Salaried Investment and Savings Plan Summary Plan Description (SPD)

Transcription

1 Salaried Investment and Savings Plan Summary Plan Description (SPD) As of January 1, 2012 (Including updates through 7/31/2012)

2 TABLE OF CONTENTS TABLE OF CONTENTS... 1 ABOUT THIS SPD... 3 ISP AT A GLANCE... 4 Accessing the Exelis Benefits Center... 4 ELIGIBILITY AND PARTICIPATION... 5 Eligibility... 5 Participation... 5 Automatic Contributions... 6 How to Make Your Elections... 7 Your Beneficiary Designation... 7 The Exelis Benefits Center... 9 YOUR CONTRIBUTIONS Eligible Pay Before-Tax Savings Catch-up Contributions After-Tax Savings Rollover Contributions Other Benefits and Social Security Changing and Suspending Your Savings COMPANY CONTRIBUTIONS Base Contributions Matching Contributions YOUR PLAN ACCOUNTS Limits on Your Accounts YOUR INVESTMENT OPTIONS How Your Account Can Grow Risk vs. Return Diversification Reassessing Your Investment Strategy Investment Elections Investing in Company Stock Self-directed Brokerage Account Investment Assistance Proxy Voting Information Available from the Recordkeeper upon Request How Plan Accounts Are Valued VESTING ACCESSING YOUR ACCOUNT Loans Withdrawals WHEN YOUR ACCOUNT IS PAYABLE Receiving Your Account Balance Requesting Payment of Your Account Partial Withdrawals After Termination of Employment Optional Payment Methods Exelis Salaried Investment and Savings Plan 1

3 Payment if You Become Totally Disabled Payment to Your Beneficiary Deferring Your Account When You Leave the Company Inability to Locate Payee SERVICE Transfers Reemployment WHEN YOU PAY TAXES Taxation of Distributions and Withdrawals Early Withdrawal Penalty Mandatory Withholding Requirements SITUATIONS AFFECTING YOUR BENEFITS How You May Lose Benefits Military Leave Claims Procedures ADMINISTRATIVE INFORMATION Official Plan Name and Number Employer Identification Number Plan Sponsor Plan Administration The Exelis Benefits Center QDRO Administrator Plan Costs Fund Management Plan Trust Fund Type of Plan Plan Records Pension Benefit Guaranty Corporation Legal Service Company Plan Continuance Legal Limitations Assignment of Benefits Plan Documents Your Rights Under ERISA Receive Information About Your Plan and Benefits Prudent Action by Plan Fiduciaries Enforce Your Rights Assistance with Your Questions No Guarantee of Employment ATTACHMENT A Exelis Salaried Investment and Savings Plan (ISP) Investment Lineup ATTACHMENT B Current Investment Funds Subject to 30-day Restriction ATTACHMENT C Target Retirement Funds and Associated Years of Birth Exelis Salaried Investment and Savings Plan 2

4 ABOUT THIS SPD The Exelis Salaried Investment and Savings Plan ((hereinafter referred to as the "Plan" or the ISP ) is designed to enable you and the Company to work together to save money for your future. The Plan makes it easy for you to save through convenient payroll deductions, and the Company adds to your savings with its own contributions. This booklet describes the provisions of the Plan in effect as of January 1, 2012 and includes updates through July 31, Please read it carefully. If you have any questions about the Plan, log onto the Plan s web site, or call the Exelis Benefits Center at Please have your User ID and your Passcode available. Please note: The term Company as used in this booklet, means Exelis Inc. and its participating divisions, subsidiaries, affiliates and units. From June 30, 2006, to October 30, 2011, the term Company referred to ITT Corporation and its participating divisions, subsidiaries, affiliates and units. Exelis Salaried Investment and Savings Plan Page 3

5 ISP AT A GLANCE Plan Participation You become a member of the Plan as soon as administratively possible after your date of hire. Your Savings You can save 1% to 70% of your eligible pay on a before-tax and/or after-tax basis (subject to IRS rules). If you do not make a contribution election, 30 days after your date of hire you will be enrolled for automatic before-tax contributions of 6% of your eligible pay. You can change your savings rate and/or include after-tax contributions at any time. If you will be age 50 or older by the end of any calendar year (December 31), you may be able to make an additional before-tax contribution known as a catch-up contribution of up to the maximum permitted by the IRS for that year (for 2012, the maximum catch-up contribution is $5,500). Company Contributions The Company makes two contributions on your behalf base contributions (determined by your age at the end of the plan year) and a company match. The company will match your contributions dollar for dollar on the first 1% of eligible pay you save, and 50 cents on the dollar on the next 5% you save. That s up to an additional 3.5% of your eligible pay! Investments You can invest your savings and the Company s contribution in one or more of the Plan s investment funds as shown on Attachment A. If you do not make an investment election for your savings and the Company s contributions, they will be invested in the Target Retirement Fund that is appropriate based on your year of birth. You can change your investment election at any time, subject to a limit of four fund transfers/reallocations in a calendar month. Some funds may impose additional transfer restrictions. Vesting You are always vested in the current value of your account, including your contributions, Company contributions and any earnings. Loans You can take up to two loans from your account at any time. Withdrawals You can withdraw your after-tax savings and rollover contributions at any time. You can withdraw your before-tax savings if you meet special IRS rules. Under certain circumstances, you may also withdraw Company contributions and earnings on those contributions. Each of these Plan features, as well as other important provisions, is described in this booklet. Be sure you are familiar with all the details before you take any action under the Plan. Accessing the Exelis Benefits Center You can access the Exelis Benefits Center (the Benefits Center ) 24 hours a day, seven days a week by visiting the Plan s web site, You can also speak with a Benefits Center representative toll-free at , Monday through Friday, 8:00 a.m. to 6:00 p.m. Eastern time, except on holidays. If you are outside the United States, you may call (this number is not toll-free). For TDD communication services for the hearing impaired, call toll-free at Exelis Salaried Investment and Savings Plan Page 4

