A university allows its employees to accumulate up to 800 hours of sick time. At retirement the employees are paid the accumunlated sick time in cash and are taxed on this payment. Is there any way that the employees/retirees can use this accumulated sick time to pay for post retirement health insurance or pay eligible medical expenses without incurring a tax liability? My research indicates that this cannot be done through a cafeteria plan. Are There any other tax deferred vehicles that can be used to avoid immediate taxation of the accumulated sick time?
------------------