State paid leave laws

[R. Butler]

Plan defines compensation as 3401(a) wages.  Participant receives payment under a state paid leave law.  Payment is actually made by the insurance company, but the income will be reported to employee on a W-2.   It is my understanding that this would generally count as compensation under the plan even if paid by the insurance company.  Does that sound correct?

Plan does contain 414(s) exclusions, but I don't see that a paid leave program is a fringe or welfare benefit.  Does that sound correct?

Thanks for any guidance.