A former executive is getting compensation under a salary continuation plan

[katieinny]

A former executive continues to receive an annual W-2 based on income he is receiving under a salary continuation agreement. He retired a couple of years ago. I don't think he is eligible to continue getting SEP contributions based on that continued salary, even though it looks like he is getting wages just like every other employee, because it's not based on active employment. However, the question came up recently, so I want to be sure. Similarly, a different former executive's spouse has been getting W-2 income, presumably because she continues to get a portion of his income after he died. She would also not be entitled to a SEP contribution for the same reason -- there is no active employment taking place -- correct?

[ETA Consulting LLC]

I agree with you. Not sure of every parameter, but the compensation appears to be severance as it does not appear to be compensation he would've received had he continued to work. I'd verify this, but the compensation appears to be because he is not working (and appears to be severance).

Good Luck!

[katieinny]

Thanks, ERISA, for taking time to respond. It helps to get my thoughts confirmed. Others in the office don't do plan work, so I can't bounce things off anybody.