Updated: March 9, 2020.
Many individuals who live in Atlanta, Georgia, work at Coca-Cola, one of the few organizations that still offers an employee pension in America. Many companies have phased out defined benefit pension plans in favor of defined contribution plans – like a more traditional 401(k). However, Coca-Cola still offers both a pension plan and other retirement savings options (like a 401(k)) to qualifying employees. Some sources even indicate that employees vest in the plan after working there for just a few years.
If you have a pension through Coca-Cola or another employer, it’s important that you understand what your pension benefit is, and how to pick a payout option that works for you and your family when you retire.
A pension is a defined benefit plan. Companies offer pensions to give their employees an incentive to stay with the organization for several years (at least). Unlike a 401(k), or other defined contribution plan, pensions are fully funded by your employer. That’s right – you don’t have to do anything to earn a benefit during retirement. Your company is essentially assuring a monthly payout (or a lump-sum payout, if that’s what you request), and all you have to do is keep showing up for work.
However – there’s a catch. You don’t automatically get a pension benefit the minute you get hired. Typically, companies will have a vesting schedule that allows you to participate in the company pension plan after you’ve worked there for a certain amount of time.
If you work at Coca-Cola, they have a few specific requirements in order to become eligible for your pension plan:
You are not eligible to access the Coca-Cola pension if:
Within the Coca-Cola pension plan, there are two services available:
The eligibility service determines whether or not you’re eligible to participate in the plan. The vesting service helps to determine whether or not you’re “vested” in the plan. To vest, you must either have completed three years of vesting service or reach age 65 after one year of qualifying employment.
If you’re “fully vested” in your company’s pension plan, it means you own your portion of the plan, and are entitled to the benefit when you retire. Every company has a different vesting schedule – but typically they fall into one of two
Cliff vesting means that after you complete a certain number of years with the company, you’ll be fully vested. This is a relatively straightforward way of looking at your pension. More often than not, though, companies who still offer a pension have it set up on a graduated vesting schedule. This means that you vest a little bit at a time over time.
For example, after three years you might vest 20%. After five years, you may have vested 40% – and so on. This means that if you work for your company for a few years, and vest in a percentage of your pension, you’ll only receive that percentage of your benefit during retirement.
You have a few different payout options available to you when you retire:
Lump sum is exactly what it sounds like. You take a lump sum payment of your entire pension benefit when you retire – and can invest it as you so choose on your own. If you take this pension option, you should likely roll this money over into an IRA, otherwise you could have a significant tax bill due as all of this money could be treated as income in the year you receive it.
Single-life benefits offer a monthly payment for the entirety of your life. But the benefit payments go away at the end of your life, regardless of when that happens.
Joint and survivor pension benefits offer a reduced monthly benefit for the entirety of your life – but they continue to pay that reduced benefit after you pass away to your spouse or partner. Currently, the Coke pension plan offers 3 joint and survivor benefit options:
The larger the survivor benefit, the smaller your benefit will be.
For instance, let’s say your single life benefit payment is $3,100 per month. Your 50% joint & survivor benefit might be $3,000 and your survivor would get 50% or $1500. Your 75% joint & survivor benefit might be $2,900 and your survivor would get 75% or $2,175. And if you elect the 100% joint and survivor benefit, your payment might be $2,800 and your survivor would also get $2,800, or 100%.
Coca-Cola offers a wide range of benefits – a pension is just one of them! They also offer an employee retirement plan – a 401(k) that you contribute to, and can receive a matching contribution from the company (typically 3% matching). Additionally, Coca-Cola offers a gift matching program up to $10,000 per employee on a 2-for-1 basis.
These are just the benefits that directly impact your finances. It’s also important to check out what health benefits you might have, and any company discounts that are available to you – like their automobile discount program.
Working for a big, international company certainly has its perks. But your pension isn’t the only way you can plan for retirement. Combining your pension with Social Security benefits, retirement savings in a workplace 401(k) account or other retirement savings vehicle, can help you to create an ongoing income stream for you and your family during retirement.
Want to learn more about planning for your ideal retirement? Schedule a consultation with me today to learn about the best ways for you to maximize your benefits to reach your retirement goals.