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Indiana State Budget Agency

SBA > Retirement Medical Benefits > Frequently Asked Questions about the Retirement Medical Benefits Plan > Unused Vacation Time Unused Vacation Time

Q. I heard I can convert unused vacation leave to a special account for medical expenses. How will that work?

A. Retirement medical benefits accounts under Internal Revenue Code Section 401(h) are to be established (subject to IRS approval) that will require retiring state employees to convert up to 30 days of any unused accrued vacation leave to a monetary contribution on a pretax basis. The Accounts can be used for sickness, accident, hospitalization, and medical expenses of the employee, spouse and dependents after the employee's retirement. State employees who are terminating employment but not retiring will continue to have up to 30 days unused vacation leave converted into cash payments.

Q. Can I retire now and convert my unused vacation time to a Retirement Medical Benefits Account later?

A. No. The program is only available following approval by the IRS and its subsequent implementation.

Q. If I retire prior to the IRS ruling regarding the 401(h), will I be eligible to participate in the 401(h)?

A. No. However, this will not impact your eligibility for participation in the Health Reimbursement Arrangement.