Retirement Overview TRW Heritage - Benefits Online

Retirement Overview

• Normal RetirementWhen can you retire?The later of:– Age 65, or– Your age on the earlier of fifth anniversary of yourparticipation in the Plan and the date you complete 3 yearsof vesting service– Effective the first day of the month coincident with or nextfollowing your normal retirement age, as described above• Early Retirement– Age 55 with 10 or more years of vesting service– Effective the first day of any month coincident with orfollowing the date you become eligible• Historical pension plans may have different eligibilitydates6

Retirement Eligibility• TRW Heritage Pension Benefit (Parts A & B)If you are at least age 55 and have at least 10 years ofvesting service, you can immediately commence your pensionbenefit using early retirement factorsIf you leave the company before reaching age 55 and have at least 5years of vesting service, you can commence your pension benefit asearly as age 55 using deferred vested factors• Northrop Grumman Pension Benefit (Parts C & D)If you are at least age 55 and have at least 10 years ofvesting service, you can immediately commence your pensionbenefit using early retirement factorsIf you leave the company before reaching age 55 and have at least10 years of vesting service, you can commence your pension benefitas early as age 55 using deferred vested factors8

Early Retirement Factors – TRW Parts A & BAgeRetire at or after age 55 with 10 ormore years of serviceHire Date Hire Date BetweenPrior to 1/1/2000 and1/1/2000 12/31/2004Terminate before age55 with 5 years ofservice or retire at orafter age 55 with 5 butless than 10 years of service65 100.0% 100.0% 100.0%64 100.0% 100.0% 93.3%63 100.0% 100.0% 86.7%62 100.0% 100.0% 80.0%61 100.0% 95.0% 73.3%60 100.0% 90.0% 66.7%59 96.0% 85.0% 62.8%58 92.0% 80.0% 58.6%57 88.0% 75.0% 54.8%56 84.0% 70.0% 51.3%55 80.0% 65.0% 48.1%9

Special Layoff Provision• If you are laid off before reaching age 55, you mayelect an early retirement benefit to begin at age 55,or the first of any subsequent month, if you have:– Attained age 53 with 10 or more years of vestingservice at the time of your layoff or– Have 75 points or higher on the date of your layoff(age + service)• Early retirement factors will be used for benefitcalculation if you meet the requirements of thisprovision10

TRW Heritage –Part A Lump Sum Option and the PPA• For retirements effective 1/1/2010 and after the newinterest rate and mortality tables prescribed by thePension Protection Act (PPA) will be phased in for lumpsum distributions• Northrop Grumman PPA Phase-In30 YearTreasuryRateCorporateBond YieldRate2009 and before 100% 0%2010 40% 60%2011 20% 80%2012 and later 0% 100%11

Northrop Grumman Pension Program:A Cash Balance Plan – Parts C and D• You earn credits toward a future benefit– “Pay Based Credit” – at the end of each month NorthropGrumman provides credits each month based on your“points” at the beginning of the month and your eligiblepay, (including overtime and bonuses), during the month– “Interest credit” – Northrop Grumman also providesinterest credits based on your balance at the beginning ofeach month• Standard pay-based credit schedule– Effective July 1, 2003 through June 30, 2008 (Part Cbenefit)• Updated pay-based credit schedule– Effective July 1, 2008 (Part D benefit)12

How It Works – Sample CalculationPay Under the Social Security Wage BasePointsUpdated SchedulePoints All Pay >SSWB

How It Works – Sample CalculationPay Over the Social Security Wage BasePointsUpdated SchedulePoints All Pay >SSWB

Converting the Cash Balance Benefit Into aLifetime AnnuityRetiring atage 60As a current employeewhose heritage pension planincludes the enhancedretirement subsidy, yourbenefit will be calculatedusing a constant annuityconversion factor of 9. Thisis based on your heritagepension plan participation onJune 30, 2003.Your balance÷Conversionfactor of 9÷12=Your lifetimemonthlypayment$137,538÷9÷12=$1,27417

