NOTHING TO SEE HERE, MOVE ALONG: Inflation Raises Expenses for Pension Funds: Cost-of-living increases are rising significantly for the first time in years, adding to retirement system liabilities.

ising inflation is driving up expenses for many large U.S. pension funds that have promised retirees cost-of-living raises.

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.

It’s called “stagflation.”