As the discussion on the faltering New Hampshire retirement system reaches critical mass, the town of Bedford has jumped on board with more than 90 other municipalities and the New Hampshire Municipal Association to sue the state if the current laws regarding funding isn’t changed.

Legislators blame a faulty funding method that projected employer contribution rates at less than what they should, resulting in a $2.7 billion shortfall in the retirement fund. This could lead to the potential depletion of the medical subsidy benefit funds in the near future.

“It is a severe long-term problem, and the more we talk, the worse it gets,” said Bedford Town Manager Russ Marcoux, one of the town officials across the state joining the charge against a recent Senate proposal.

House Bill 1645, which was the initial proposed legislation aimed at restoring the $2.7 billion to the pension fund and sustaining the retirement system for teachers, firefighters, police officers and municipal workers, would make several changes to the existing system.

The most pressing change would be the elmination of an 8 percent annual medical subsidy increase for retirees. Instead, $250 million would be taken out of the medical subsidy fund and transferred into the fund for pensions to help restore the balance.

In addition to adding financial and accounting professionals to the New Hampshire Retirement Board of Trustees, the House’s bill would also increase the minimum retirement age for public saftey workers, such as police and firefighters, to 50 instead of 45, and would require them to work for at least 25 years instead of the current 20 years before receiving retirement benefits.

Under the House bill, the changes would take place starting July 1, 2008, a deadline that has compelled many teachers and town employees to retire this year to get their medical subsidy payments.

The medical subsidy fund, however, is going to be expended in a relatively short period of time regardless if nothing is done quickly, said Marcoux.

The Senate bill going through committees presently leaves the age and time limits for retirement as is and also leaves the Board of Trustees unchanged.

Further, it would freeze medical subsidy payments for four years, at which point the payments would start up again at 4 percent increases, instead of 8 percent.

“What the Senate did, in my opinion, is they gutted (House Bill) 1645 and basically satisfied the needs of labor,” Marcoux said.

If nothing is done, towns will see significant increases in their costs toward the retirement system to pay off the $2.7 billion.

According to the New Hampshire Municipal Association’s cost calculator, Bedford’s retirement system contribution could top out at around $878,000, including the town and school district’s portions in the coming fiscal year, Marcoux said, a dramatic increase that would fall to taxpayers.

With significant tax increases for Bedford residents for this year and last year, said Bedford School Superintendent Tim Mayes, the School Board sees the increased retirement costs as another burden on taxpayers.

The board is considering, under the advisement of counsel, whether to join with the many other towns and school districts in legal action against a potential unfunded mandate forcing employers to contribute to medical subsidies, said Mayes.

Mayes said he also thinks the structure of the New Hampshire Retirement System’s Board of Trustees is important to sustaining the system, and said getting people on it who are versed in accounting and financial situations is critical.

“I think the impression that employers have is that when that was first presented as a benefit, it was clearly articulated that that part of the benefits was based on excessive earnings, and was not going to be a liability for employers,” Mayes said. “They’ve got to come up with the money somwhere.”