What is Cash or Deferred Arrangement?
A cash or deferred arrangement, or CODA, is an investment plan that allows employees to contribute a portion of his or her salary to the plan. One of the best examples of a cash or deferred arrangement is the 401(k) plan, which allows employees to authorize amounts to be deducted from each paycheck and contributed to the plan. These contributions are often invested in relatively safe and secure investments, making it possible for the plan to generate interest income for the employee that can be drawn upon in later years. One of the main advantages of a cash or deferred arrangement for an employee is that saving money for the future is relatively easy and painless. Because the contributions are structured as fixed amounts that are deducted on a consistent basis, there is no temptation to forego making a contribution. Because the deduction is automatic, many employees forget all about the cash or deferred arrangement, until the quarterly or annual statement arrives to show the amount of