Payment Options• Parts A, greater of B or C and D― Single Life Annuity― 50%, 75%, 100% Joint & Survivor with contingentannuitant― 10 years certain and continuous― Age 62 level income with single life annuity or 50%, 75%or 100% joint and survivor• Part A only— Lump sum if lump sum requirements are met attermination:– Must initiate commencement of benefits prior to the end ofservice accrual (the month of termination)18

Pension Estimates

Benefits OnLine Home PageYou canlog intoyour MyBenefitsAccesspageherehttp://benefits.northropgrumman.comAccessible via the Intranet or Internet20

My Benefits Access - Pension EstimatesFrom the drop down menu on the homepage select “Estimate RetirementIncome”21

My Benefits Access – Pension Estimates (cont’d)Will youhaveenoughretirementincome?Personalizeyourprojection22

My Benefits Access Pension Estimates (cont’d)Personalize your projection byentering your own specific detailsand/or estimated expenses afterretirement23

My Benefits Access Pension Estimates (cont’d)After you havemade all yourpersonalizedchanges, besure to click“SaveAssumptions”and then“UpdateProjection”24

My Benefits Access - Pension Estimate ResultsTo see your pension payment options select“view forms of payment”25

Pension Estimates - Forms of PaymentHistorical Benefit (Part A) examplePull downmenudisplaysHistoricaland CashBalancebenefits26

Pension Estimates - Forms of PaymentHistorical with Transition Benefit (Part B or C) example28

Pension Estimates - Forms of PaymentCash Balance Benefit (Part D) examplePull downmenudisplaysHistoricaland CashBalancebenefits29

Applying for Retirement

Requesting Your Retirement Kit• Request your retirement kit at least 2 months, (but no morethan 90 days), prior to your retirement date, by calling theNGBC or by logging in to My Benefits Access― For example, if retiring on May 5th and commencing yourpension on June 1st, you would need to initiate yourretirement no later than April 1 st• Your Retirement Specialist will review your “next steps” withyou• You will need to provide the following information:— Date of retirement— Date you want to commence your pension (1st of month)— Spouse and/or Beneficiary information:• Name• Relationship• Date of birth &• SSN31

Retirement Kit ContentsYour retirement kit contains the following:• Pension Disclosure Notice or Starting Your Pension Benefit• Pension Calculation Statement• Pension Options Descriptions• Pension Options Worksheet• Payment Delivery and Withholding Worksheet• Notice of Rights• Relative Value NoticeYou should read all materials in your kit thoroughly.32

Making Your Pension Elections• Follow instructions in the kit and make pension elections by:– Calling the NGBC or– Logging in to My Benefits Access (MBA)• After making your elections, you will receive an ElectionConfirmation Statement and a Pension Election AuthorizationForm. Review the Confirmation statement carefully.• If Confirmation Statement accurately reflects your elections,sign and return the Pension Election Authorization Form bythe deadline reflected on the Confirmation Statement.• Once pension elections have been made they are irrevocable33

Additional Benefit Plans

Retiree Medical – Heritage Eligibility• Eligibility for Heritage retiree medical was frozen as of6/30/2003- 1/1/2004 for Newport News- 1/1/2005 for TRW• If you were hired prior to the freeze date, you may beeligible for a subsidized Heritage plan. You must contactthe Northrop Grumman Benefits Center (NGBC) todetermine your eligibility.35

Retiree Medical – Access Only Eligibility• If you were hired after the freeze date, or your heritagecompany did not offer a retiree medical plan, you areeligible for Access Only Retiree Medical coverage if youmeet the following requirements:– At least age 55 with a minimum of 10 Years ofService– At least age 65 with a minimum of 5 Years of Service• Access Only offers the same medical plan options butthe costs are not subsidized by Northrop Grumman36

Benefits Continuation under theConsolidated Omnibus Reconciliation Act(COBRA)• Benefits coverage under COBRA, if elected, continues for a maximum of 18months (extensions are available under certain circumstances)– Medical coverage under COBRA automatically ceases if the employee orspouse becomes eligible for Medicare after the date of COBRA election• Your 18 month COBRA eligibility period begins on the first of the monthfollowing your last day worked• You may elect benefits continuation under COBRA only for those healthplan options that were in effect on the day before your benefits terminated– You may continue some or all of your active benefits under COBRA• COBRA is available for eligible dependents covered as of your last day ofwork37

