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. How do gains from my 401(k) figure into my taxable income?

    Capital gains from a 401(k) account figure into taxable income in that capital gains are taxed at the ordinary income rate ... Read Full Answer >>
  4. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  5. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  6. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... 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. Taxes

    Are You Paying Too Much in Taxes?

    Overpaying taxes amounts to an interest-free loan to the government. Here are some ways to avoid that scenario.
  6. Retirement

    Calculating Volume Weighted Average Price

    Volume weighted average price, or VWAP, is the average value of a stock traded over the course of a set time horizon, which is typically one day.
  7. Personal Finance

    6 Websites Where You Can Book a Private Jet

    These sites can help you get the flights and destinations you desire – and sometimes, even just a seat instead of a whole plane.
  8. Insurance

    Tips for Insuring Your Salary

    Those with high incomes really can’t afford to be without disability insurance. Here's why.
  9. Retirement

    401(k) Rollovers: The Tax Implications

    The tax rules for 401(k) rollovers can be simple or more complex, depending on which path you take.
  10. Retirement

    Avoid These 4 Retirement Account Mistakes

    The top 4 mistakes investors should avoid in their retirement accounts.

You May Also Like

Hot Definitions
  1. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  3. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  4. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  5. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
  6. Himalayan Option

    An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!