(1) For applicable systems, lump-sum payments made upon termination of employment for paid leave, including banked holiday time, vacation, personal, sick, or compensatory leave may be included in the calculation of a member's highest average compensation (HAC) by replacing lower consecutive compensation months with the same number of higher consecutive compensation months.

(2) The number of replacement months and the amount of compensation included in the replacement months is determined by either:

(a) dividing the lump-sum payment by the regular hourly rate in effect for the employee at the time of termination, or the monthly salary earned at the time of termination; or

(b) for members whose monthly compensation varies, multiplying their hourly rate times 2,080 (the assumed number of hours worked in a fiscal year) divided by 12 to determine the monthly wage and then dividing the lump-sum payment by the monthly wage.

(3) Lump-sum payments made without termination of employment for banked holiday time, compensatory leave, sick leave, or vacation leave will not be considered as compensation for any purpose regardless how the payout is classified, including identifying the payout as a bonus.