    3 Reasons To Use An Employer-Sponsored Retirement Plan

    If you aren't participating in your employer-sponsored retirement plan, you're missing out! Learn the benefits.
  2. Retirement

    Introduction To SIMPLE 401(k) Plans

    Learn about the features and benefits of the plan that is a cross between a SIMPLE IRA and a traditional 401(k) plan.
  3. Entrepreneurship

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  4. Taxes

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  5. Professionals

    Help Parents Avoid This Retirement Savings Blunder

    Parents should make saving for their own retirement a priority over helping with their children’s college costs.
  6. Investing

    Financial Gifts For Grads: Kindergarten To College

    If you really want to help your grad preparing for the future, consider a present that supports their long-term goals—an early start to financial planning.
  7. Professionals

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  8. Entrepreneurship

    Why Small Business Owners Need Financial Advisors

    Small business owners are too busy to effectively manage their own money. That's why a financial advisor can be a big help.
  9. Professionals

    401(k) Risks Advisors Should Know About

    Lawsuits are challenging the the fiduciary duty of plan sponsors related to 401(k) fees. Here's what financial advisers should know.
  10. Professionals

    Why Doing Your Taxes is Good Retirement Planning

    Income tax time is a great time to reevaluate retirement planning, since all the information you need is right at your fingertips.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center