Rising inflation is driving up expenses for many large U.S. pension funds that have promised retirees cost-of-living raises, the Wall Street Journal reported. About half of states link pension benefits for some or all of their retired workers to changes in the consumer-price index, according to the National Association of State Retirement Administrators. With inflation reaching 7% in December, some retirement funds are now looking at increasing pension checks by 3% or more for the first time in a decade. At others, board members or state officials are approving one-time cost-of-living raises. “It’s a hot topic,” said Keith Brainard, the association’s research director. “A cost-of-living adjustment can be an expensive plan provision.” Pension funds are confronting a challenge shared by institutions and household savers alike: Just as expectations for public market investment returns are dimming, everyday costs are going up. This year, many retirement systems will book a loss on cost-of-living adjustments, rather than the annual windfall they have been seeing for years when those inflation-linked increases came in below expectations.
