Here is the IRS answer, at least with regard to 403(B) plans:
QUOTE
Question - On retirement, I received a check for 20 years of accumulated sick leave pay. How much of that check can I use as includible compensation for my MEA calculation?
Answer - Includible Compensation is generally defined as income earned in your most recent one-year period of service. Only a portion of the sick leave was earned in the most recent one-year period of service. The portion of the sick leave payment that may be used as includible compensation is that portion of the payment that was earned in the most recent one-year period of service.
This is from "
Frequently Asked Questions regarding Tax Sheltered Annuities." Of course, it would not apply totally for purposes of section 457, because the definitions of includible compensation are different. However, it appears based on this that the IRS might argue that sick leave accrued in prior years was not deferred before it was earned, as would be required for a 457 plan.