The pension estimator has been updated to include the calculation of lump sum benefits using the new interest rate and mortality tables prescribed by the Pension Protection Act (PPA) for retirements effective on or after January 1, 2010. Online estimates are now available for many employees at My Benefits Access. Employees who are unable to access the online calculator, such as rehires, participants with multiple heritage plan benefits or participants with nonqualified benefits may call the Northrop Grumman Benefits Center (NGBC) at 1-800-894-4194 for a pension estimate.

The Pension Protection Act (PPA) prescribes how to calculate minimum lump sum payouts from a pension plan.  Following are commonly asked questions our employees have on how the PPA will impact their pension benefit.

What plans feature a lump sum payment option that will be impacted by the new interest rate calculation under the PPA?

The Northrop Grumman Space & Missions Systems Corp. Salaried Pension Plan (heritage TRW) offers a lump sum payment option for the Part A benefit.

The Westinghouse (ES) pension plan also offers a lump sum payment option for service prior to January 1, 1994. As such, it represents a small amount of the total benefit from this Plan.

What interest rate is used in calculating a lump sum payout?

Northrop Grumman will implement the new interest rate calculations for retirements effective on or after January 1, 2010 using the following phase-in schedule:

Current interest rates will be used to estimate your benefit regardless of your intended retirement date.  Note that if you are planning to retire at a later date, we cannot estimate future interest rates.  Your lump sum estimate will change as interest rates fluctuate.

Can Northrop Grumman choose not to offer a lump sum payment option?

Northrop Grumman opted to maintain the lump sum benefit option for certain heritage pension plans. However, the PPA requires that if the funding level of a pension plan falls below 80%, lump sums and other accelerated forms of distribution under the plan are likely to be restricted to less than the full benefit amount, with any remaining amount required to be paid in the form of an annuity.  If the funding level falls below 60%, the plan may pay benefits only in the form of an annuity, as lump sums and other accelerated forms of distribution (such as level benefit options) must cease.  If the funding level falls below 60%, future benefit accruals must also stop.  Northrop Grumman is aware of the impact these restrictions would have on plan participants and takes this into consideration when determining discretionary contribution amounts to the retirement plans.  Funding levels are measured annually and participants are notified of the plan’s position through an Annual Funding Notice that must be distributed to participants no later than April 30th. 

I am considering retiring in 2011.  Will I be able to get a pension estimate with a future retirement date?

You will be able to get an estimate with a future retirement date utilizing today's applicable interest rate under PPA appropriately weighted between the 30-Year Treasury Rate and Corporate Bond Yield Rate. Since we cannot predict future interest rates, we cannot illustrate how a lump sum pension benefit may change over time.

What is the purpose of the Pension Protection Act?

PPA was a comprehensive bill focused mainly on funding of pension plans. One of the provisions addressed establishing minimum lump sum requirements. Participants could, and often do, outlive the benefit as life expectancies increase. With investments uncertain, participants assume a large risk by electing a lump sum payment option.

Can Northrop Grumman choose to delay the implementation of the PPA lump sum provisions?

Congress provided for phase-in by 2012, with a standard phase in as of 2008.  Northrop Grumman did not elect to begin phase-in for 2008 because federal guidelines were not issued until November 2007.  The Company elected to continue to use the 30-year Treasury rate to calculate 2009 lump sum payouts and will phase-in the new interest rate calculation January 1, 2010.

Does the PPA require new mortality tables to be used in the lump sum payout calculation? 

Yes.  Northrop Grumman will use the new mortality factors effective January 1, 2010.

Is Northrop Grumman required to adopt the corporate bond yield rate to calculate lump sum payouts?

No. Northrop Grumman could use an interest rate that provides a higher benefit to participants.  However, the Company has chosen to follow PPA guidelines in order to maintain protections afforded by the PPA.  In addition, our government customers may not be willing to reimburse us for the difference between the 30-year treasury rate and corporate bond rate.