Define: Cash Or Deferred Arrangement

A Cash or Deferred Arrangement (CODA) is a type of retirement plan that allows employees to contribute a portion of their salary to a retirement account, such as a 401(k) plan, on a pre-tax basis.

Under a CODA, employees can choose to have a portion of their salary withheld and contributed to a retirement account instead of receiving it as cash. This allows them to save for retirement while also reducing their taxable income.

Employers are not required by law to offer a CODA, but many choose to do so as part of their employee benefits package.

Yes, employees can typically choose the percentage or amount of their salary they wish to contribute to a CODA, within certain limits set by the Internal Revenue Service (IRS).

Yes, one of the main advantages of participating in a CODA is that the contributions are made on a pre-tax basis, meaning they are not subject to income tax until withdrawn during retirement.

In general, employees cannot withdraw money from their CODA before reaching a certain age, usually 59 ½, without incurring penalties. However, there may be exceptions for financial hardship or other specific circumstances.

Yes, employers can choose to match a portion of their employees’ contributions to a CODA as an additional benefit. This can vary depending on the employer’s policies.

Yes, employees can typically change their contribution amount to a CODA during designated enrollment periods or under certain life events, such as marriage, birth of a child, or divorce.

When an employee changes jobs, they can usually choose to roll over their CODA balance into a new employer’s retirement plan or an individual retirement account (IRA) to continue saving for retirement.

Yes, the IRS sets annual limits on the amount employees can contribute to a CODA. These limits are subject to change and may vary depending on the employee’s age and other factors.