Carson Maricle (Mathis, Marifian & Richter, Belleville, IL) has published Comment, Early Retirement Payments Under Tenure and FICA Taxes: Transfer of a Property Right or Just Another Payday?, 34 S. Ill. U. L.J. 727 (2010). Here is the Conclusion:

Rather than employing on an all-or-nothing approach that ignores economic reality, courts should utilize an approach which would make concessions to all those involved. A better approach would be for Congress to adopt a fixed percentage approach, such as allowing twenty percent of these payments to escape FICA taxation because a portion of the school’s payment is in exchange for the relinquishment of tenure rather than for recognition of services previously rendered. This approach would recognize that tenure, as Judge Posner observed, has economic value. This approach also would recognize the difficulty that comes with attempting to place a value on tenure. A current section of the Internal Revenue Code and a previous settlement agreement adopted by the IRS suggest that a fixed percentage approach would be a workable option for all parties involved. Most importantly, a fixed percentage approach would prevent the inherent unfairness of an all-or-nothing approach. Because tenure has value, it is patently incorrect to conclude that relinquishment of tenure plays no role in the calculation of an early retirement payment. However, it is also patently incorrect to conclude that relinquishment of tenure is the only consideration in calculating an early retirement payment. Rather than debating over whether one hundred percent or zero percent of the payment should be subject to FICA, a middle-of-the-road approach should be utilized. A fixed percentage, such as twenty percent, should be implemented in order to remedy the current situation.