EX-10.(J).(IV) 11 dex10jiv.htm APPENDIX G: OFFICERS SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM Appendix G: Officers Supplemental Executive Retirement Program Exhibit 10(j)(iv)
APPENDIX G
TO THE NORTHROP GRUMMAN SUPPLEMENTAL PLAN 2
Officers Supplemental Executive Retirement Program
(Amended and Restated Effective as of October 1, 2004)
Appendix G to the Northrop Grumman Supplemental Plan 2 (the “Appendix”) is hereby amended and restated effective as of October 1, 2004, except as otherwise provided. This restatement is intended solely to clarify that the Appendix is part of the Northrop Grumman Supplemental Plan 2 and to incorporate into the Appendix previously adopted amendments to the Appendix and is not intended to make substantive changes to the Appendix.
The Appendix was last restated effective July 1, 2003. Subsequently, the Appendix was amended to (a) address the eligibility of officers of the Company’s Mission Systems and Space Technology Sectors, effective January 1, 2005 and (b) address the forms of payment available and the determination of “Eligible Pay,” effective January 1, 2004.
| G.01 | Purpose. The purpose of this Program is to give enhanced retirement benefits to eligible officers of the Company. This Program is intended to supplement benefits that are otherwise available under the Qualified Plans. |
| G.02 | Definitions and Construction. |
| | (a) | Capitalized terms used in this Appendix that are not defined in this Appendix or Article I of the Plan are taken from the Qualified Plans, and are intended to have the same meaning. |
| | (b) | Eligible Pay. Subject to paragraphs (1) through (3) below, Eligible Pay will generally be determined under the rules of the Participant’s supplemental benefit plan (for section 401(a)(17) purposes). |
| | (1) | For periods during which a Participant did not participate in a supplemental benefit plan, Eligible Pay will be determined by reference to the applicable qualified defined benefit retirement plan under which the Participant benefits. |
| | (A) | Eligible Pay will be calculated without regard to any otherwise applicable limitations under the Code, including section 401(a)(17). |
| | (B) | Eligible Pay will include compensation deferred under a Deferred Compensation Plan and in connection with the Northrop Grumman Electronic Systems Executive Pension Plan. |
| | (C) | For purposes of (B), any compensation deferred will only be treated as compensation for Plan benefit calculation purposes in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. |
| | (2) | Special Rules for Certain Participants. |
| | (A) | Former Northrop Grumman Electronic Systems Executive Pension Plan Participants. For years prior to 2002, Eligible Pay is determined by reference to the Participant’s total base salary under the Northrop Grumman Electronic Systems Pension Plan plus any bonuses that were received or would have been received had the Participant not elected to have the amounts deferred under a deferred compensation arrangement. No compensation of any kind paid or otherwise earned while employed by an entity prior to that entity becoming an Affiliated Company will be included in the Participant’s Eligible Pay. |
| | (B) | Employees of Newport News Shipbuilding, Inc. For the period beginning on January 1, 1994 and ending December 31, 2003, Eligible Pay is determined by reference to the Participant’s total base salary plus any bonuses that were received or would have been received had the Participant not elected to have the amounts deferred under a deferred compensation arrangement. |
| | (3) | If a Participant experiences a Termination of Employment before December 31 of any year, Eligible Pay for the year in which the Participant’s Termination of Employment occurs is determined in accordance with the Standard Annualization Procedure in Article 2 of the Standard Definitions and Procedures for Certain Northrop Grumman Corporation Retirement Plans. |
| | (c) | Final Average Salary for any Plan Year is the Participant’s average Eligible Pay for the highest three of the last ten consecutive Plan Years in which the Participant was an employee of an Affiliated Company and a participant in a qualified defined benefit retirement plan. For this purpose, years will be deemed to be consecutive even though a break in service year(s) intervenes. |
| | (d) | Months of Benefit Service. |
| | (1) | Months of Benefit Service will be determined under the rules of the Qualified Plans for determining Credited Service. |
| | (2) | Months of Benefit Service will continue to be counted for a Participant until the earlier of (A) or (B): |
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| | (A) | The date the Participant ceases to earn benefit accrual service under either the Qualified Plans or some other defined benefit plan of the Affiliated Companies that is qualified under section 401(a) of the Code (“Successor Qualified Plan”). |
| | (B) | Cessation of the Participant’s status as an elected or appointed officer of the Company. |
| | (3) | If a Participant is transferred to a position with an Affiliated Company not covered by a Qualified Plan, Months of Benefit Service will be determined as the Credited Service in the Participant’s last Qualified Plan. |
| | (A) | If such a transfer occurs, the Participant will continue to earn deemed service credits as if he or she were still participating under the Qualified Plan. |
| | (B) | Those deemed service credits will not be considered as earned under the Qualified Plan for purposes of determining: |
