SEP contribution for a terminated employee

[Guest Jensen]

Company has a SEP and makes contributions on a monthly basis. Employee has been terminated. The way I understand it, under a SEP each employee must share in any contribution the employer makes for a particular year. Does that mean that the employer must continue to make contributions on the terminated employee's behalf? (Employee has already received contributions for Jan, Feb. and March 2006; question is whether he must receive contributions for April - December 2006?)

[Bird]

SEP contributions are allocated on the basis of annual compensation. If the annual allocation is to be 10%, and you were putting in 10% as you went along, then you should be done. But you still need to do the calculation on an annual basis, and check the allocation against the deposits.

[Guest Jensen]

Thank you! That makes perfect sense.