HJR 54 would apply to retirement systems that are not statewide systems, and the Statewide Emergency Services Retirement Fund. Under the proposal, membership in an affected retirement system would become a contractual relationship, and accrued benefits could not be reduced or impaired. It is unknown whether the clause stating that membership would become a contractual relationship would also inhibit the reduction or impairment of all future benefit accruals for all members of these retirement systems.

If the systems affected did not need to change their assumptions and their current assumptions were reasonably accurate for the long term, the resolution may have no actuarial impact. If circumstances suggested changes in assumptions were necessary, especially economic assumptions, plan costs and unfunded liabilities might rise significantly. Currently, plans may adjust their benefits as experience changes. Plans would no longer be able to increase retirement age, or even make minor adjustments to plan design that resulted in any loss of benefits.

A sampling of 13 major municipal plans affected by the resolution reveals that on a market basis, at the end of 2002, not a single plan has a funding ratio (assets/liabilities times 100) over 80 (a standard for a reasonably well funded plan), most are in the 60s and two have funding ratios in the low 50s. If interest returns are below assumptions for the next few years, the plans' actuarial health will further deteriorate; with 5 years of 4.5 percent interest at current contributions the funding ratios are estimated to range from 0.41 to 0.63.  Using market fund values, on a level dollar basis, employer contributions 3 times greater than current contributions are already necessary to keep some plans from deteriorating further.  

The proposal would limit the ability of the plans to increase member contributions or make benefit changes to assist in improving the actuarial health of the fund. It would supercede existing arrangements to have members partially contribute towards the cost of emerging liabilities, unless the employees agreed to continue them. This lack of flexibility may lead some plans towards significantly poorer actuarial health than they would otherwise face. In the long run this may affect the ability of the plan to pay benefits.