Hawaii Public Pension System Will Get $2.4M Efficiency Overhaul
The goal: To make the retirement process for state and county government employees more efficient, and save taxpayers money in the long run.
Inefficiencies with the Hawaii Employees’ Retirement System have led to such things as backlogs for pension benefits and inaccurate payments. The fund has about 111,000 state and county government employee members, including about 39,400 retirees and beneficiaries.
ERS trustees on Monday approved a six-part plan recommended by a Virginia-based consultant to help streamline the process for calculating retirement benefits.
The efficiency study said the plan would cost $2.4 million and take 18 months to implement. The ERS would make back its investment fairly quickly. The study estimates the system would make back nearly $2.5 million in fewer than four years with the changes.
The plan is also seen as critical in light of new retirement rules Hawaii lawmakers approved earlier this year to save money by reducing benefits for new hires.
The Virginia consultant, , told ERS trustees that the new retirement rules should be seen as a “driver” for implementing the efficiency plan. The rules include six changes for new employees hired after June 30, 2012, including increasing the length of service required for vesting and increasing the minimum age for full retirement benefits.
The reduced benefits are expected to save $440 million in the first five years of implementation and help address an estimated $9 billion unfunded liability.
ERS Administrator Wes Machida said the system’s current budget can cover between 60 percent to 70 percent of the $2.4 million project — “enough to get started,” he said.
Here’s a rundown of the six recommendations:
1. Construct employment history
Current situation: Some employers (the state and the different counties) provide employment history electronically; some provide paper, which is not processed until retirement

R±ð³¦´Ç³¾³¾±ð²Ô»å²¹³Ù¾±´Ç²Ô: Help employers gain the capability to submit electronically. Provide user interface to facilitate entry.
Benefit to the ERS: Best practices require a pension system maintain a complete and accurate employment history and have data available prior to retirement.
2. Clean historical data
Current situation: Some earnings are not being put into correct pay period (lagged). Retroactive pay is not being distributed properly.
Recommendation: Fix lagged data. After employment history has been built, use it to properly distribute retro pay.
Benefit to the ERS: Best practices require all complete and accurate data be in the system; data be available in time to be useful for retirement processing.
3. Enhance work reporting
Current situation: Work report data “exceptions” are ignored because resources are not available to deal with them in a timely fashion. This skews the employee’s “final average salary.”
Recommendation: Do not allow work report data into the system unless it is valid. Ensure that changes in earnings are supported by required documentation; ensure that all earnings data goes into the correct payroll period; handle contributions for members on workers compensation.
Benefit to the ERS: Per best practices, this will prevent bad data from getting into the system.
4. Perform teachers/professors calculations within system
Current situation: Teachers/professors calculations are done on spreadsheets because it requires knowing instructors’ schedules to differentiate summer pay.
Recommendation: Enhance tool to allow entry of teacher work schedules into system. Create “batch job” to allocate summer pay over school year.
Benefit to the ERS: Per best practices, will have all benefit calculations done within the system.
5. Obtain data needed at time of retirement from employers
Current situation: Various items required for calculating benefits are not provided for months after retirement. Data often provided by paper.
Recommendation: Request needed data items — such as sick leave balance — upon receipt of retirement application. Provided electronic means to enter these data items.
Benefit to the ERS: This will significantly reduce finalization time.
6. Reconcile member contributions
Current situation: Member account were converted from former system, but not reconciled on an account-by-account basis.
Recommendation: After all data is cleaned up and employment history built, reconcile contributions against earnings.
Benefit to the ERS: This is a service to members who will have the ability to correct contribution deficiencies. If an employee wants to make up for deficient contributions, they can pay for it, and the ERS can charge interest.
