Abstract
Economists in and out of government generally agree that the Consumer Price Index (CPI) overstates the true annual inflation rate by as much as 1%. While proposals for a readjustment of the index are stalled for now, the cry for a downward revision of the CPI is likely to be revived since it would affect a wide range of government and private-sector payments. Thus, the impact on employers of a downward revision in the future is worth examining. Obviously, a change in CPI measurement would have a direct impact on retirement plan sponsors' costs; however, the authors point out that a modest change would be a non-event with regard to the initial benefit workers would receive upon retirement. And a downward adjustment of the CPI would lower the cost to employers of providing certain healthcare benefits.
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