6 ELIGIBILITY AND PARTICIPATION Eligibility You are eligible to become a member of the Plan if you are a regular, full-time salaried employee who is on a U.S. payroll, and you are employed by Exelis or a designated division, subsidiary, affiliate or unit of Exelis that is participating in the Plan (a Participating Company ). Your Human Resources representative can tell you if your local unit is a Participating Company in the Plan. Who Is Not Eligible You are not eligible to become a member of the Plan if: The terms and conditions of your employment are determined by a collective bargaining agreement with the Company that does not make this Plan applicable to you You are classified by the Company as a consultant, an independent contractor, or are in any relationship that the Company characterizes as other than an employment relationship You are a leased employee You are a non-resident alien with no U.S. income You are regularly employed in a permanent position, and (ii) your primary place of employment is located outside the United States and your primary residence is outside the United States You are paid on an hourly basis and, under the Company s employment classification practices, are considered an hourly employee for purposes of the Company s employee benefit plans You are currently accruing benefits under a pension plan of the Company or any of its affiliates other than the Exelis Salaried Retirement Plan You are classified by the Company as being in a position which is deemed not eligible to participate in this Plan because you are eligible to participate in another defined contribution plan sponsored by the Company or any Associated Company You are not a U.S. citizen or resident alien and you are employed by the Company or an Associated Company on a temporary assignment in the U.S, or You are a resident of Puerto Rico. Participation Your participation in the Plan automatically begins as soon as administratively possible after your date of hire. You should elect a contribution rate as soon as possible, or 30 days after your date of hire you will be automatically enrolled with a 6% before-tax contribution rate. If you leave the Company and are later rehired, you will re-enter the Plan on your date of rehire. Exelis Salaried Investment and Savings Plan Page 5

7 Automatic Contributions If you do not make an election before your participation date, 30 days after your date of hire you will be automatically enrolled in the Plan with a savings rate of 6% before-tax. You will continue to contribute at this rate until you make a change to your contribution election. In addition, if you do not make an investment election, your automatic contributions, as well as your Company matching and base contributions, will be invested in the Target Retirement Fund in the Plan that is appropriate based on your year of birth. Please note that if you do not wish to save in the Plan, you must change your savings rate to 0% by logging onto or by calling the Benefits Center at To stop automatic contributions, increase your savings rate above the 6% of eligible pay level, add aftertax contributions and/or change how your savings and the Company s contributions are invested to be effective as soon as you become a Plan member, you must make your election by your second week of employment. To make your election, log onto or call the Benefits Center. When you complete and sign the Acknowledgment of ISP Automatic Contributions form, you are acknowledging that you have been informed of the Plan s automatic contribution policy and your ability to change your savings rate and investment elections at any time. Please note that even if you do not sign this form, the automatic contributions will still be deducted from your paychecks. You must log onto or call the Benefits Center to stop the automatic contributions. New Hire Kit Your New Hire Kit, available from your Human Resources representative, contains all the information you need to get started in the Plan. You are encouraged to make your contribution and investment elections on or by calling the Benefits Center as described in the section How to Make Your Elections. Your kit will include: Acknowledgment of ISP Automatic Contributions form, and Previous Participation form. You should complete and return these two forms as soon as possible. Your User ID and Passcode To protect the security of your account information, you must set up a User ID and a Passcode on to access your Plan account. At first, you ll be able to use your Social Security number as your temporary User ID, and a temporary Passcode made up of the last four digits of your Social Security number and the two-digit month and two-digit day of your birth. (If you were a member in the ITT Corporation ISP, you may use the same User ID and Passcode for this Plan.) For example, if your Social Security number is and your birthday is September 7, your temporary User ID would be and your temporary Passcode would be Once you re logged on, you will be prompted to create a new User ID and a new Passcode. You will need your Social Security number and your Passcode to access your Plan account when you call the Benefits Center. Exelis Salaried Investment and Savings Plan Page 6

8 How to Make Your Elections You can find out how to enroll in your New Hire Kit or by contacting the Benefits Center. You will need to select: The percentage of eligible pay you want to save each pay period Whether to save before-tax dollars, after-tax dollars, or a combination of both If eligible, whether or not you want to make Catch-up Contributions One or more beneficiaries to receive your account if you die How you want to invest your savings and the Company s contributions, and Whether you want the dividends on your balances that you have elected to have invested in the Exelis Stock Fund (if any) reinvested in the Plan or paid to you in cash. To make your elections, log onto or call the Benefits Center. Your elections will take effect with the second or third payroll paid after the date you made your election. NOTE: If you elect not to contribute to the Plan when you are first eligible and then later on wish to start contributing, you simply need to follow the instructions indicated above. Whether or not you elect to contribute to the Plan when first eligible, you should make your investment election for your Company contributions and designate your beneficiary (or beneficiaries) in the event of your death. Your Beneficiary Designation You must also designate a beneficiary for your account, either on or by completing the Beneficiary Designation form. If you are married, by law you must name your spouse as your beneficiary unless your spouse provides written, notarized, and irrevocable consent for you to name someone else. If you are not married, you may name anyone as your beneficiary. Whether you are married or single, you may also name a contingent beneficiary who will receive your account balance if your primary beneficiary dies before you do. If you name more than one beneficiary, you must list the percentage payable to each one. Otherwise, all beneficiaries will share equally in the value of your account. You may change your beneficiary at any time. If you are single and later marry, your beneficiary designation becomes void, and your spouse automatically becomes your beneficiary unless, with your spouse s written, notarized and irrevocable consent, you name someone else as your beneficiary. Important: Please remember that if you die without a valid beneficiary designation on file and: you are married, your spouse will automatically be your beneficiary; you are unmarried, your account balance will be payable to your estate. Exelis Salaried Investment and Savings Plan Page 7

9 So, it is important to keep your beneficiary designations up-to-date, especially if your marital status changes. Designating Your Beneficiary To designate your beneficiary: on click on Personal Information, then Beneficiaries, and follow the simple instructions. Once you have designated your beneficiary, you will be able to view and edit this information on at any time. If you are married and name someone other than your spouse as your sole primary beneficiary, your spouse must provide written, notarized and irrevocable consent to your designation. (For a copy of the form, call the Benefits Center or download a copy from Documents & Forms in the Savings Plan section ofwww.benefitsweb.com/exelis.html. by completing the Beneficiary Designation form, first obtain a copy of the form from or the Benefits Center. If you are married and name someone other than your spouse as your sole primary beneficiary, your spouse must complete and sign the spousal consent section of the form, with your spouse s signature witnessed by a notary public. Your completed, signed, and notarized form should be returned to the Benefits Center at the address shown on the form. This form should be completed and signed by your spouse, with your spouse s signature witnessed by a notary public. The completed, signed, and notarized form should then be returned to the Benefits Center at the address shown on the form. Please note that your beneficiary designation of someone other than your spouse will not be valid until your completed, signed, and notarized Beneficiary Designation form has been reviewed and approved. Your beneficiary designation will also be available for viewing on Designating a Trust as Your Beneficiary If you name a trust as your beneficiary (primary or contingent), you must complete the Beneficiary Designation form, and submit it, along with a copy of the trust document for approval, to the Benefits Center at the address shown on the form. If you are married and are designating a trust as your primary beneficiary, your spouse must sign the spousal consent section of the form, with your spouse s signature witnessed by a notary public. Please note that your beneficiary designation of a trust for all or any part of your Plan account will not be valid until the trust agreement and your properly completed Beneficiary Designation form have been reviewed and approved. In addition, you must provide a letter from your attorney indicating that the trust and the intended beneficiaries are valid under the law of your applicable state. Upon approval, your beneficiary designation will be available for viewing onwww.benefitsweb.com/exelis.html. Exelis Salaried Investment and Savings Plan Page 8

