The answer to this question says the active lives are more sensitive to inflation.
Surely retired lives, with a fixed annuity are, given inflation will erode this. And active lives have wage growth, which has an element of inflation in it
CFa answer below:
Benefit payment obligations in the retired-lives pool are exposed to less inflation risk because, unlike the active-lives pool, payments are fixed in nominal terms and do not adjust for inflation. Benefit payment obligations in the active-lives pool are exposed to more inflation risk than in the retired-lives pool because, unlike the retired-lives pool, active Titan employees accrue pension benefits based on salary increases, which include inflation as a component.
You’re looking at this from the wrong perspective. What matters in this context is the effect inflation can have on the pension plan’s liabilities. If a pension plan offers payments to retirees that are indexed to inflation, the plan has to worry about unexpected inflation increases, as it will be a cost to the plan (higher payments). Thus the plan would mimic the uncertainty of this liability with real rate bonds (TIPS).
But the plan in this case does not, so inflation is not a concern for retirement payments. These payments are fixed and the liability can be mimicked with nominal bonds. However, wage inflation IS a concern for active participants who are still accruing benefits, as benefit values are usually tied to the participant’s wage income (higher wages = higher accrued pension benefits the plan is obligated to pay in the future).