What is a primary disadvantage of CODA plans?

CODA plans, or Cash or Deferred Arrangements, are typically associated with 401(k) plans and similar retirement savings structures. One primary disadvantage of these plans is that they require complex and costly administration. This complexity arises from various factors, including compliance with tax laws, reporting requirements, and the need to properly manage contributions, distributions, and plan testing to ensure that the plan meets legal regulations and does not discriminate against non-highly compensated employees.

Managing these plans often involves ongoing obligations that require specialized knowledge and can lead to increased administrative expenses. Organizations must allocate resources to ensure that they comply with regulations and effectively communicate with plan participants, which can complicate the management process.

The other options do not accurately reflect the key disadvantages associated with CODA plans. For instance, while employer contributions need to be planned, they are not inherently high as a characteristic of all CODA plans. The option regarding guaranteed minimum benefits to employers does not apply, as CODA plans do not typically offer benefits that guarantee returns. Lastly, immediate vesting is not a common feature of all CODA plans and can vary based on the specific plan design.