401(k) deferral of n-q deferred comp payments

[Guest jppcpa]

This may sound like a really stupid question, but I can't find anything on point! Client sets up a n-q deferred comp plan for general manager. When gm starts taking payments from n-q deferred comp plan, client allows 401(k) deferrals and employer profit sharing contributions based on "salary" from deferred comp. This seems to make no sense as you normally don't get payments under a deferred comp agreement until termination of employment and, of course, you can't participate in the qualified plan if you aren't employed! Anyone have any reference, or is this just a common sense error. (If it does work....pretty neat idea for continuing deferral of income!!)