Florida Life, Health, and Variable Annuity Practice Exam 2026 – Complete Prep Guide

The 403(b) Plan is also known as a Tax Sheltered Annuity because it is specifically designed for employees of public schools and certain tax-exempt organizations. Contributions to a 403(b) plan are made on a pre-tax basis, which allows employees to reduce their taxable income. The growth of the investments within the plan is also tax-deferred until withdrawal, typically during retirement. This tax-advantaged feature is what leads to the classification of the 403(b) as a Tax Sheltered Annuity.

Other plans listed, while providing tax advantages, serve different groups or purposes. For example, a 401(k) is primarily offered by private sector employers, a 457 plan is for state and local government employees, and a Keogh plan is for self-employed individuals and small business owners. Each has distinct rules and tax implications, but the 403(b) specifically emphasizes its suitability for eligible nonprofit and educational institution employees, hence its nickname as a Tax Sheltered Annuity.