“Spiking” is when an employee’s salary is increased dramatically in the last few years in order to increase their retirement benefit. This is expensive to the retirement system and the employers because the funding of each person’s retirement is predicated on the fact that the system has had time to invest and save for the employees’ expected retirement amount based on a normal, steady career path with normal, steady pay increases. If the employee’s pay “spikes” all-of-a-sudden just before retirement – it’s an unbudgeted expense that will increase the employer’s assessments.
In 2011, two “anti-spiking” laws were passed that put a reasonable cap on the amount of any pay increases that can be used in retirement calculations. (note: the employee can keep the higher salary – it’s just that it might not all be used in the retirement calculation)
Below are links to PERAC’s detailed descriptions of the two provisions. Briefly – one of them switches the retirement calculation to 5 years instead of 3 if any year is 100% greater than the year before. The second limits each year’s amount to 110% of the average of the prior two years.
PERAC’s first memo (#38/2012) on anti-spiking
PERAC anti-spiking slides from Dec 2012
PERAC’s later memo (#16/2014) clarifying bona fide exemptions to anti-spiking