Cash Or Deferred Arrangement - CODA


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.

BREAKING DOWN '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.

  1. Qualified Retirement Plan

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

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  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. ...
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