Hundreds of retiring Hawaiian public workers “spiked” their pension benefits

By   /   March 9, 2012  /   News  /   No Comments

By Jim Dooley | Hawaii Reporter

HONOLULU — Of 5,000 state and county employees who retired since 2009, 674 of them substantially boosted their pension benefits by a practice called “spiking,” a state senate investigating committee was told today.

A “spiking” employee arranges to work as many hours of overtime as possible over the last three years of service, knowing that the extra pay will disproportionately boost pensions at retirement.

Wesley Machida, head of the state Employees Retirement System, said a $50,000-per-year worker is entitled to a $33,476 pension after 30 years of service.

The same worker who “spikes” the last three years of pay to $200,000 annually will collect a $120,000 pension, Machida said.

The practice is most commonly found in public safety and public health organizations and contributes to the state pension system’s staggering $8.15 billion unfunded liability, said Machida.

Pension calculations for state and county employees begin by averaging the workers’ three highest years of pay before retirement.

Machida said if the worker earning $50,000 in base pay consistently worked a lot of overtime through the course of his career, enough matching contributions would have been made to pension system to cover the extra pension benefits.

But when the earnings spike at the end of a career, extra contributions aren’t nearly enough to cover the corresponding pension increase, said Machida.

The state is looking for ways to stop the spiking phenomenon. At least 15 other states have anti-spiking laws, according to Machida.

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