If you are employed by a state or local government public school, or by a tax-exempt religious, charitable, scientific, or educational organization, or are on the civilian staff or faculty of the Uniformed Services University of the Health Sciences (Department of Defense), you may be able to arrange for the purchase of a nonforfeitable tax-sheltered annuity. Tax-sheltered annuities may also be purchased by self-employed ministers and by non-tax-exempt employers of ordained or licensed ministers or chaplains. Another name for a tax-sheltered annuity is a 403(b) plan. A 403(b) plan may invest funds for employees in mutual-fund shares as well as in annuity contracts.
The purchase of the annuity or mutual-fund shares is generally made through pre-tax salary-reduction contributions. Your plan may allow you to make after-tax contributions, and the employer may make non-elective contributions.
Caution: As the following contribution rules for tax-sheltered annuities have been stated in general terms, we suggest that you also consult your employer or the issuer of the contract. IRS Publication 571 has detailed examples.
Tax-free salary reductions are limited to the annual ceiling for elective deferrals, and the plan may permit additional deferrals for participants who are age 50 or older (7.18).
If, in addition to a tax-sheltered annuity, you make salary deferrals to a 401(k) plan, SIMPLE ...