Tennessee Life Producer Practice Exam

Who is typically considered the owner of a 403(b) tax-sheltered annuity?

1. The employer

2. The insurance agent

3. The employee

4. A financial advisor

The correct answer is: The employee

In a 403(b) tax-sheltered annuity, the employee is typically considered the owner. This type of retirement plan is primarily designed for employees of certain tax-exempt organizations, such as schools, nonprofits, and some government entities. The purpose of the 403(b) is to allow employees to contribute a portion of their salary on a pre-tax basis, thereby reducing their taxable income in the present while saving for retirement. By being the owner of the 403(b) account, the employee has control over the contributions made, investment choices, and the eventual distribution of funds at retirement. This ownership reflects the personalized nature of the plan, focusing on the employee’s individual retirement needs and financial goals. The employer may facilitate or sponsor the plan, but they do not own the account. Likewise, while the insurance agent and financial advisors can provide valuable guidance and management, they do not hold ownership of the account, which ultimately remains with the employee.