That's bogus information from the institutions. For the purpose of a retirement contribution the S corp owner is an employee of the S corp and is subject to the same contribution limit as any other employee of the S corp (if there were any) with that limit being 25% of W-2 wages only. Income reported on Schedule K-1 (Form 1120S) is NOT compensation and is NOT to be included in the calculation of the SEP contribution.
See IRS Pub 560, page 5, where, with regard to compensation, it explicitly states, "It doesn't include income passed through to shareholders of S corporations."
https://www.irs.gov/pub/irs-pdf/p560.pdf
(Perhaps the rep that gave you that bogus information misunderstood and thought that you Schedule K-1 reporting self-employment income from a partnership, not pass-through income from an S corp, or maybe the reps were just poorly trained.)
