Is Amount of Settlement of claim under STD Plan Subject to Employment

[Guest Edward McElroy]

A Company will pay a former employee a lump sum settlement. Amounts will not be paid in accordance with Company's STD's policy, although the amount would equal aggregate amount of payments individual would have received under policy. Amounts are from employer's general assets. While general rule would treat these amounts as wages subject to withholding, does result change because amounts are received as part of settlement.