The Employment Retirement System (ERS), which handles benefits for about 93,000 state employees, retirees and beneficiaries, calculates pensions based on the best three 12-month periods of a retiree’s pay as a state or local government employee, Washington-based legal publisher BNA reported.
The 12-month periods do not have to be consecutive or even start with January. This allows employees to collect optimal benefits, but the method takes several hundred million computations and 15 minutes of computer time to calculate the pension, ERS spokesman Wesley Machida told BNA.
Under a new law, employees can choose to base their pensions either on their three highest-paying calendar years, or on the three years immediately preceding their retirement dates. The law also requires, for the first time, that employees retire only on the first day of a month. In addition, the new law provides for a change to benefits payments from a bimonthly to a monthly schedule.
While the new law was intended to streamline an ultra-complex benefits system, the BNA said it has also aroused fears among pensioner groups that it will hurt retirees’ pension benefits.
In fact, the State of Hawaii’s Organization of Police Officers (SHOPO) and the Hawaii’s State Teachers Association (HSTA) had been considering a joint lawsuit for a court injunction to prevent the law from taking effect. But the BNA said recent meetings between union representatives and fund trustees appear to be steering efforts toward new legislation instead.
SHOPO spokesman Kimo Smith said police officers’ pay could fluctuate substantially, depending on overtime, hazardous duty, night duty and location of the work. The changed method of benefits calculation will not account for such compensation variations to the retirees’ advantage, Smith told BNA.
Joan Husted, president of the Hawaii State Teachers Association, told BNA that teachers will be hurt financially by the new law’s change in pension calculation, because, among other things, they will be penalized for time off for pregnancies, unpaid leave, and strikes. Teachers also object to use of a calendar year instead of a school year, Husted said.