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The Aerospace Corporation Evolution of a Pension Plan

April 11, 2006
Related Topics: Retirement/Pensions, Featured Article, Compensation
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Time periodParticipationPlan benefit formulaRetirement benefits
Until April 1993All employeesOne-third of benefits accrue using a traditional defined-benefit plan formula, and two-thirds of benefits accrue using a variable-benefit formula in which retirement benefits can vary and participants bear investment risk.Full retirement benefits at age 62.
April 1993-January 2005Employees hired before April 1993 remain in the original plan.

New hires are enrolled in a defined-contribution plan.
Original plan is unchanged.

Eight percent of pay is contributed to a defined-contribution plan on employees’ behalf.
Full retirement benefits at age 62 for employees in the original plan.

Retirement benefits available as governed by federal regulations and tax law.
Current planEmployees hired after April 1993 have a choice between participating solely in the defined-contribution plan or participating in a new plan that provides a mix of defined-contribution and defined-benefit plan participation.Original plan remains unchanged for employees hired before April 1993.

New plan allows employees a choice between:
--Continuing to receive a company contribution to the defined-contribution plan equal to 8 percent of salary

or
--Receiving a company contribution to the defined-contribution plan equal to 4 percent of salary and a benefit accrual in the defined-benefit pension plan designed to equal 4 percent of employees’ pay*. The same ratio of fixed and variable benefits used in the original pension plan applies to the defined-benefit pension plan.
 
Full retirement benefits at age 62 for employees in the original plan.

Employees participating solely in the defined-contribution plan can take retirement benefits at any time subject to federal regulations and tax law.

Employees hired after April 1993 and participating in the defined-benefit pension plan can get full retirement benefits from that plan at age 65.

*Because a portion of the defined-benefit pension plan is accrued using a variable-benefit formula in which benefits vary based on investment performance and participants bear investment risk, the 4 percent figure is calculated using an assumption of "acceptable investment performance," according to company representatives.

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