So it's wrong-ish.
They're treating the contribution as an employee benefit. Since it does not fall within the list of tax-preferred benefits (like health insurance), the value is taxable income to you.
What's wrong is, any compensation they give you for performing your work duties should be added to your W-2, and subject to FICA and medicare withholding, along with regular withholding.
In Turbotax, after you enter the 1099-MISC, I believe there is a page of special circumstances and one of the boxes you can check is "I received this money from my W-2 employer and it should have been included on my W-2." Turbotax should prepare a substitute W-2 form and you will pay income tax plus 7.65% employee share of medicare and social security instead of income tax plus 15% self-employment tax.
