Life · Chapter 11 · Salary Reduction Plans
401(k) Plan (CODA)
Definition
A cash or deferred arrangement: employees choose to take income as cash OR defer part of it pre-tax into the plan (participation can't be forced). Deferrals are excluded from gross income, grow tax-deferred, and are often matched by the employer. IRS-set annual limit, plus a catch-up contribution at age 50+ — and a larger "super catch-up" in the years the participant turns 60, 61, 62, or 63 (SECURE 2.0), which drops back to the ordinary amount at 64.
Exam tip
⚠️ Two catch-ups now, not one: 50+ gets the regular catch-up; ages 60–63 only get the bigger one. Age 64 is back to the regular amount — the exam loves "a 64-year-old" as the trap.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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