Frequently Asked Questions (FAQs) ULA RETIREMENT PLANS ULA PENSION PLAN FOR HOURLY REPRESENTED EMPLOYEES ULA 401(K) SAVINGS AND RETIREMENT PLAN

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1 Frequently Asked Questions (FAQs) ULA RETIREMENT PLANS ULA PENSION PLAN FOR HOURLY REPRESENTED EMPLOYEES ULA 401(K) SAVINGS AND RETIREMENT PLAN Updated: April 28, 2015 Changes since last update are in Red To succeed and secure our future, we must win BOTH government and commercial business. To accomplish this, we must do it together. Our country has challenged us to use an all-american engine and growing demands for commercial space flight require a more cost-effective rocket. This is a worthy challenge. To meet this challenge, we have taken a hard look at what we have to let go of or leave behind as we move forward. We believe we must freeze the pension for all employees to secure our place as the go-to provider for launching people and one-of-a-kind payloads into space well into the future. We all must share in this sacrifice. We will freeze the Salaried Pension on Jan. 1, In the proposed contract, we are seeking to freeze the ULA Pension Plan for Hourly Represented Employees effective Jan. 1, Change can be difficult. However, we have replaced your traditional pension with a package that will help fund your retirement income. In addition, employees will be able to easily determine how much money is set aside in their individual account, to save and manage their retirement assets as they choose, and to take that money with them wherever they go. Here are some questions and answers you may find helpful. We will update this FAQ as we receive additional questions. Q. 1 What happens to my retirement benefits under the proposed contract? A. 1 It depends on your date of hire. For employees hired prior to Jan. 1, 2013: Pension Plan: Under the current proposal, the benefit multiplier used to calculate your pension benefit will be increased to $95 effective May 4, Effective Jan. 1, 2017, your pension benefit will be frozen, which basically Page 1

2 means that the $95 benefit rate and your years of benefit service will be permanently fixed as of Dec. 31, 2016, and your pension benefit will be calculated based on those numbers. Any company service earned or wage increase after that date will not increase your benefit amount. You will keep all vested pension benefits you have accumulated as of Dec. 31, This benefit continues to provide a monthly income stream upon commencement of retirement. New 401(k) Feature: Under the current proposal, effective Jan. 1, 2017, ULA will make guaranteed quarterly (four times a year) contributions to your 401(k) account through a new feature called the ERSC. The ERSC contributions will be equal to $800 per quarter, and will occur whether or not you elect to defer any of your own compensation to your 401(k) account. In addition, ULA will enable you to defer your ratification bonus into your 401(k) account subject to the IRS limits. You will invest and control the funds in the ERSC. 401(k) Company Match: For those employees hired before Sept. 1, 2006, the company match on your 401(k) contributions will be increased to 60 percent of your 401(k) contributions, up to 8 percent, effective Jan.1, You will continue to invest and control the funds in your 401(k). For employees hired after Jan. 1, 2013: The ULA Pension Plan for Hourly Represented Employees already is closed to employees hired after Jan. 1, You already are receiving the guaranteed quarterly ERCS payments and the ULA match of 60 percent of first 8 percent you contribute into your ULA s 401(k) Savings Plan. In the proposed contract, we will increase the guaranteed quarterly ERCS payments into your 401(k) account to $600, effective Jan. 1, Effective Jan. 1, 2017, the ERSC payment will increase to $800 per quarter. ULA will enable you to defer your ratification bonus into your 401(k) account subject to the IRS limits. You will continue to invest and control the funds in your 401(k). Q. 2 Who will be affected by the pension freeze? A. 2 All IAM represented employees who were hired or rehired before Jan. 1, IAM represented employees hired since Jan. 1, 2013, already receive the ERSC instead of the pension plan. Page 2

3 Q. 3 What does freezing my pension mean? A. 3 You will keep all pension benefits you have accumulated as of the freeze date. Your pension multiplier and service as of the freeze date will not increase your pension benefit going forward. The benefit payable at your normal retirement will become fixed as of the freeze date. Q. 4 What about the non-represented employees? A. 4 The ULA Salaried Pension Plan was closed to new employees on Jan. 1, 2012 and will be frozen effective Jan. 1, This freeze will affect everyone in the plan including the CEO, COO and all executives. Q. 5 Can ULA take away the pension I have already earned? A. 5 No. ULA cannot take away your vested pension benefit. At retirement, you will be eligible for all benefits you will have earned under the pension plan through Dec. 31, Q. 6 Will my retirement income still be sufficient to support me after this change? A. 6 Refer to the Appendix A below, which illustrates the retirement income generated by the proposed contract under different scenarios. You should regularly assess the progress you are making toward your retirement goals. Q. 7 Does this proposed contract mean that I need to retire early to maintain my pension plan benefits? A. 7 No. You are not required to retire before the pension freeze goes into effect to preserve your pension plan benefits. Page 3