Medicare Eligible Participants• If you and/or a dependent are Medicare eligible(because you are 65 or under 65 and disabled),you MUST enroll in Medicare Part B as soon asyour active employment ends.– Claims will be processed as though Medicare has paidprimary– Failure to enroll in Medicare B as soon as activeemployment ends may also result in an SSA/Medicareimposed penalty on all future Medicare B premiums– Visit www.medicare.gov for more information aboutMedicare• COBRA coverage is not considered active employercoverage and therefore is secondary to Medicare.38

Enrollment• If you are immediately eligible for retiree medical you may:– Immediately elect retiree medical– Defer coverage until after the COBRA period– Defer retiree medical indefinitely• If you want to enroll for Retiree Medical you must contact theNGBC to request a Retiree Medical kit– Kit will include your plan options, costs for each option andenrollment instructions• Dental and/or vision can be continued through COBRA evenafter you commence retiree medical.39

Northrop Grumman Savings Plan• You are 100% vested and entitled to the full value of your account,which includes your contributions, company matching contributionsand all earnings.• Retirement Account Contributions (for eligible employeeshired/acquired after 6/30/08) will become 100% vested after 3 yearsof service.• If your account balance exceeds $1,000, and your retirement datehas been recorded in the system, you may:- Receive payment of your entire account balance (lump-sum distribution)- Receive payment of a portion of your account balance (partial distribution)- Leave your money in the NG Savings Plan and delay taking adistribution as late as age 70½- Roll over your account balance to an employer’s qualified plan or an IRA• If your account balance is $1,000 or less, you will automaticallyreceive a lump-sum distribution 60 days following the recording ofyour retirement date in the system.– You may elect to roll over the distribution to an IRA or other qualifiedaccount if requested prior to the scheduled force-out date.40

Northrop Grumman Savings Plan – Taxes• If you elect to receive a distribution, your tax-deferred contributions,company matching contributions and all investment earnings are taxed asordinary income. Unless you elect to directly roll over your account balanceto an IRA or other qualified plan, current law requires:- 20% Federal Income Tax withholding on the taxable portion of thedistribution- May be subject to an additional 10% Federal penalty- State penalties may also apply in some cases• Your Savings Plan account will not be assessed a 10% Federal Penalty Tax if:- You are age 55 or older and elect early retirement- You are 59½ years of age or older- You roll over your distribution to an IRA or another employer’s qualified planwithin 60 days of the date you receive it– Review the Northrop Grumman Savings Plan Summary Plan Description(SPD) accessible at Benefits OnLine for more details41

Resources

Social SecurityA reduced social security benefit is available as early as age 62.Or, you can wait to receive your full Social Security benefit (basedon year you were born).Apply 3 months before benefit is to begin.• To apply for your SocialSecurity benefits:– Via the web atwww.ssa.gov– By telephone 1-800-772-1213– In person at your localSocial Security officeWhen You Can ReceiveYour Full Social SecurityBenefitAge at Which You AreEligible to ReceiveYear ofYour Full SocialYour BirthSecurity Benefit1937 or earlier 651938 65 and 2 months1939 65 and 4 months1940 65 and 6 months1941 65 and 8 months1942 65 and 10 months1943 -1954 661955 66 and 2 months1956 66 and 4 months1957 66 and 6 months1958 66 and 8 months1959 66 ad 10 months1960 and later 6743

Benefits OnLine Home PageYou canlog intoyour MyBenefitsAccesspageherehttp://benefits.northropgrumman.comAccessible via the Internet44

Northrop Grumman Benefits Center (NGBC)A call center staffed by knowledgeable representativesAvailable Monday through Friday(excluding holidays)9:00 a.m. to 6:00 p.m. ETCall1-800-894-419445

Questions?46