10 The Exelis Benefits Center When you log onto or call the Exelis Benefits Center (the Benefits Center ), you will be able to: Change how much you are saving Change the way current and future savings will be invested Request loans and withdrawals or obtain information about them Change your beneficiary designation Get information about Plan features, obtain fund performance and account information, and request specific Plan forms and documents. You will receive a confirmation statement for any transaction you make, generally within 10 business days of the date you requested the transaction. You can access the Benefits Center 24 hours a day, seven days a week by visiting You can also speak with a Benefits Center representative toll-free at , Monday through Friday, 8:00 a.m. to 6:00 p.m. Eastern time, except on holidays. If you are outside the United States, you may call (this number is not toll-free). For TDD communication services for the hearing impaired, call toll-free at Exelis Salaried Investment and Savings Plan Page 9

11 YOUR CONTRIBUTIONS You can generally save 1% to 70% of your eligible pay, in whole percentages. Once you decide on the total percentage of your pay that you want to save, you must decide whether to save before-tax dollars, after-tax dollars, or a combination of both. The difference between before-tax and after-tax savings is when your savings are taxed. In addition, if you will be age 50 or older by the end of a given calendar year (December 31), and you are saving the maximum before-tax amount allowed under the Plan or under IRS regulations, you may elect to save an additional before-tax dollar amount known as a catch-up contribution up to the maximum permitted by the IRS for that year. A Closer Look: Highly Compensated Employee Before-tax and after-tax savings by Plan members who are considered highly compensated as defined by the IRS may be limited under the Plan. Currently, highly compensated members can save up to 70% of their eligible pay on a before-tax basis (not to exceed the IRS limits). If the highly compensated member also wishes to save on an after-tax basis, he or she can save up to 12% of the eligible pay as after-tax less any amount contributed on a before-tax basis. However, the combined amount of savings (before-tax and/or after-tax) cannot exceed 70% of the member s eligible pay or the IRS limits. For 2012, you are considered to be a highly compensated employee under the Plan if, during the previous plan year, you were a five-percent owner or you earned $110,000 or more from Exelis. This dollar amount is subject to change annually. The Benefits Center will let you know if you are affected by this limitation. In addition, the IRS imposes other limitations on the amount of contributions that may be made to the Plan. If these limitations affect you, you will be notified so that your contributions can be adjusted. Eligible Pay Eligible pay means your annual base pay plus overtime, shift differentials, commissions, regularly occurring incentive pay and differential wage payments. It does not include foreign service allowances, separation pay, special bonuses or commissions, or any other special pay or allowances of a similar nature. The IRS limits the amount of pay that may be considered each year for purposes of the Plan. This dollar amount may be changed each year (for example, the 2012 IRS limit is $250,000). If you receive at least part of your compensation in the form of sales incentives or commissions, see your Human Resources representative to determine what your eligible pay will be for purposes of the Plan. Please note that severance and/or vacation paid as a result of employment termination are not considered eligible compensation for purposes of the Plan. Therefore, your savings will not be deducted from these payments. Exelis Salaried Investment and Savings Plan Page 10

12 Before-Tax Savings Before-Tax savings are deducted from your eligible pay before your federal and in most cases, state and local income taxes are calculated. You may contribute up to 70% of eligible pay on a before-tax basis, subject to IRS limitations ($17,000 for 2012, plus an additional $5,500 in 2012 if you elect Catchup Contributions). Note: These dollar amounts are subject to change each year. The Advantage of Before-Tax Savings: An Example Suppose you are married, filing jointly, your eligible pay is $50,000, and you are in the 15% tax bracket. The following table shows the difference in your take-home pay (spendable income) and contributions into the Plan when you elect to save 6% on a before-tax basis versus saving on an after-tax basis in the Plan. Save 6% Before-Tax Save 6% After-Tax Your annual eligible pay $50,000 $50,000 Before-tax savings $3, Taxable income $47,000 $50,000 Tax (15% tax bracket) -$7,050 - $7,500 After-tax savings -- - $3,000 Net take-home pay (spendable income) $39,950 $39,500 As you can see, saving on a before-tax basis actually increases your take-home pay. Limits on Before-Tax Savings Once your before-tax savings reach the annual IRS limit, your savings will automatically stop. If you want to continue contributing, you will have to elect after-tax savings for the rest of the year. Other limits on regular before-tax savings depend on the Plan s compliance with certain limitations imposed by the Internal Revenue Code. The Benefits Center will let you know if you are affected by these limitations. Please note that if you make any changes in your savings rate after your contributions have been stopped, you will have to remember to log onto or contact the Benefits Center to resume savings at your elected before-tax rate at the start of the next calendar year. Exelis Salaried Investment and Savings Plan Page 11

