Northrop Grumman Pension Plan

Cash balance plan crediting monthly pay credits equal to 6% to 9.5% of monthly income (scaled by age and years of service; lower rates of 4.5% to 8% for employees hired on or after January 1, 2004 but before July 1, 2008) plus annual interest credits applied to the hypothetical account balance. Grandfathered participants from predecessor final-average-pay programs receive the greater of (a) their crystallized FAP benefit as of December 31, 2014 or (b) their accumulated cash balance account. Benefits are payable as a single-life annuity, joint-and-survivor annuity, or as a lump sum under the Optional Total Benefit option.

This is general educational information about how the plan's formula works, not a calculation of your individual benefit. Your actual benefit depends on your service, pay history, and the plan terms in effect during your employment.

Am I still earning pension benefits at Northrop Grumman?

If you were hired before July 1, 2008, yes. Your cash balance account receives monthly pay credits (6% to 9.5% of income, depending on age and service) plus annual interest credits. Employees hired on or after July 1, 2008 are not eligible for the pension and instead receive enhanced employer contributions to the Northrop Grumman Savings Plan. Three years of service are required to become vested.

Can I take my Northrop Grumman pension as a lump sum?

Yes. The plan offers annuity options (including a 100% joint-and-survivor annuity) and a lump sum under the Optional Total Benefit option. For cash balance participants the lump sum generally equals the vested account balance. Lump sum amounts are sensitive to IRS segment rates, so higher prevailing interest rates reduce the present-value lump sum and the timing of a retirement election can materially affect the amount received.

What happened to the old final-average-pay formula?

Northrop Grumman transitioned its primary pension formula to a cash balance design. Participants who had accrued benefits under predecessor final-average-pay plans (from legacy entities such as Litton Industries or TRW) had those benefits crystallized as of December 31, 2014. After that date, all future growth occurs through cash balance pay credits and interest credits. At retirement you receive whichever amount is larger: your frozen FAP benefit or your total cash balance account.

Is my Northrop Grumman pension protected by the PBGC?

Most single-employer defined benefit pensions are insured by the Pension Benefit Guaranty Corporation (PBGC), a federal agency. If a covered plan terminates without enough money to pay promised benefits, the PBGC pays benefits up to a legal maximum that varies by age. Benefits that have been transferred to an insurance company through a pension risk transfer are no longer PBGC insured and are instead backed by state guaranty associations.

Should I take my Northrop Grumman pension as a lump sum or an annuity?

There is no single right answer. The decision depends on your health and life expectancy, your other retirement assets, whether you need to provide for a survivor, and the interest rate environment that sets the lump sum value. Our lump sum versus annuity guide walks through the trade-offs in detail.