Dear Corporate Pension Actuary: While I know that tariffs will impact the price of goods, I’m not clear on how they might impact the costs of our employee benefits programs, especially our pension and healthcare plans. What should I be thinking about to proactively address the impact on our benefits programs and the employees who participate in them?

-Concerned About Costs and Disruption

Dear Concerned,

Recent tariffs imposed by the U.S. are expected to impact economies around the world. Even though the U.S. market has bounced back since tariffs were announced, businesses and consumers may eventually share the impact of cost increases and market volatility. As a result of these impacts, benefit plans could be caught in the crossfire. There are a few things you can do to prepare for the potential outcomes of the global trade environment.

1. Pension plans may experience shifts in funded status.

• If you sponsor a defined benefit plan, tariff-fueled market volatility can result in unexpected shifts in your funding levels, potentially leading to increased costs and cash contributions.
• Action tip: Review your plan’s funded status regularly and talk with your actuary about de-risking options available to mitigate volatility. Stress testing market shocks could help identify the best options.

2. Healthcare costs could creep up, and employees could face disruption in coverage.

• Most healthcare is local and not directly impacted by tariffs, but tariffs could impact certain imported products. Medical devices have experienced some price impact, but those costs represent a small percentage of plan sponsor medical spend. So far, prescription drugs have been exempt from tariffs, although the administration has communicated plans to implement them for the EU effective September 1st and floated significant tariffs in general. Tariffs on prescription drugs, if significant, could raise your plan’s costs and increase the potential for disruption.
• Action tip: Work with your benefits consultants, carriers, and/or pharmacy benefit managers (PBMs) to identify any exposure and find ways to mitigate disruption and cost increases—like formulary adjustments.

3. Your people are watching.

• Even if the benefits themselves don’t change, the stress of tariffs and market instability can pressure your employees, especially those near retirement with 401(k)s. Some may have to save less due to increased costs of living, while others may make investment decisions that are less than ideal for retirement security.
• Action tip: Consider offering financial wellness programs, webinars, or in-person meetings with advisors to calm nerves and help your employees stay focused on the long term.

4. Keep communication clear and calm.

• During times of uncertainty, be proactive about updates—even if it’s just “we’re monitoring the situation.” Transparency builds trust.
• Action tip: Team up with benefits consultants to help with messaging and Q&A materials in case changes are needed.

Bottom line: Tariffs don’t just affect supply chains—their impact can ripple into retirement plans, healthcare, and employee confidence. A few solid steps now can keep your benefits steady and your team assured.

- Your Milliman Actuary

This edition of Dear Actuary was written by Vanessa Vaag FSA, EA, MAAA and Marcella Giorgou FSA, EA, MAAA.