A tax-sheltered annuity (TSA), or 403(b) plan, is a type of investment vehicle that lets an employee make pretax contributions into a retirement account from income. Because the contributions are pretax, the Internal Revenue Service (IRS) does not tax the contributions and related benefits until the employee withdraws them from the plan.

Since the employer can also make direct contributions to the plan, the employee gains the benefit of having additional tax-free funds accruing.