Skip to content
Breadcrumbs

Texas Payroll/Personnel Resource

Note: To navigate this guide on a mobile device you must use the Table of Contents.

Lump-Sum Payment of Accrued Vacation and Sick Time for Deceased Employees
Making the Payment, Taxes, Deductions

Responsibility for Making the Payment

The state agency or institution of higher education that employed a state employee immediately before the employee’s death is responsible for making the lump-sum payment of vacation and sick leave to the employee’s estate or spouse.

The responsibility exists even if the employee, immediately before death, was employed by the agency in a position that did not accrue vacation leave, sick leave or either.

The payment must be charged to the appropriation year the employee’s death occurred in.

Special Tax Considerations

At the death of a state employee, the sick leave portion of a lump-sum payment of accrued vacation and sick leave is not subject to:

  • Federal income tax (FIT) withholding.
    – or –
  • Withholding under the Federal Insurance Contributions Act (FICA).

The vacation leave portion of a lump-sum payment of accrued vacation leave and sick leave at the death of a state employee is not subject to FIT withholding, but is subject to withholding under FICA if paid in the same year as death.

Refer to Internal Revenue Service Form W-2 InstructionsPDF for tax information.

Deduction Considerations

At death of a state employee, a lump-sum payment for accrued vacation and sick leave is not subject to deductions for employee retirement contributions to any of the following:

  • Optional Retirement Program (ORP)
  • Teacher Retirement System (TRS)
  • Employees Retirement System (ERS)

Sources

Texas Estates Code Section 453.004; 34 Texas Administrative Code Section 5.44; Texas Government Code, Section 661.031-.038; IRS Publication 15 (Circular E) PDF, Employee’s Tax Guide; IRS Publication 15-A PDF, Employer’s Supplemental Tax Guide.