13 NOTE (for new hires and rehires): If you contributed before-tax dollars to your previous employer s 401(k) plan or to another Exelis 401(k) plan in the year in which you first begin saving in the Plan, you must complete the Previous Participation form and return it to your Human Resources representative along with a copy of your final pay stub from your prior employer showing your total before-tax contribution to your prior employer s plan. Based on the information you provide, the Company will limit your before-tax contributions to the Plan so that you do not exceed the IRS annual maximum before-tax contribution for that year. If you do not let the Company know that you participated in another employer s 401(k) plan in the same year in which you begin saving in the Plan, or you do not provide accurate information, you may owe unexpected taxes for the tax year in which you first begin saving in the Plan. The Previous Participation form is available on under Documents & Forms in the Savings Plan section, and in the New Hire Kit. Catch-up Contributions If you will be age 50 or older by the end of the calendar year, you may be eligible to make additional before-tax contributions (limited to $5,500 in 2012) to the Plan in excess of the annual IRS limit ($17,000 for 2012). These additional contributions are referred to as Catch-up Contributions. To be eligible for Catch-up Contributions, you must also meet either the IRS limit on before-tax contributions or the Plan s limit on contributions (see below for an explanation of these limits). Keep in mind that these dollar limits may change each year. You can elect or change your Catch-up Contributions at any time during the year in which you are eligible. NOTE: Catch-up contributions are not eligible for Company Matching Contributions. Limits on Catch-Up Contributions Once your Catch-up Contributions reach the annual IRS limit, your Catch-up Contributions will stop for the rest of that calendar year. Your Catch-up Contributions will automatically resume, at the same dollar amount per paycheck, at the beginning of the next calendar year. Please note that if: you elect to have your Catch-up Contributions spread over the entire year, the maximum allowable catch-up contribution limit increases in the next calendar year, and you want to contribute the new maximum allowable catch-up contribution amount in the next year, you must log onto or contact the Benefits Center at the beginning of the next calendar year to increase the catch-up contribution dollar amount per paycheck. Exelis Salaried Investment and Savings Plan Page 12

14 Important: Beginning in 2012, if you elect to make both regular before-tax contributions and Catch-up Contributions to the plan but do not reach the IRS maximum on before-tax contributions by the end of the year, your Catch-up Contributions will be reclassified as regular before-tax contributions (but only to the extent of the IRS maximum). If you are eligible for matching contributions, these reclassified before tax contributions will be included when determining if you are eligible for a year end Company true- up matching contribution. After-Tax Savings After-tax savings come out of eligible pay that has already been taxed. When you take your savings out of the Plan, these savings are not taxed again. However, investment earnings on after-tax savings are taxed when they are taken out of the Plan. In addition, if you are a non-highly compensated employee, you may contribute up to 25% of your eligible pay on an after-tax basis as long as your combined before-tax and after-tax contributions are not more than 70% of your eligible pay. On the other hand, if you are considered a highly compensated employee, you may contribute up to 12% of your eligible pay on an after-tax basis as long as your combined before-tax and after-tax contributions are not more than 70% of your eligible pay. The Plan requires a minimum savings rate of 1% for before-tax and after-tax savings. The savings rate must be in whole percentages. Rollover Contributions If you received a qualified lump-sum distribution from another employer s eligible retirement plan, you can make a rollover contribution into your account in the Plan. You may also roll over the non-taxable portion of your distribution into your Plan account. However, you must be an active Plan member when you make the rollover contribution. The distribution may come from either another employer s eligible retirement plan, or an Individual Retirement Account that was used to hold only assets from another employer s eligible retirement plan and their earnings (a conduit IRA ). Note that Roth contributions are not eligible for rollover. To make a rollover contribution, you must complete the Rollover form, which is available on under Documents & Forms in the Savings Plan section. You can also call the Benefits Center to request a form be mailed to you. Other Benefits and Social Security Your decision to save on a before-tax or after-tax basis will not affect your other Company benefits that are based on salary, such as life insurance, disability and retirement benefits. Also, your decision will not affect the amount of your Social Security taxes or future benefits. Exelis Salaried Investment and Savings Plan Page 13

15 Changing and Suspending Your Savings You may increase or decrease your overall savings rate, stop saving altogether, or change your beforetax or after-tax savings rates, including catch-up contribution rates, at any time by logging onto or by calling the Benefits Center. Your election to change or suspend your savings will take effect as soon as administratively possible after you make your election, depending on your payroll schedule. If you suspend your savings, you may start saving again at any time by logging onto or by calling the Benefits Center. Your savings will resume as soon as administratively possible, depending on your payroll schedule. If you suspend your savings, the Company s matching contributions on your behalf will also stop, but the base contribution will continue. Any amounts that are already credited to you will continue to share in the investment results of the Plan. If your savings are suspended because you received a hardship withdrawal, you may resume savings as of any date following the six-month suspension period by logging onto or calling the Benefits Center. Your savings will resume as soon as administratively possible, depending on your payroll schedule. Exelis Salaried Investment and Savings Plan Page 14

16 COMPANY CONTRIBUTIONS The Company makes two types of contributions on your behalf: Base contributions and Matching contributions. Base Contributions The Company makes a base contribution of: 2% of eligible pay, if you are less than 35 years of age 3% of eligible pay if you are at least 35 but younger than age 45 4% of eligible pay if you are age 45 or older. These contributions are based on your age at the end of the plan year. For example, if you will turn age 35 in 2012, you will receive the 3% base contribution for the entire year. Matching Contributions The Company will also make a matching contribution of 100% up to the first 1% of your eligible pay and 50% of the next 5% of eligible pay that you save, whether your savings are before-tax, after-tax or a combination of both. For example, if your eligible pay is $50,000, and you save 6% of your eligible pay, you will contribute $3,000 a year. The Company would add $1,750 per year in matching contributions. The Company does not match your savings above 6% of your eligible pay. The Company also does not match your Catch-up Contributions. However, both of these amounts share fully in the Plan s investment results and enjoy its tax advantages. Beginning in 2012 and as of the last day of the Plan Year, if the amount of matching contribution that the Company made that year on your behalf is less than the maximum matching contribution to which you are entitled (i.e., 100% of the first 1% and 50% of the next 5% of your eligible pay you contributed to the plan during that entire plan year), the Company will make a single true-up contribution to your account in an amount equal to the difference. Exelis Salaried Investment and Savings Plan Page 15

