Pension and 401(k): Why Having Both Matters

A pension and a 401(k) are both retirement benefits, but they are not the same thing. More importantly, this is not an either-or issue.

We can have both.

That point matters because some younger members hear the word “pension” and think it is old-fashioned. They hear “401(k)” and think it is better because they can see the account balance, choose investments, and control contributions. A 401(k) can be a good tool. But it is not a replacement for a pension, especially when the company does not contribute anything to the 401(k).

Our pension is employer-funded retirement income. Our 401(k) is employee-funded retirement savings.

Those are two very different things.

The Short Version

A pension is designed to provide a monthly retirement benefit for life. A 401(k) is an individual investment account.

Under our We Soda LLC pension plan, the pension is a defined benefit plan. That means the benefit is calculated using a formula in the plan.

A 401(k) is a defined contribution plan. That means the final amount depends on how much money goes into the account, how the investments perform, what fees are charged, and how withdrawals are handled in retirement.

The pension gives you a formula-based monthly benefit. The 401(k) gives you an account balance.

Both can help. But they are not equal substitutes.

The Biggest Difference: Who Pays?

This is the part every younger member needs to understand.

According to the pension Summary Plan Description, the employer pays the full cost of the pension benefit. Members do not contribute to the pension out of their paycheck.

That is a big deal.

With our 401(k), members can contribute their own money, but the company does not add anything to it. That means if a member wants money going into the 401(k), it has to come from that member’s paycheck.

So when someone says, “I would rather just have a 401(k),” the first question should be:

With whose money?

If the company is not contributing to the 401(k), then losing the pension does not magically make the 401(k) better. It means members could lose an employer-funded retirement benefit and be left relying even more heavily on money they save themselves.

That is not an upgrade. That is shifting more responsibility onto the worker.

How Our Pension Works

Our pension is a defined benefit plan. That means the benefit is based on a formula, not on the stock market performance of an individual account.

The plan says eligible covered hourly employees can participate after completing one Year of Credited Service. It also says members become vested after five Years of Vesting Service. Once vested, you have earned a non-forfeitable right to a pension benefit, even if you leave before retirement age.

The monthly pension amount is based on Credited Service and the plan’s benefit formula.

For example, the SPD lists the formula for someone retiring on or after July 1, 2025 and before July 1, 2026 as:

$98.25 per Year of Credited Service

The SPD gives this example for a participant retiring at age 65 with 30 Years of Credited Service on November 1, 2025:

$98.25 x 30 = $2,947.50 per month

That example is paid as an Individual Life Annuity and may be reduced by any accrued benefit under the prior FMC plan, if applicable.

The formula also increases in later listed years:

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That is what makes a pension valuable. It is not just an account balance. It is a monthly benefit calculated under the plan.

How a 401(k) Works

A 401(k) is different.

The IRS defines a 401(k) as a defined contribution plan where employees can contribute part of their paycheck before tax or after tax, depending on the plan.

With a 401(k), your retirement money depends on several things:

• How much you contribute
• Whether the employer contributes
• How the investments perform
• What fees are charged
• When you retire
• How much you withdraw
• How long the account lasts

A 401(k) can absolutely be useful. Members should not ignore it. Starting young, contributing consistently, and letting investments grow over time can make a major difference.

But if the company does not contribute to the 401(k), then the 401(k) is mostly your own money working for you. The pension is different because the employer funds it.

That is the key distinction.

Why a 401(k) Balance Can Be Misleading

A 401(k) feels more visible because you can log in and see a number. That makes it feel real.

A pension can feel less real because younger members may not see a big account balance with their name on it. But that does not mean the pension is worth less.

A monthly pension check has value because it is designed to keep paying for life, depending on the payment form selected. To replace a pension with a 401(k), a worker would need to save enough money to create the same kind of reliable monthly income.

That is not easy.

For example, if a pension pays around $2,900 per month, that is nearly $35,000 per year in retirement income. To generate that kind of income from a 401(k), a person would need a large account balance, strong savings discipline, investment growth, and careful withdrawals.

