Inflation Moderately Pressures US Public Pension Liabilities

The high inflation environment in the US is likely to have only moderately negative effects on state and local government public pension plan liabilities via automatic cost of living adjustment (COLA) mechanisms but will pressure plans through weakening asset performance and rising payroll costs, Fitch Ratings says. Market value smoothing and supplemental pension contributions by some governments this year from budget surpluses will help partially mitigate these challenges. While automatic COLA provisions differ across plans, those plans that provide them...