17 YOUR PLAN ACCOUNTS When you become a Plan member, you will have one or more accounts established in your name. Because there are numerous references to these accounts throughout this booklet, it is important to know what each of these accounts means. Employee Contribution Account for your before-tax and after-tax savings, your Catch-up Contributions (if eligible and if elected), plus any investment gains or losses on these amounts Company Contribution Account for the Company s matching and base contributions, plus any investment gains or losses on those contributions. Your savings and the Company s contributions are credited each pay period and posted to your account as soon as administratively possible thereafter. The Plan s trustee invests the money in one or more of the Plan s investment funds, based on the elections you have made. Some Plan members may also have the following accounts if they have money from another plan that was transferred or rolled over to the Plan: Rollover Contribution Account for amounts you elected to rollover into the Plan from another employer s eligible retirement plan or from a plan of a company acquired by the Company, plus any investment gains or losses on those amounts Prior Plan Account for amounts transferred into the Plan from a plan of a company acquired by the Company, plus any investment gains or losses on those amounts. Limits on Your Accounts The IRS also imposes limits on the total amount of contributions that can be made on your behalf in any Plan Year. This includes your Before-Tax Contributions, After-Tax Contributions, Company Base Contributions, Company Matching Contributions and other contributions, if any. This IRS limit is known as the annual addition limit. Note that the annual addition limit does not include any Catch-up Contributions. For 2012, the limit on your total annual additions is $50,000 (as indexed in the future by the IRS). Exelis Salaried Investment and Savings Plan Page 16

18 YOUR INVESTMENT OPTIONS The Plan offers a variety of investment funds to meet your individual needs. Attachment A provides highlights of the investment funds available in the Plan including fund name, fund manager, benchmark, investment management fee, and a brief description of the fund. The funds are listed in order of relative degree of investment risk and return. More detailed information on each of the funds is available on or by calling the Benefits Center. You may invest your savings and the Company contributions made to your account in one or more of the Plan s investment funds, including the Exelis Stock Fund and a self-directed brokerage account, subject to the Exelis Stock Fund and self-directed brokerage account limitations described later in this section. The Plan also offers access to online investment advice, as well as a managed account program option, both through Financial Engines Advisors, LLC. Note: The Plan is meant to constitute a plan described in Section 404(c) of ERISA and Title 29 of the Code of Federal Regulations Section c-1 and, therefore, the Company, the Trustee, the Recordkeeper and the fiduciaries of the Plan may be relieved of liability for any losses that are the direct and necessary result of investment instructions you or your beneficiary may give. The Company does not guarantee the performance of these investment funds and is not liable for any losses you may experience due to investment performance. How Your Account Can Grow The growth of your account depends on several factors: How much and how long you save The amount of Company contributions made on your behalf Dividends and interest on investments held for you in the Plan, and Performance of the funds in which you invest. Although no one can predict exactly what will happen in the future, you can model how your Plan account may grow using various assumptions. Log onto and select the Savings page, click on Resource Materials, and then Calculators & Tools to get started. Risk vs. Return Be sure to think about each of these points as you choose your investments: Your investment time horizon how long you have to save and invest your money before you will need it. Your risk tolerance your ability to accept uncertainty in the value of your investments (keep in mind that investments with high potential returns typically carry higher levels of risk). The balance between risk and return the risk and expected return associated with each investment measured against your investment goals, and the actual rate of return you will need to outpace inflation. Exelis Salaried Investment and Savings Plan Page 17

19 To receive the higher returns of a more aggressive mix, you take the risk of incurring a short-term loss. But, with a longer investment horizon, you may be comfortable with a more aggressive investment approach. Diversification The saying don t put all your eggs in one basket is particularly important for investors. Spreading your money over several types of investments is called diversification. Diversification can help you achieve a favorable rate of return, while reducing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well, will often cause another asset category, or particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, you may not be properly diversified. Although diversification may not guarantee against loss, it is an effective strategy to help you manage risk. In deciding how to invest your Plan account, you should take into consideration all of your assets, including your retirement savings outside of the Plan. No single approach is right for everyone since, among other factors, individuals have different financial goals, different time horizons for meeting those goals, and different tolerances for risk. The diversified investment options in the Plan cover a broad range of risk and reward profiles, enabling you to create a unique and diversified portfolio that reflects your retirement investment strategy. Reassessing Your Investment Strategy Investing is not a one-time activity. You should continually review your goals and strategy to make sure your investment choices reflect your current goals and circumstances. The Exelis Pension Fund Trust and Investment Committee (PFTIC) is responsible for the choice of the investment funds, investment managers and the Trustee for the Plan. However, you are solely responsible for how your account is invested among the various investment funds available in the Plan. The decisions you make will have a direct impact on the value of your Plan account. You should weigh your own circumstances, goals and risk tolerance in view of the objectives and risk and return characteristics of each of the Plan s investment funds before making or changing your investment elections. You may also want to consult with a financial advisor, or use the Financial Engines Advisors, LLC investment tools available in the Plan before you make your investment decisions. Investment Elections Your investment elections apply to both your savings and the Company s contributions to your account. If you do not have an investment election on file with the Plan, both your savings and the Company contributions will be invested in the Target Retirement Fund in the Plan which is appropriate based on your year of birth. Target Retirement Funds are funds made up of multiple asset classes. The funds offer a professionally managed, diversified investment in a single fund. The allocation of different asset classes will change over time, so the funds will become increasingly conservative as your target retirement date approaches. Exelis Salaried Investment and Savings Plan Page 18

20 The Target Retirement Funds, and the years of birth associated with each of these Funds is shown on Attachment C. Making Your Investment Elections You can elect to have your savings and your Company contributions invested in one or more of the investment funds shown on Attachment A in multiples of 1%. For example, you may invest in just one of the funds, split your investment between two or more of the funds, or invest in all of the funds, in 1% multiples, adding up to 100%. Your investment elections are subject to the limitations described in Exelis Stock Fund Rules and Self-directed Brokerage Account. Changing Your Future Investment Election You can change the way your future savings and your future Company contributions are to be invested at any time, in 1% multiples, and as often as you would like. You change your future investment election by visiting or by calling the Benefits Center. All changes in your future investment elections are effective on the next business day. Reallocating or Transferring Your Existing Balances You can reallocate the existing balance in your account among any of the Plan funds in 1% multiples. Alternatively, you may transfer balances between Plan funds. Both fund reallocations and fund transfers are subject to the fund transfer rules described below. You may make up to four fund reallocations/transfers in any calendar month. (A fund reallocation/transfer is defined as a single reallocation/transfer or a series of reallocations/transfers taking place on a single day.) Once you have reached this limit, you may not request additional fund reallocations/transfers until the first business day of the following month. Take Action: You may request a fund reallocation or a fund transfer by logging onto or by calling the Benefits Center. The transaction is effective at the end of the business day you make your election (if you make your election before 4 p.m. Eastern time or, if earlier, the time the New York Stock Exchange closes for that business day). Otherwise, the change will become effective at the end of the next business day. The ISP Stock Funds If you were with the former ITT Corporation when it split into three independent companies on October 31, 2011, you know that the spinoff had a special impact on the Company stock fund. Specifically, the spinoff of Exelis and Xylem from ITT meant that you received within your ISP account one share of each of the two new companies for each share of the former ITT Corporation stock you held. As a result, your ISP account today includes shares in the Exelis Stock Fund and may also include shares in the Xylem and ITT Stock Funds, which are considered non-employer stock funds. You may continue to maintain balances in the Xylem and ITT Stock Funds until Exelis decides to completely shut down (sunset) the non-employer stock funds. You may transfer balances from those non-employer stock funds into the Exelis Stock Fund, but you may not transfer balances into or make contributions into those funds. Here is a summary of the guidelines: Exelis Salaried Investment and Savings Plan Page 19

