Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A 403(b) tax-sheltered annuity (TSA) is best described as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A 403(b) plan, historically called a tax-sheltered annuity, lets employees of public schools and certain tax-exempt organizations contribute pre-tax dollars to retirement accounts, often invested through annuity contracts. It functions like a 401(k) for the nonprofit and education sector, with tax-deferred growth and ordinary income taxation at distribution. Section 403(b) of the IRC governs the arrangement.
Why the other options are wrong
- B) A 403(b) is a long-term retirement accumulation vehicle, not an immediate annuity producing income within a year.
- C) 403(b) plans are qualified arrangements with statutory contribution limits; they are not nonqualified deferred annuities.
- D) Medicare supplement products are governed by Medigap rules, completely separate from the 403(b) retirement framework.
Memory hook
403(b) TSA = the nonprofit world's 401(k): pre-tax dollars, school employees, annuity flavors.