Contribution Question

[Archimage]

There is an employee that was terminated in 1999. This employee is an attorney and received wages due to a pending settlement over the last couple of years. He received his final settlement wages (W-2) in late 2001 even though he is terminated from the employer. Does the employer still have to contribute to the SEP for him?

[actuarysmith]

What does the document say?

If you are using a model 5305 SEP document, they generally don't require any minimum hours or end of year employment.

Therefore, a contribution is probably required regardless of the termination of employment.

[Guest b2kates]

I have a different take. Question is the salary as part of the settlement considered current 2001 year salary?

Did the attorney provide any hours of service during the 2001 year?

How many years of service did the attorney have?

[Gary Lesser]

Although there is little on point concerning a SEP, a private letter ruling sd be sought. That being said; the compensation was not received for services rendered in the current year. Neither was the individual an employee. IMO, no contribution is required for the current year. Whether a make-up contribution is required for an earlier year and whether it can be made now is entirely another question. If the individual was an employee at the time the award was made, then a contribution wd be required for that year.