21 New Contributions Are And You May Transfer Existing Account Balances Exelis Stock Fund Allowed, subject to the 20% rule From Xylem and ITT Stock Funds into this fund Xylem Stock Fund Not allowed Into Exelis Stock Fund without regard to the 20% rule and any other fund except the ITT Stock Fund ITT Stock Fund Not allowed Into Exelis Stock Fund without regard to the 20% rule and any other fund except the Xylem Stock Fund Investing in Company Stock Financial advisors generally suggest diversification when investing for retirement, since placing all of your retirement savings in a single stock is the highest risk investment strategy. In order to encourage diversification, the Plan limits the percentage of your Plan account that can be invested in the Exelis Stock Fund. If less than 20% of your total Plan account is invested in Exelis stock, you will be able to have up to 20% of your future Plan contributions invested in the Exelis Stock Fund, and you will be able to transfer funds into the Exelis Stock Fund, as long as your Exelis stock position in the Plan does not exceed 20% after the transfer. If your Exelis Stock Fund balance is 20% or more of your total Plan account, you will not be able to invest future contributions in Exelis stock, and you will not be able to transfer funds into the Exelis Stock Fund. To determine whether or not you can invest future contributions in the Exelis Stock Fund, your balance in that Fund is tracked as of the last business day of each calendar quarter. If 20% or more of your total Plan account balance is invested in the Exelis Stock Fund on that day, you will not be able to invest any future contributions (employee and Company) in the Exelis Stock Fund for the following quarter. To determine if you can transfer funds into the Exelis Stock Fund, your balance in that Fund is tracked at the close of each prior business day. If 20% or more of your total Plan account balance is invested in the Exelis Stock Fund, you will not be able to transfer additional amounts into that Fund. 30-Day Restriction A 30-day restriction is applied to certain transfers and reallocations between investment funds in the Plan. This means that if you elect to transfer or reallocate money out of an affected investment fund in the Plan, you cannot transfer or reallocate money back into that same investment fund for at least 30 calendar days. This restriction does not apply to future contributions made through your savings, loan repayments, Company contributions or rollover contributions. The investment funds in the Plan that are currently subject to the 30-day restriction are shown on Attachment B. Please note: Fund managers periodically monitor trading activity within their funds, and may, from time to time, apply additional restrictions if they see excessive trading. If you are participating in the Personal Asset Manager Program, transactions initiated by that Program are not subject to the 30-day restriction, as you do not direct these transactions. Additionally, while investments in your Self-directed Brokerage Account through the Plan may be subject to similar rules, they are not subject to the Plan s fund transfer rules. Exelis Salaried Investment and Savings Plan Page 20

22 In addition to the above, please note that the Exelis Stock Fund rules continue to apply as does the rule limiting fund transfers and reallocations to four in any calendar month (see Reallocating or Transferring Your Existing Balances ). Dividends You decide how the dividends on all contributions (employee and Company) invested in the Exelis Stock Fund are handled. You can have these dividends reinvested in the Plan, or have them paid to you in cash on a quarterly basis. When you elect to reinvest your dividends, they are reinvested in the Exelis Stock Fund in your account. Please note that if you elect to have your dividends paid to you in cash, and the amount of the quarterly cash payment is less than $10, your dividends will be automatically reinvested in the Exelis Stock Fund in your Plan account for that quarter. If you do not make a dividend election, your dividends will be automatically reinvested in the Exelis Stock Fund in your Plan account. Note that dividends with respect to ITT common stock and Xylem common stock will be reinvested in the ITT Stock Fund and Xylem Stock Fund, respectively. Dividends with respect to Exelis Stock will be subject to the provisions indicated above. Self-directed Brokerage Account The Plan offers a self-directed brokerage account, the Schwab Personal Choice Retirement Account (PCRA), through Charles Schwab & Co., Inc. This option provides experienced investors with additional investment flexibility. With a PCRA, you have access to thousands of investments, including mutual funds, stocks and bonds. Please note that you cannot purchase Exelis stock through your PCRA in the Plan. You pay regular retail brokerage fees and commissions when you perform a transaction in your PCRA. You can find a schedule of these commissions and fees at or by calling Schwab at You can transfer up to 20% of your total Plan account balance to your PCRA. Unlike the other investment choices in the Plan, you cannot elect to have future contributions deposited into your PCRA; you must transfer balances from the other funds (known as core funds ) in your Plan account. This means that to open a PCRA, and to have any additional amounts invested in this account, you must transfer balances from your core funds in the Plan. There is no minimum transfer amount for the initial and subsequent transfers. Transfers to and from your PCRA are subject to the limitations described in Reallocating or Transferring Your Existing Balances on page 25. Transactions within your PCRA are not subject to these limitations. To open a PCRA, log onto or call the Benefits Center to request an Enrollment Kit which includes the necessary paperwork as well as additional information and restrictions. Once your PCRA is opened, you can manage it online at or by calling Schwab s Dedicated PCRA Call Center at Exelis Salaried Investment and Savings Plan Page 21

