Earnings grow in a SEP on a tax-deferred basis and are not taxed until distributed. Some of the tax advantages of a SEP are:

. Employer contributions are not included in the employee's current income for federal income tax purposes.
. Earnings in the account accumulate on a tax-deferred basis for the employee.

In addition to the employer's contributions, an eligible employee may contribute to a Traditional IRA or Roth IRA (subject to applicable Modified Adjusted Gross Income (MAGI) limitations). For deductibility of Traditional IRA contributions, the employee is treated as an active participant in an employer-sponsored plan for any year in which the employer makes a SEP contribution.