Intermediate Accounting III ACC305
19 November, 2011
Coca Cola and Pepsi are the two most popular and widely recognized beverage brands in the United States. Pepsi and Coca Cola contrast each other on their taste, its associated colors and themes, and ingredients. Even the pension plans and funding status are a competitive comparison.
1. Compare the pension plans of Coca-Cola and PepsiCo, including type of plan and funded status at 2007 year-end.
PepsiCo, Inc. has a voluntary defined benefit pension plan that includes all full time U.S. employees and some international employees. This plan is a noncontributory plan; the employer is the only contributor funding the plan therefore they bear the entire cost of the plan. This plan is a qualified pension plan allowing tax incentives for employer contributions which are calculated based on employees years of service or a combination of service and income. In addition, PepsiCo offers medical and life insurance benefits and a retiree medical plan that are only funded on a “pay as you go” basis. These plans are not generally funded by the employer since they do not fund plans where no tax benefits are received. A specific dollar amount is assigned as a “cap” for employer payments the remaining funds are received from the retiree.
Coca Cola has a defined contribution plan that includes all U.S. employees and some international employees. This is a contributory plan; both the employer and the employee make contributions. This plan offers substantial tax benefits for the contributions made by the employer. In addition, Coca Cola also has a defined benefit pension plan. This plan is considered a nonqualified, unfunded plan primarily for the organizations officers, most U.S. employees, and some international employees. This plan offers no tax benefits for contributions made by the organization. In 2007, Coca Cola amended this plan to reduce exposure.... [continues]
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