23 Investment Assistance Plan members have access to tools, through Financial Engines Advisors, LLC, that can help them determine how to best invest their Plan assets to meet their retirement goals. Financial Engines is an online investment advisory service that provides unbiased and personalized recommendations for your Plan account, and more. Financial Engines provides the Personal Online Advisor and Personal Asset Manager programs to Plan members. More details on these valuable tools are provided below. Personal Online Advisor The Plan offers you access to Financial Engines Personal Online Advisor for personalized recommendations and advice on goal-setting, risk level, savings rates and investments. This program makes recommendations not only for your Plan account, but also for your other tax-deferred account holdings (for example, an IRA, your spouse s 401(k) plan, etc.). Members also have the option to purchase Total Portfolio Advice. Total Portfolio makes recommendations not only for your Plan account and your other tax-deferred accounts, but also for your taxable accounts. The annual cost for Total Portfolio Advice is $50. Take Action To access Personal Online Advisor, log onto select the Savings page, click on Plan Your Financial Future, then review the Investment Services Agreement, and click I Agree to begin. You will need to log ontowww.benefitsweb.com/exelis.html or call the Benefits Center if you want to change your investment elections or reallocate existing balances. Personal Asset Manager If you prefer to have someone else handle your Plan investments, Financial Engines Personal Asset Manager may be right for you. Personal Asset Manager is a voluntary managed account program that uses sophisticated financial models and the latest research to allocate, diversify and monitor your Plan account for you. If you elect to participate in this program, you will be charged a fee based on your Plan account balance. If you enroll in the Personal Asset Manager program, professionals will evaluate the personal information you provide and create a personalized investment strategy for you. You review and approve your new strategy before it is implemented. Once your new strategy is implemented, professionals will monitor your Plan account and manage all transactions; you will not be able to initiate any investment transactions (reallocate or transfer existing balances, or change your future investment election) while you are a member in the Personal Asset Manager program. If, before April 1, 2006, you held and want to continue to hold more than 20% of your Plan account in the Exelis Stock Fund, please be aware that the Personal Asset Manager program will reduce your stock holdings. Once your stock holdings in the Plan are reduced, you will not be able to increase your stock holdings if you have more than 20% of your Plan account invested in the Exelis Stock Fund. Exelis Salaried Investment and Savings Plan Page 22

24 For more information about the Personal Asset Manager program, or to enroll, log onto or call Proxy Voting Voting Exelis Stock If you have a balance in the Exelis Stock Fund, you are entitled to voting rights on Company common stock held in this fund. The Trustee will provide you with an annual report, proxy information and other materials that are provided to all shareholders of the Company. You also will receive information from the Trustee on how you may exercise your voting rights of your Company common stock. Your voting instructions will be made directly to the Trustee. How you vote your shares of Company common stock will be kept confidential by the Trustee and will not be disclosed on an individual member basis to Company management. If the Trustee does not receive timely voting instructions from you, the Trustee will vote the shares attributable to your account balance in proportion to those shares in the fund for which timely instructions are received from Plan members. If the Trustee determines that voting in this fashion is not in the best interest of the Plan members, the Trustee will make an independent determination as to how to vote such shares. Voting Rights for Other Funds Except for the Exelis Stock Fund, the Investment Manager for each Fund will decide how to exercise any voting rights attributable to stocks and other investments held in that particular Fund. As explained earlier, you decide how to exercise any voting rights attributable to the Exelis Stock Fund. Information Available from the Recordkeeper upon Request To find out how your account balance is invested or the value of your investment in each Fund, or to change the investment of your future contributions or your account balance, visit or call the Benefits Center. The following information is available upon written request: A description of the annual operating expenses of each investment option available under the Plan (e.g., investment management fees, administrative fees, transaction costs) that reduce the rate of return you receive and the aggregate amount of those expenses expressed as a percentage of average net assets of the investment option. Copies of any prospectuses, financial statements and reports, and any other materials relating to the investment options, to the extent that information is provided. The following information is available through Information about the total value of units in each investment option offered under the Plan, as well as the past and current investment performance of each option determined net of expenses. Exelis Salaried Investment and Savings Plan Page 23

25 List of assets comprising the portfolio of each designated investment alternative that is considered a plan asset under Department of Labor regulations, the value of each such asset (or the proportion of the investment alternative that it comprises) and, with respect to each such asset that is a fixed rate investment contract, the name of the issuer of the contract, the term of the contract, and the contract s rate of return. How Plan Accounts Are Valued All funds are valued as of the end of each business day, reflecting that day s investment performance. To value the funds, the trustee determines the total fair market value of all assets held in each fund. The gain or loss in the value of the assets in each fund is then calculated and allocated pro rata to the credited balances of all members as of the beginning of that business day. Your Quarterly Statement Each quarter, you will receive a personal statement showing: The Company contributions to the Plan on your behalf How much you have saved Your investment results Any transactions you may have requested during the previous quarter, and Other important information about your savings, including your vested account balance. Your quarterly statement will also contain information on how the Plan s investment funds have performed. Take Action: You may view your most recent quarterly statement and fund performance information at any time by logging onto or by calling the Benefits Center. Exelis Salaried Investment and Savings Plan Page 24

26 VESTING You are always entitled to the full current value of your account, including your own contributions, Company base and matching contributions, Prior Company matching contributions and earnings on those contributions. If you were a member in the ITT ISP on October 30, 2011, but were not yet vested, you became fully vested in this Plan on January 1, If you terminated employment before January 1, 2012, and before you became 100% vested in your Prior Company Matching Contributions, and are rehired, you will become 100% vested in your Prior Company Matching Contributions as of your rehired date. You will be 100% vested in all dividends associated with ITT Common Stock in your account paid on or after November 27, 2001, and before October 31, 2011, and to Exelis Stock in your account paid after October 30, Exelis Salaried Investment and Savings Plan Page 25

27 ACCESSING YOUR ACCOUNT Although the Plan is designed to encourage long-term savings, there are certain circumstances where you may need access to your money before you retire. Depending on the situation, you may be eligible to borrow from your account, or to withdraw funds. Loans You can request a loan from your vested account in the Plan by logging onto or by calling the Benefits Center. Unlike a withdrawal, you pay no tax on the amount of your loan, and you can borrow from your before-tax account without having to show a financial hardship. As the loan is repaid, repayments of both principal and interest are credited back to your Plan account. You can have up to two outstanding loans at any time. Who Is Eligible for a Loan You are eligible for a Plan loan if: You are a Plan member who has not terminated employment with the Company, and Your vested account balance is over $2,000. How Much You Can Borrow The minimum loan amount is $1,000. The maximum loan amount is the lesser of: 50% of your vested account balance, or $50,000 reduced by your highest outstanding loan balance(s), if any, during the prior one-year period. If you previously participated in another savings plan sponsored by the Company, any outstanding loan balance(s) you had in that plan during the prior one-year period will be considered when determining the maximum amount you can borrow from this Plan. If you participated in another savings plan sponsored by the Company, you must speak with a Benefits Center representative to request a loan. Interest Rate The Plan s loan interest rate for new loans is set each month, based on the prime rate published in The Wall Street Journal on the first business day of that month. The interest rate for Plan loans is the prime rate plus 1%. The interest rate on your loan will be determined at the time you make your loan request, and will remain the same for the term of the loan. You can obtain the current loan interest rate on or by calling the Benefits Center. Exelis Salaried Investment and Savings Plan Page 26