| | (i) | benefits under the Qualified Plan or supplements to the Qualified Plan other than this Program, or |
| | (ii) | the offset under Section G.05 below, including the early retirement factors associated with the plans included in the offset. |
| | (e) | The benefits under this Program are designed to supplement benefits under the Qualified Plans and are to be construed using the same principles and benefit calculation methodologies applicable under the Qualified Plans except where expressly modified in this Program. |
| | (f) | Benefits are calculated without regard to the limits in sections 401(a)(17) and 415 of the Code. |
| G.03 | Eligibility. Except as otherwise provided in (1) through (5) below, eligibility for benefits under this Program is limited to elected or appointed officers of the Company, other than Charles H. Noski. |
| | (1) | Employees of Newport News Shipbuilding Inc. will be eligible to participate under this Program effective January 1, 2004. |
| | (2) | No employees of Northrop Grumman Space & Mission Systems Corp. (formerly TRW Inc.), Component Technologies, or Premier America Credit Union are eligible for benefits under this Program. |
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| | (3) | No Participant is entitled to any benefits under this Appendix G until he or she becomes Vested under the Qualified Plans, except to the extent provided in Section G.08. |
| | (4) | No individual who is, was, or will be eligible to participate in and receive benefits under Appendix F of the Plan (the “CPC SERP”) is eligible to participate under this Program. |
Effective January 1, 2005, Section G.03 is restated in its entirety to provide as follows:
| | G.03 | Eligibility. Except as otherwise provided in (1) through (5) below, eligibility for benefits under this Program is limited to elected or appointed officers of the Company, other than Charles H. Noski. |
| | (1) | Employees of Newport New Shipbuilding, Inc. will be eligible to participate under this Program effective January 1, 2004. |
| | (2) | No employees of Vinnell Corporation, Component Technologies, or Premier America Credit Union are eligible for benefits under this Program. |
| | (3) | No Participant is entitled to any benefits under this Appendix G until he or she becomes Vested under the Qualified Plans, except to the extent provided in Section G.08. |
| | (4) | No individual who is, was, or will be eligible to participate in and received benefits under Appendix F of the Plan (the “CPC SERP”“) is eligible to participate under this Program. |
| | (5) | Notwithstanding any other provisions of this Program to the contrary, elected and appointed officers of the Company’s Mission Systems and Space Technology Sectors will be eligible to participate under this Program effective as of January 1, 2005. |
| | (a) | A Participant’s annual Normal Retirement Benefit under this Program equals the sum of (1) through (3) below, subject to the limit described in Section G.05: |
| | (1) | 2.0% x Final Average Salary x Months of Benefit Service up to 120 months ÷ 12 |
| | (2) | 1.5% x Final Average Salary x Months of Benefit Service in excess of 120 months up to 240 months ÷ 12 |
| | (3) | 1.0% x Final Average Salary x Months of Benefit Service in excess of 240 months up to 540 months ÷ 12 |
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However, if an employee performs service during his or her career in covered positions under both this Appendix G and the CPC SERP: the employee’s entire benefit will be calculated under Section F.04 of the CPC SERP and payable under the terms of that program; all benefits accrued under this Program will be eliminated; and no amounts will be payable under this Appendix G.
| | (b) | The total benefit payable is a single, straight life annuity commencing at age 65, assuming an annual benefit equal to the gross benefit under (a). The form of benefit and timing of commencement will be determined under Section G.06. |
| | (c) | If a Participant’s benefit is paid under this Program before age 65, the benefit will be adjusted as follows. The Early Retirement Benefit is a monthly benefit equal to the Normal Retirement Benefit reduced by the lesser of: |
| | (1) | 1/12th of 2.5% for each calendar month the payment of benefits begins before age 65; or |
| | (2) | 2.5% for each Benefit Point less than 85 where the Participant’s Benefit Points (truncated to reach a whole number) equal the sum of: |
| | (A) | his or her age (computed to the nearest 1/12th of a year) at the annuity starting date and |
| | (B) | 1/12th of his or her months of Credited Service under the applicable Qualified Plan (also computed to the nearest 1/12th of a year) as of the date his or her employment terminated. |
A Participant’s Vesting Service and months of Credited Service earned under the Qualified Plans (or deemed earned in the event of a transfer) are used to determine whether the Early Retirement Benefit provisions apply and to calculate the early retirement reduction.
| | (d) | Except as provided under Sections G.06(c) and G.07, no benefit will be paid under this Program if a Participant: |
| | (1) | experiences a Termination of Employment before attaining age 55 and completing 120 Months of Benefit Service; or |
| | (2) | is not an active Participant in the Plan at the time of his or her Termination of Employment. |
Notwithstanding any other provision of the Program to the contrary, a Participant who otherwise satisfies the requirements of this subsection (d) is not required to retire and commence benefits under this Program upon his or her Termination of Employment.