4 Q. 8 What if I do not have five years of service when the pension is frozen? Will service after Jan. 1, 2017 count toward vesting and early retirement eligibility? A. 8 After the freeze, you will continue to earn vesting service which will count toward vesting and early retirement eligibility (based on age and years of service). If you are not vested at the freeze date, you will still have the opportunity to vest as you work additional years at ULA. Q. 9 What happens to my pension if ULA goes out of business? A. 9 All of ULA s pension plans, including the plan for IAM represented employees, have assets set aside in a Master Pension Trust to pay pension benefits. The trust assets will not be affected or diminished should ULA go out of business. In addition, should ULA go out of business, ULA could turn over the assets, and the responsibility for your pension, to any one of several entities, such as an annuity provider or the Pension Benefit Guarantee Corporation (PBGC), who would then administer your plan and pay your retirement benefits. Q. 10 Are retirees or former employees affected by these changes? A. 10 No. Retirees and former employees are not affected by the pension freeze as their retirement benefit is already fixed as of their retirement date. Q. 11 How does this new ERSC plan compare to the retirement plan instituted for IAM represented employees hired since 2013? A. 11 This new ERSC plan is identical to the current new hire plan ensuring a consistent approach to retirement benefits going forward for all IAM represented employees. Under the proposal, effective Jan. 1, 2017, the ERSC quarterly contribution will be $800 for all employees, regardless of hire date. Page 4

5 Q. 12 What is the Employer Retirement Savings Contribution (ERSC)? A. 12 The ERSC is a company-funded contribution that will become an additional component of your ULA 401(k) Savings and Retirement Plan. Each quarter, the Company will make an automatic ERSC retirement contribution to your 401(k) savings account. IAM represented employees hired or rehired since 2013 already participate in the ERSC plan. Q. 13 How can I make the most of ERSC? A. 13 Starting in 2017, you will have more direct control in deciding how to invest and manage your future retirement benefits. We are providing tools and resources to help you assess the impact of these changes on your retirement income and make adjustments, if necessary, to meet your financial goals, whether you are near retirement or many years away. The impact of the transition to ERSC will vary depending on your age, length of service, accumulated savings and other personal financial factors. See Question 18 for more information on how to access the retirement resources. Q. 14 What are my investment options for ERSC? A. 14 Your investment options for ERSC will be the same as those available for the ULA 401(k) Savings and Retirement Plan. All contributions (yours, company matching, rollover and ERSC) will be combined and invested according to your investment elections. You will not need to make new investment elections unless you have never participated in the ULA 401(k) Savings and Retirement Plan or you choose to do so. Q. 15 Does this mean I will have two 401(k) accounts, a ULA 401(k) savings account and an Employer Retirement Savings Contribution (ERSC) account? A. 15 No. You will have one account within the ULA 401(k) Savings and Retirement Plan, with separate benefit components: Your pre-tax contributions Your after-tax contributions The company-matching contributions Your rollover contributions, if any The ERSC automatic company retirement contributions Page 5

6 The first four are immediately vested; the ERSC requires you to have three years of service (including recognized heritage company service) to be vested. All employees hired before Jan. 1, 2013 will have at least 3 years vesting service when the plan freezes on Jan. 1, Q. 16 What is the benefit to ULA of freezing the pensions for all employees? A. 16 Pension costs are included in the cost of each rocket we sell. Our pension expenses continue to grow and already add significant cost to each rocket. ULA will not be able to build a $100 million commercial rocket if we cannot contain pension costs. The proposed contract will allow us to control pension costs and still offer employees a path to achieve a significant retirement income. Q. 17 Can ULA pay out my pension benefits to me as soon as the plan is frozen? A. 17 No. By law, the plan cannot pay out a pension until the employee leaves ULA s employment and meets the terms of the plan regarding commencement of benefits. Q. 18 Where can I find additional information and tools so I can manage my retirement goals? A. 18 You can use the following: Pension Estimator: Employees can access the pension estimator through ULA Benefits Web. It is located under the Pension Tab. The estimator can calculate your accrued benefit or you can calculate a benefit projection at various termination and retirement dates. Retirement Income Modeler: Employees can access the retirement income modeler through the ULA Benefits Web. It is located under the Total Rewards and then by selecting Lifetime Planner from the options on the left column. The retirement income modeler estimates employees total retirement income, combining employees pension and Social Security annuities and 401(k) savings account balances. The pension calculator estimates the employees pension at various termination and retirement dates. Page 6

7 Retirement Planning Seminars: Retirement planning sessions will be offered this fall at each location. You will have the ability to attend financial seminars and to talk to a financial planner during a one-on-one session. Additional financial planning services are available for a flat fee. These sessions are delivered by Voya, ULA s 401(k) vendor. ULA will be providing these seminars on an annual basis. If you have questions about any of these tools, please call the ULA Benefits Center at Q. 19 What happens to my current pension and the new Employer Retirement Savings Contribution (ERSC) when I die? A. 19 Under the pension plans there are survivor spouse benefits. You are unable to give your pension benefits to anyone other than a spouse. Under the ERSC, which is in your 401(k) account, you can designate one or more beneficiaries and the total account will go to those beneficiaries. Q. 20 What does cliff vesting mean? How does it affect me? A. 20 An employee is considered "vested" in an employer benefit plan once the employee has earned the right to receive benefits from that plan. Cliff vesting is when an employee becomes fully vested after a specified time. The Hourly Pension Plan has a five-year cliff vesting schedule. Employees are vested in their pension benefit after they have earned five years of vesting service. If an employee leaves the company before becoming fully vested, he or she would forfeit their accrued retirement benefits. The Employer Retirement Savings Contribution has a three year cliff vesting schedule. For example: On Jan. 1, 2017, employees hired on or before Jan. 1, 2014, will have met a three-year cliff vesting period. On Jan. 1, 2017, employees hired on or before Jan. 1, will have met a five-year cliff vesting period. Employees are affected only if they terminate employment prior to being fully vested. Page 7

