If this is a true retirement, there won't be any settlement on the 4-year contract. You only get a settlement if you're fired. If you retire, you get nothing.
One other possibility is that the 4-year contract extension was done before Polk decided to retire. I can easily see Polk after last year's CWS run being excited and saying he wanted to coach several more years, so LT gave him a contract extension. Then 8 months later as this season is starting, Polk had a change of heart and decided this might be it for him. Remember, we're talking about the same coach who retired and unretired within the span of a month during the season back in the early 90s.