Northrop Grumman Corp. will phase out by 2015 two programs intended to lure executives with supplemental retirement contributions, according to a Dec. 21 report filed with the Securities Exchange Commission.
Effective Dec. 31, 2014, Northrop Grumman (NYSE: NOC) will freeze accrued benefits of those that participate in the supplemental executive retirement programs for officers and for members of the Corporate Policy Council, the latter of which includes corporate vice presidents and division presidents. These programs provide supplemental pensions upon retirement that are calculated using a formula that takes into account both average salary and years of employment or participation on the council.
Such programs are typically used by larger corporations to provide top executives with retirement benefits above the IRS limitations that more closely mirror their working income. This makes them an easy target for spending hawks that feel executive compensation is excessive. For CEO Wes Bush, the combined value of his participation in the supplemental executive retirement programs as of fiscal 2010 was $4.82 million, according to an April 2011 proxy statement filed with the SEC.
At Northrop Grumman, supplement executive retirement programs were among the qualified pension plans that were closed to new entrants in 2008, but remained available to existing executives. According to the Dec. 21 SEC filing, current participants will transfer to Northrop Grumman’s Officers Retirement Account Contribution Plan on Jan. 1, 2015, which functions more like a standard retirement account that includes a company contribution.
An official with Northrop Grumman could not be reached for comment.