YOU ASK:

What is the definition of Tax Sheltered Annuity (TSA)?

WE ANSWER:

A Tax Sheltered Annuity (TSA) refers to an annuity that allows the employee to use his income make "tax-free" contributions towards a retirement plan.

Since the contributions come directly from the income of the employee, the contributions and the related benefits it buys will not be taxed as long as the employee does not withdraw these funds from the plan. Once a withdrawal is made, tax is tacked on to the contributions.

This only refers to annuities that are bought by organizations that provide retirement plans based on the Internal Revenue Code's section 403(b). According to the IRS Code, there are maximum limits as to how much money an employee can pay towards the plan.

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