Whats the difference between a CODA plan and a 401(k) plan?
TB: A CODA and 401(k) are essentially the same thing. The term CODA stands for cash or deferred arrangement. Your pre-tax contribution to a 401(k) plan is possible because the law allows you to receive this amount as either cash or to put it into the plan. Federal-income taxes are deferred when the money is contributed to the plan, which is where the word “deferred” is used. The cash portion is subject to federal-income tax. Section 401(k) of the Internal Revenue Service code established the legal framework for this arrangement when it was added in 1978. Subsequently, these plans took their name from the section, which made it all possible.