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| G.05 | Benefit Limit. Accruals under Section G.04 will be limited as provided in this Section. |
| | (a) | A Participant’s total accrued benefits under all plans, programs, and arrangements in which he or she participates, including the benefit accrued under Section G.04 and all plans included in Section G.05(b), may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the Participant’s benefit accrued under this Program will be reduced to the extent necessary to satisfy the limit. |
| | (1) | The Participant’s Final Average Salary will be reduced for early retirement applying the factors in Section G.04(c). |
| | (2) | The limit in this subsection may not be exceeded even after the benefits under this Program have been enhanced under any Special Agreements. |
| | (b) | The gross benefit calculated under Section G.04 above (multiplied by any applicable early retirement factor) is reduced by the retirement benefits the participant is entitled to receive (including all early retirement subsidies, supplements, and other such benefits) under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified (but not contributory or defined contribution plans, programs, or arrangements). |
| | (c) | For purposes of the offset in subsection (b): |
| | (1) | Offsets will be made: |
| | (i) | benefits accrued under any plan while a Participant is employed by the Affiliated Companies; and |
| | (ii) | benefits accrued under any plan while a Participant was employed by a company before it became an Affiliated Company; |
| | (B) | with respect to any benefit enhancements under change-in-control Special Agreements (including enhancements for age and service) that Participants have entered into with the Company (“Special Agreements”); and |
| | (i) | benefits accrued under the Supplemental Retirement Income Program for Senior Executives described in Appendix A; or |
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| | (ii) | Part II benefits under the Litton Restoration Plan and Litton Restoration Plan II. |
| | (2) | If a Participant’s benefit under this Program commences upon reaching age 65, the Participant’s benefits under all the plans and programs described in (b) above will be compared on the basis of a single, straight life annuity commencing at age 65 using the assumptions stated in Section G.09. |
| | (3) | If a Participant’s benefit under this Program commences before age 65, benefits under this Program will be offset for the plans described in (b) above by converting the benefits paid or payable from those plans to an actuarially equivalent single life annuity benefit commencing upon retirement. For this purpose, the benefit will be converted to an early retirement benefit under each applicable plan’s terms and further adjusted, if necessary, for different normal forms of benefits or different commencement dates using the actuarial assumptions of Section G.09. |
| | (4) | If a Participant previously received a distribution under one of the plans described in (b) above for a period of service that counts as Months of Benefit Service, that previously received benefit applies toward the limit under this Section. |
| | (e) | Example: A Participant elects to receive an early retirement benefit at age 55 after completing 240 Months of Benefit Service with Final Average Salary equal to $250,000. The Participant has accrued monthly benefits under the Northrop Grumman Electronic Systems Pension Plan (the “ES Plan”) equal to $2,550 payable at age 55, the Northrop Grumman ERISA Supplemental Program 2 (“ERISA 2”) equal to $600 payable at age 55, and the Northrop Grumman Electronic Systems Executive Pension Plan (the “ES EPP”) equal to $600 payable at age 65. |
The Participant’s pre-offset benefit under this Program, calculated in accordance with Section G.04, equals 35% of the Participant’s Final Average Salary ($250,000) x 75% to account for the early retirement reduction under Section G.04(c). This results in a monthly gross benefit under this Program, before the benefit limit is applied, equal to $5,468.75. The Participant’s total net benefit is calculated, taking into account the offset under (b) above, by reducing the gross benefit by the following:
| | (1) | the $2,550 monthly benefit under the ES Plan payable at age 55, subject to that plan’s conversion factors; and |
| | (2) | the $600 ERISA 2 early retirement single life annuity payable at age 55. |
| | (3) | No offset results from the ES EPP, however, because the Participant is not eligible to receive a benefit at age 55 under that plan. |
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This results in a monthly gross benefit under this Program equal to $2,318.75.
G.06 Payment of Benefits.
