It’s more complicated than deciding whether to roll over your 401(k) into an IRA.

FIGURING OUT WHAT TO DO with your company pension when you retire can be quite a bit more complicated than making a plan for your employer-sponsored 401(k) plan.

Retiring workers basically have two choices when deciding what to do with their 401(k): Leave it with the company or roll it over into an individual retirement account. Financial planners generally recommend the latter, if for no other reason than you have many more investment choices in an IRA.

But with a company pension plan, your choices can range from many to none. “Every pension plan is a little bit different from the other,” says Christine Russell, a senior manager of retirement and annuities at TD Ameritrade. “When you can get the money out and how is almost completely up to the plan and how it is structured.”

While pensions remain the norm for state and federal employees, the proportion of Americans in the private sector covered by pensions has dwindled to about 13 percent, according to Bureau of Labor Statistics data. Companies began moving their workers into 401(k)s in the 1980s as they found traditional pensions too expensive, and new employers largely decided not to set up traditional pension plans.

Federal Government Employees

Federal government employees often have pensions, but they generally don’t have the option of taking a lump sum. In fact, when it comes to their pensions, they have very little to decide, says Caine Crawford, a retirement advisor based in Denver who specializes in federal employees. “They have the option to take a deferred pension if you (retire) early, prior to 62, or full retirement age,” Crawford says. “Otherwise it’s cut in stone. All you can decide is when to retire.”

Private Sector Employees

Workers in the private sector generally have more options. Russell says the first thing you should do is talk to your human resources department or the administrator who is in charge of the plan. Also, get a summary plan description to see the rules about accessing your money. You need to determine when and how you are eligible for payments and if you have the option to take a lump sum distribution and roll your plan over into an IRA. “In the 401(k) world you always have the option of rolling over into an IRA,” Russell says. “In a pension you may not have the option. You may be only able to get it out as a monthly benefit.”

Monthly Check or Lump Sum Payment

To decide which type of payment is the better option, you need to evaluate your personal situation. “Typically, your options are you can take a lump sum distribution, or you can take payments over your lifetime,” says Rich Ramassini, director of strategy and sales performance at PNC Investments. “You can take your payment over a joint life period (both spouses) or you can take your payment for a defined period of time.”

A lump sum gives you immediate access to a large amount of cash, but you become responsible for making that money last for the rest of your life. The monthly payment option can be especially beneficial to retirees who expect to live a long life, and you don’t have to worry about picking investments and potential losses. “You can request a lump sum, but you have to be careful,” Ramassini says. “The (monthly) distribution is for as long as you live.”

Single Life Benefit or Survivor Benefit Option

If you select the monthly payment, your next choice will be whether you want to receive a single life benefit or a joint and survivor benefit. Picking the first choice will result in a higher monthly payment, but when the recipient dies, the benefit stops. If the pensioner gets into an auto accident and dies a month after the pension starts, the payments will end. The spouse has to sign a consent form for this option. This rule was mandated in the Retirement Equity Act of 1984 to make sure the spouse was aware that if the pensioner died, he or she would receive nothing.

If you pick the joint life option the benefit will be lower, but if the pensioner dies, the spouse will receive a lifetime benefit. “You can, in many plans, buy a richer benefit for your spouse,” Russell says. “You might be able to use some of your pension benefits to give your spouse, instead of 50 percent, maybe 75 percent or 100 percent of what you get. It will be in the summary plan report. You can see if it makes sense to get a richer benefit for your spouse.”

Crawford says federal employees have the option of providing a surviving spouse either 25 percent or 50 percent of their pension. Their monthly benefit will be reduced by whichever amount they choose. “Statistically, if I’m a lot younger than my spouse, maybe it makes sense to weigh the cost. Does the cost of providing that benefit match the benefit?” Crawford says. “If you can provide another benefit for the same cost, like a life insurance policy, it’s worth looking into. If you have a 401(k) or Thrift Savings Plan going to a spouse, maybe they don’t need your pension.”

Period Certain Option

Some pensions allow participants to take a higher payout and receive the pension for a certain period of time, such as 10, 15 or 20 years. With this option, even if the pensioner dies, the checks will continue for his or her spouse or heirs for the remainder of the period. “We look at all the options – the annuitization option and lump sum option – as part of a comprehensive retirement plan, as opposed to one piece,” says Kristian Finfrock, founder and financial advisor with Retirement Income Strategies in Madison, Wisconsin. “Every option has advantages, disadvantages and strings attached. Look at the impact of losing a spouse. We usually advise the 100 percent continuation option if they are married.”

Several factors come into play when you’re trying to make the decision on taking a lump sum versus annuitization. “Individuals are overwhelmed with do-it-yourself retirement. Will my 401(k) last? What about Social Security? This is one of the few areas where you get guaranteed payments for life,” Russell says. “Do you have other guaranteed income for life? If not, it is something you should seriously consider.”

Those with a long life expectancy have the most to gain by setting up monthly payments for life. “If the probability that you are going to live a long life is high, (the annuity) could be the benefit that gives you the most income,” Ramassini says. “If your health is not great and you won’t have a long life span, you may want the lump sum or joint life.”