Final answer:
Annual pension cost is true; it is the required contribution by an employer to ensure the pension fund is adequately financed. Defined benefits pensions offer fixed payments, which may lose purchasing power due to inflation. They are increasingly replaced by defined contribution plans like 401(k)s, providing potential inflation protection. It is true
Step-by-step explanation:
The statement is true: Annual pension cost is indeed the actuarially determined amount that an employer should contribute in the current year to maintain adequate funding status. Pensions, often referred to as defined benefits plans, provide fixed annual payments that do not increase over time.
This can lead to a decrease in purchasing power due to inflation. On the other hand, pensions have been increasingly replaced with defined contribution plans like 401(k)s and 403(b)s where the employer's contribution is fixed, and the funds are invested in various investment vehicles. These contribute to a retirement account that's tax-deferred and portable, potentially mitigating inflation risks associated with traditional pensions.