8 Q. 21 When calculating ULA pension years of service, are heritage years counted or is that a separate pension? A. 21 For the Hourly Pension Plan, benefit service is earned while working for a bargaining unit that is covered under the plan whether at ULA or your heritage company. Benefit service from the heritage company is recognized as long as the service was with a bargaining unit covered by the plan and prior to Dec. 1, Please refer to the Summary Plan Description for your covered group (Space Systems, IAM 725 or IAM 44). You can check your benefit and vesting service on the ULA Benefits website: under the pension tab or call the ULA Benefits Center at Please note that some employees have worked for other Boeing or Lockheed Martin groups that were not covered by the Space Systems Plan, IAM 725 Plan or the IAM 44 Plan, and that service is still at either Boeing or Lockheed under other pension or savings plans that they sponsor. Q. 22 Will the time an IAM-represented employee is on strike affect retirement benefits? A. 22 In general, the time that an IAM-represented employee is on strike will not count towards the accruing of vesting service nor the accruing of credited service for the year. The rules governing the accrual of vesting service and credited service depend on the plan you participate in. Please refer to your pension plan s Summary Plan Description (SPD) for additional rules governing service accrual. Page 8

9 Appendix A (Illustration of retirement income generated by the proposed contract under different scenarios) Retirement Income for IAM Represented Employees Sample Employee 1 Age 35 with 5 Years at January 1, 2017 Retires at Age 62 Age 62 Monthly Benefit Pension Plan $ 404 Age 62 ULA 401(k) Savings and Retirement Plan Account Balance 2 401(k) Employee Savings $ 635, (k) Employer Match Contributions 381,000 ERSC Contributions 258,000 $6,000 RAT Bonus deferred to ERSC 37,000 Savings Plan Total $ 1,311,000 1 The following assumptions are used in this illustration: - Hourly wage is $26.50 ($55,120 annually) - Pay increases 3% per year (includes GWI, ARP and COLA) - Employee 401(k) savings rate is 8% of pay; savings began at hire and continue until retirement - Employer 401(k) match remains at 60% - ERSC is $800/quarter - Investments return 7% per year 2 Account Balance could vary based on employee savings rate, investment strategy and market performance. Page 9

10 Retirement Income for IAM Represented Employees Sample Employee 1 Age 45 with 10 Years at January 1, 2017 Retires at Age 62 Age 62 Monthly Benefit Pension Plan $ 808 Age 62 ULA 401(k) Savings and Retirement Plan Account Balance 2 401(k) Employee Savings $ 422, (k) Employer Match Contributions 253,000 ERSC Contributions 109,000 $6,000 RAT Bonus deferred to ERSC 19,000 Savings Plan Total $ 803,000 1 The following assumptions are used in this illustration: - Hourly wage is $31.25 ($65,000 annually) - Pay increases 3% per year (includes GWI, ARP and COLA) - Employee 401(k) savings rate is 8% of pay; savings began at hire and continue until retirement - Employer 401(k) match remains at 60% - ERSC is $800/quarter - Investments return 7% per year 2 Account Balance could vary based on employee savings rate, investment strategy and market performance. Page 10

11 Retirement Income for IAM Represented Employees Sample Employee 1 Age 55 with 25 Years at January 1, 2017 Retires at Age 62 Age 62 Monthly Benefit Pension Plan $ 2,019 Age 62 ULA 401(k) Savings and Retirement Plan Account Balance 2 401(k) Employee Savings $ 544, (k) Employer Match Contributions 326,000 ERSC Contributions 33,000 $6,000 RAT Bonus deferred to ERSC 10,000 Savings Plan Total $ 913,000 1 The following assumptions are used in this illustration: - Hourly wage is $41.00 ($85,280 annually) - Pay increases 3% per year (includes GWI, ARP and COLA) - Employee 401(k) savings rate is 8% of pay; savings began at hire and continue until retirement - Employer 401(k) match remains at 60% - ERSC is $800/quarter - Investments return 7% per year 2 Account Balance could vary based on employee savings rate, investment strategy and market performance. Page 11

12 Every effort has been made to provide accurate information in this document. The material provided here about Company policies, procedures, and benefits is for informational purposes only; it does not constitute a contract or contractual obligation. Certain eligibility provisions apply to each of the programs, policies, and benefits; not all of these provisions are described here. In the event of a conflict between this document and any of the benefit plans, the terms of the plans will control. ULA reserves the right to change, modify, amend, or terminate any of the plans described here at any time and for any reason. Page 12