Tax-sheltered Annuity

Tax-sheltered Annuity

Tax-sheltered Annuity means:
a retirement plan invested in annuities or a mutual fund custodial account for employees of a public school system or an exempt educational, charitable, or religious organization. The employee's rights must be nonforfeitable, and the retirement plan must follow the qualified plan nondiscrimination and compensation rules. Employer contributions to a tax-sheltered annuity are excludable from an employee's income to an extent based on a percentage of annual compensation and years of service. Former IRC (check if this IRC provision is current here) §403(a).

Description and Definition of Tax Sheltered Annuity

A retirement annuity offered to employees of tax-exempt organizations and educational systems. Also known as a Section 403(b) plan. Generally, the plan is funded by employee salary reduction contributions and it's earnings are tax deferred until withdrawal.


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