The initial conditions are specified in the Setup Editor and can be either constant for the domain or distributed, using .dfs2 or .shp files. The initial conditions in boundary cells are held constant during the simulation, which means that the initial head in cells with Dirichlet's boundary conditions is the boundary head for the simulation.
If there is ponded water on the ground surface at the start of the simulation and the simulation is steady-state, then the depth of ponded water is treated as a fixed head for SZ.