SEP coverage for disabled employee?

[katieinny]

An employee has been out on disability for most of 2003. He was being paid by the employer's disability plan, not through regular payroll. The employer uses a 5305 SEP document. Must the employer make a SEP contribution based on the disability pay, even though the disability pay will not show up on the employee's W-2?

[Gary Lesser]

Assuming the individual is an employee and earns above the minimum compensation amount (generally $450) if required under the plan, the contribution would be based on compensation paid by the employer. The disability payments of an insurer would not be treated as plan compensation.