| | (a) | Benefits will generally be paid in accordance with Section 2.03 of the Plan. |
| | (1) | A Participant’s benefits under this Program will be paid from among the benefit forms available under the Northrop Grumman Pension Plan with respect to benefits accrued on or after July 1, 2008. |
| | (2) | In addition to all other benefit forms otherwise available under this Program, effective as of January 1, 2004, a Participant may elect to have his or her benefits paid in the form of a 75% Joint and Survivor Option. Under this option, the Participant is paid a reduced monthly benefit for life and then, if the Participant’s spouse is still alive, a benefit equal to 75% of the Participant’s monthly benefit is paid to the spouse for the remainder of his or her life. If the spouse is not still alive when the Participant dies, no further payments are made. The determination of the benefit payable under this option will be made utilizing the factors for a 75% Joint and Survivor Option under the provisions of the Northrop Grumman Retirement Plan. |
| | (b) | Except as provided in (c), benefits will commence as of the first day of the month following the Participant’s Termination of Employment or, if later, as of the date the Participant’s early retirement benefit commences under the Qualified Plans. |
| | (c) | If a Participant has a Termination of Employment because of disability before the Participant is eligible for an early retirement benefit from a Qualified Plan, benefits may commence immediately, subject to adjustment for early commencement using the applicable factors and methodologies under Sections G.04(c) and G.05(c)(3). |
| | (d) | If a Participant dies after commencement of benefits, any survivor benefits will be paid in accordance with the form of benefit selected by the Company. If a Participant dies prior to commencement of benefits, payment will be made under Section G.07. |
| G.07 | Preretirement Death Benefits. If a Participant dies before benefits commence, preretirement surviving spouse benefits are payable under this Program on behalf of the Participant if his or her surviving spouse is eligible for a qualified preretirement survivor annuity (as required under section 401(a)(11) of the Code) from a Qualified Plan. |
| | (a) | Amount and Form of Preretirement Death Benefit. A preretirement death benefit paid to a surviving spouse is the survivor benefit paid to a surviving spouse is the survivor benefit portion of a 100% joint and survivor annuity calculated using the |
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| | survivor annuity factors under the Northrop Grumman Pension Plan in an amount determined as follows: |
| | (1) | First, the Participant’s gross benefit under Section G.04(a) will be calculated and reduced, as necessary, for early retirement using the factors in Section G.04(c); |
| | (2) | Second, the target preretirement death benefit under this Program will be calculated by applying the appropriate 100% joint-and-survivor annuity factor (as provided in the Northrop Grumman Pension Plan) to the amount determined in (1); and |
| | (3) | Third, the target preretirement death benefit determined in (2) will be reduced by the preretirement death benefits, if any, payable under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified, that are otherwise included in the offsets described under Section G.05(b) such that the sum of the preretirement death benefit payments made to the surviving spouse under all plans, including this Program, will equal, at all times, the level of payments determined to be the target preretirement death benefit (subject to the benefit limit described in Section G.05(a)). |
| | (b) | Timing of Preretirement Death Benefit. |
| | (1) | Benefits commence as of the first day of the month following the death of the Participant, subject to adjustment for early commencement using the applicable factors under G.04(c). |
| | (2) | If there is a dispute as to whom payment is due, the Company may delay payment until the dispute is settled. |
| | (c) | No benefit is payable under this Program with respect to a spouse after the spouse dies. |
| G.08 | Individual Arrangements. This Section applies to a Participant who has an individually-negotiated arrangement with the Company for supplemental retirement pension benefits. Notwithstanding any other provision to the contrary, this Section does not apply to any individually-negotiated arrangements between a Participant and the Company concerning severance payments. |
| | (a) | This Section is intended to coordinate the benefits under this Program with those of any individually-negotiated arrangement. Participants with such arrangements will be paid the better of the benefits under the arrangement or under Sections G.04 or G.07 (as limited by G.05). |
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| | (b) | In no case will duplicate benefits be paid under this Program and such an individual arrangement. Any payments under this Program will be counted toward the Company’s obligations under an individual arrangement, and vice-versa. |
| | (c) | If the benefit under an individually-negotiated arrangement exceeds the one payable under this Program, then the individual benefit will be substituted as the benefit payable under this Program (even if it exceeds the limit under G.05). |
| | (d) | To determine which benefit is greater, all benefits will be compared, subject to adjustment for early retirement using the applicable factors and methodologies under Sections G.04(c) and G.05(c)(3). |
| | (e) | For purposes of (d), the individually-negotiated benefit will be determined in accordance with all of its terms and conditions. Nothing in this Section is meant to alter any of those terms and conditions. |
| | (f) | This Section does not apply to the Special Agreements. |
| G.09 | Actuarial Assumptions. The following defined terms and actuarial assumptions will be used to the extent necessary under Sections G.05 and G.08 to convert benefits to straight life annuity form commencing upon the Participant reaching age 65: |
Interest: Five percent (5%)
Mortality: The applicable mortality table under section 417(e)(3) of the Code, which would be used to calculate a lump sum value for the benefit under the Qualified Plans.
Increase in Code Section 415 Limit: 2.8% per year.
Variable Unit Values: Variable Unit Values are presumed not to increase for future periods after commencement of benefit.
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IN WITNESS WHEREOF, this Amendment and Restatement is hereby executed by a duly authorized officer on this 22 day of February, 2005.
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| NORTHROP GRUMMAN CORPORATION |
| |
| By: | | /s/ J. Michael Hateley |
| J. Michael Hateley |
| Corporate Vice President and Chief Human |
| Resources and Administrative Officer |
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