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At least 14 states have revamped their pension systems in the past five years to prevent employees from “spiking” their pay to pad retirement benefits.

The Hawaii Employees’ Retirement System is looking to do the same despite opposition from public employees’ unions.

The system’s trustees expect to draft legislation aimed at deterring the practice known as pension spiking — essentially working extra overtime in the years before retirement to boost the overall pay level on which retirement pay is based. Wes Machida, the system’s administrator says spiking is a big concern, especially in light of the ERS’s estimated $9 billion unfunded liability.

Some ERS members serving on a legislative committee are scheduled to meeting Tuesday to come up with a plan to present to the full board before the Legislature convenes in January.

Now, pension benefits for Hawaii government retirees are calculated by averaging their highest three or five years of compensation, depending on their hire date — what’s known as “final average compensation.”

Compensation, as currently , includes base pay, overtime, differentials and supplementary payments, bonuses and lump sum salary supplements.

Board members are considering excluding or capping additional compensation beyond base salary when calculating benefits. The changes are targeted at employees “trying to game the system or trying to boost their pension in their final years of service,” Machida said.

At its last meeting, the legislative committee had wanted more details from its actuary on exactly how the ERS’s funded status will be affected by excluding those various payments from an employee’s compensation.

Other states have struggled with the same issue, a national expert says.

“The popular thing is to limit salary increases in the last few years of employment,” said Keith Brainard, research director at the . “Another thing is to prohibit or limit overtime and sick leave in calculating average final compensation.”

He said excessive overtime tends to be more of a city-level issue because it’s more common among public safety personnel such as fire fighters and police.

Some states — including Arkansas, Colorado, Iowa and Nevada — have set caps on how much an employee’s pay can increase from year to year. Any pay that exceeds the cap won’t be counted when calculating retirement benefits.

In Georgia, the employer — meaning the state, city or county department — is required to cover the extra benefits costs for any pay increase that exceeds 5 percent during the 12 months before an employee’s retirement.

Other states — including West Virginia and Kentucky — don’t allow lump sum payouts to be counted when calculating benefits.

Here’s a look at what 14 other states have done in the past five years to curb spiking, based on research by Brainard.

Arkansas

The salary used to calculate final average compensation cannot grow by more than 10 percent a year over the preceding year’s salary.

Colorado

Has an 8 percent cap on salary increases from one year to the next that will be counted toward the calculation of highest average salary.

Georgia

Calculation of a pension for hires after July 1, 2009 cannot include a pay increase of more than 5 percent in the last 12 months of employment.

Requires an employer pay the retirement system the actuarial cost of giving a raise of more than 5 percent during the 12 months before an employee’s retirement.

Illinois

If a school employee gets a pay raise of more than 6 percent, the school district, not the state, is required to fund the difference for pension benefits.

Iowa

Pension system compares the average of the highest three years, or the final average salary, to the fourth highest year’s salary. If the final average salary is more than 121 percent of the fourth highest wage, the final average wage is adjusted. This approach allows for wage increases of about 10 percent in each of the highest three years.

Kentucky

Removes lump-sum compensation from calculation of average final compensation for new hires. Requires highest five years to be the five 12-month fiscal years immediately preceding retirement.

Louisiana

Annual wage increases are capped at 10 percent when calculating average final compensation, except for legislatively enacted increases. For firefighters and police, compensation for a given year may not exceed compensation for the prior year by more than 15 percent.

Missouri

Annual wage increases are capped at 10 percent when calculating average final compensation. The cap does not apply to increases tied to changes in position or employer, or ones required by state statute.

Nebraska

The amount of compensation which would be subject to retirement cannot exceed 7 percent per year during the five years before retirement. Changes in pay that result from a collective bargaining agreement or from a substantial change in an employee’s job position do not qualify as exceptions.

Nevada

Calculating of average final compensation will not include pay increases of more than 10 percent per year for the five years leading up to retirement.

New Hampshire

The definition of “earnable compensation” for calculating retirement benefits does not include end-of-career payments and a number of work-related reimbursements. If compensation in the final year of service exceeds 125 percent of final average compensation, the retiree’s last employer will be assessed the cost of the excess benefit. Annual retirement benefits are capped at $120,000.

South Dakota

For the purposes of calculating benefits, compensation in an employee’s last quarter cannot exceed 105 percent of any previous quarter, and the average compensation of the last four quarters cannot exceed 110 percent of any previous quarter.

Vermont

Compensation increases for teachers are capped at 10 percent per year when calculating final average compensation.

West Virginia

Lump sum payments are not included in final average salary calculation. Police and firefighters cannot receive a total, combined
benefit greater than 105 percent of the highest salary received in a position covered by the pension system.