And they would still carry the risk of market downturns, inflation, bad timing, and living longer than expected.

That is why looking only at a 401(k) balance does not tell the whole story.

Who Carries the Risk?

With a pension, the plan is responsible for funding the promised benefit. The employer contributes to the plan, and the plan uses actuarial calculations to fund future benefits.

With a 401(k), the worker carries most of the risk.

If the market drops, your account can drop. If you cannot afford to contribute for a while, your account may fall behind. If you retire during a bad market, withdrawals can hurt more. If you live a long time, you have to make sure the money lasts.

That does not make a 401(k) bad. It just means it is a different kind of retirement tool.

The strongest position for a member is having both: a pension providing monthly retirement income and a 401(k) building additional savings.

Early Retirement and the Pension Supplement

The pension SPD says normal retirement is age 65. It also allows early retirement as early as age 55 if the service requirements are met, though benefits may be reduced if started before age 62.

The plan also includes a pension supplement for certain members who retire on or after age 60 and begin benefits immediately after leaving the employer. For terminations on or after July 1, 2024, the listed supplement is $900 per month, offset by any applicable FMC pension supplement. The supplement is generally payable until age 65.

That kind of benefit is another reason members should not dismiss the pension too quickly. A 401(k) does not automatically provide that.

Payment Options Matter

The pension is paid monthly in one of several forms. If you are single, the automatic form is generally an Individual Life Annuity unless another option is elected. If you are married, the automatic form is generally a 100% Joint and Survivor Annuity unless another option is elected with proper spousal consent.

Those choices matter because some options pay more per month, while others provide protection for a spouse after the participant dies.

A 401(k) usually works differently. It is an account that you draw from. Unless you use the money to purchase an annuity or follow a strict withdrawal plan, it does not automatically create a lifetime monthly check.

Is the Pension Guaranteed?

No retirement benefit should be described as risk free.

The pension SPD says benefits under the plan are insured by the Pension Benefit Guaranty Corporation, or PBGC, a federal insurance agency. If the plan terminates without enough money to pay all benefits, PBGC may step in to pay pension benefits, up to legal limits.

That protection is important, but it is not unlimited. The SPD says PBGC generally does not cover benefits above the legal maximum, some recent benefit increases, benefits that are not vested, certain early retirement payments, and some other benefits.

A 401(k) is different. PBGC does not insure defined contribution plans like 401(k)s.

Why This Matters for Younger Members

Younger members have the most time to build retirement security, but they also have the most to lose if they undervalue the pension.

It is easy to think, “I am young. Retirement is far away. I would rather control my own money.”

Control matters. But employer-funded retirement income matters too.

If we lose the pension, younger members do not automatically get a better 401(k). They could simply lose an employer-funded benefit and be left with a 401(k) that depends on their own paycheck contributions.

That is the part that needs to be said clearly.

A 401(k) is a good supplement. It is not a guaranteed replacement.

Bottom Line

Our pension and our 401(k) are not enemies. They are different tools.

The pension is employer-funded, formula-based, and designed to provide monthly retirement income. The 401(k) is employee-funded, investment-based, and depends on contributions and market performance.

The best retirement position is having both.

So before anyone says a 401(k) is better than a pension, they should ask three questions:

1. Is the company contributing to the 401(k)?
2. How much would I need to save to replace a lifetime monthly pension?
3. Who carries the risk if the market drops or the money runs out?

Those questions change the conversation.

Because this is not just about retirement language in a contract. It is about whether members keep an employer-funded benefit that can help provide income for the rest of their lives.

Sources

• Genesis Alkali, LLC Union Retirement Plan Summary Plan Description, amended and restated January 1, 2025, for Green River hourly employees. Note: this is the official SPD title of the document reviewed.
• U.S. Department of Labor, “Types of Retirement Plans”
• U.S. Department of Labor, “FAQs about Retirement Plans and ERISA”
• IRS, “Retirement Plans Definitions”
• IRS, “Defined Benefit Plan”
• PBGC, “How are pensions and 401(k)s different?”
• PBGC, “Understanding Your Pension and PBGC Coverage”