28 Term and Repayment of Loan You can repay your loan over a period of one to 60 months. If you took out your loan to purchase your primary residence, the repayment period may be longer up to 180 months. You select the term when you request your loan, and repay the loan in equal installments through payroll deductions. For example, assume you take out a loan and the Plan loan interest rate in effect at the time of your loan is 5%. If you elect to repay the loan over a period of 36 months, your monthly payment would be $27.64 per $1,000 borrowed. A $5,000 loan in that case would be repaid in 36 monthly installments of $ Loan repayments are taken from each paycheck and will begin as soon as administratively possible after your initial loan request, depending on your payroll schedule. Repayments come out of your pay on an after-tax basis. Your repayment, including both principal and interest, is credited back to your account in the Plan on a per pay period basis, in accordance with the investment direction for your future savings and Company contributions. Please note that you must continue to repay your loan while you remain on the Company s active payroll, until the loan has been totally repaid. If you stop making loan repayments, you may be required to pay taxes on the amount you borrowed. If you are on a paid leave of absence, payroll deductions for your loan repayments will continue. If you are on an unpaid leave of absence, you must arrange with the Benefits Center to repay your loan by direct payments. You may be eligible to suspend loan payments during your unpaid leave for up to 12 months, or until the end of the term of the loan, if earlier. When you return from your leave, you may resume payments with the full balance due at the end of the repayment period, or elect to have the outstanding loan balance plus accrued interest re-amortized using the original interest rate of the loan over the remaining term of the loan. Special rules apply if you are on a military leave of absence, and you have an outstanding loan. Please contact the Benefits Center for information regarding loan repayments while on military leave. When Loan Proceeds Are Paid Your loan is valued as of the end of the business day you request the loan (if you make your request before 4 p.m., Eastern time or, if earlier, the time the New York Stock Exchange closes that business day). Your check will generally be mailed to you within 10 business days of your request. If the loan is for the purchase of your primary residence and the term of the loan is more than 60 months, your loan is valued as of the end of the business day the Plan approves your application and supporting documentation. Your check will be mailed to you within approximately 10 business days after the approval. Exelis Salaried Investment and Savings Plan Page 27

29 The loan proceeds will be withdrawn from your Plan account in the following order: before-tax account, after-tax account, prior plan account, rollover account, Company base account, Company matching account. In addition, amounts are withdrawn from your investment funds within each account on a prorata basis, however, amounts in the Exelis Stock Fund will be the last to be withdrawn from each account. Amounts held in your self-directed brokerage account are not available for a Plan loan. Therefore, if you have a self-directed brokerage account and your loan request cannot be completely funded without using assets in your brokerage account, you will need to sell assets in your brokerage account and transfer the proceeds to core investment fund in the Plan. Early Repayment You can repay your loan in full at any time. Early repayment must be made by cashier s or certified check, and the amount must be for the full remaining principal amount, including interest to the date of repayment. To pay off a loan, you should log onto or call the Benefits Center to request a loan payoff notice. Your check should be made payable to the Exelis Salaried Investment and Savings Plan and sent, along with the payoff notice, to the Benefits Center at the address indicated on the notice. If any additional loan repayments are deducted from your paycheck after you have repaid your loan in full, you will receive a refund of the overpayment amount. Effect of Bankruptcy Filing on an Outstanding Loan If you file for bankruptcy protection and you have an outstanding loan under the Plan, the payroll deductions covering loan repayments for this loan will continue. Also note that your contributions to the Plan will continue unless and until you log onto or call the Benefits Center to suspend your contributions. Termination of Employment with an Outstanding Loan You may continue to make loan payments after you leave the company by sending your repayment checks directly to the Benefits Center, as long as you leave your account in the Plan, and your account balance is more than $5,000 as of your termination date. To set up these direct loan repayments, contact the Benefits Center and speak with a representative. In lieu of periodic loan repayments, you may pay back the principal, plus interest, in one lump sum. A lump-sum payment must be made, or periodic direct repayments must be set up, no later than 90 days after your termination or, if earlier, the date your account balance is distributed to you. If you do not select one of the repayment methods described above (i.e., lump-sum payment or direct loan repayments), your loan will be defaulted, and the defaulted loan is considered a distribution from the Plan. This distribution will be subject to certain default rules depending on the method of distribution elected and the types of money in your account. In addition, you may be required to pay taxes on the taxable portion of the defaulted loan. More information about termination with an outstanding loan can be obtained on or from the Benefits Center. Exelis Salaried Investment and Savings Plan Page 28

30 Withdrawals Depending on the type of withdrawal you take, all or part of the withdrawal may be taxable. In certain cases, a withdrawal will be subject to both ordinary income tax and a penalty tax. See When You Pay Taxes for more information. Hardship Withdrawals In return for the tax advantages of before-tax savings, the IRS places some restrictions on when you can withdraw the money while you are still working. You may withdraw your before-tax savings before age 59½ only if you meet both of the following requirements established by the IRS: You must have what the IRS calls a financial hardship an immediate and heavy financial need, and You must demonstrate that you have no resources reasonably available to you to meet your financial need, other than your before-tax savings in the Plan. These withdrawals, called hardship withdrawals, are generally limited to the amount of your beforetax savings, and do not include earnings on those savings. However, investment earnings on before-tax savings credited before 1989 are available for hardship withdrawal. You may not withdraw more than the amount of your actual financial need, plus 20% of that amount (to cover federal, state and local taxes and any penalties). Applying for a Hardship Withdrawal Before you can apply for a hardship withdrawal, you must first try to meet your financial need by: Taking a loan you must take the maximum loan available under the Plan, as long as the loan repayments do not result in a financial hardship for you, and Withdrawing all of your after-tax savings, prior plan contributions, rollover contributions and Company contributions as described under In-Service Withdrawals. If you have a financial hardship as defined by the IRS, have exhausted other sources of funds within the Plan (and any other savings plan sponsored by the Company), and have no other funds reasonably available to meet that need, you may apply for a hardship withdrawal. Hardship Withdrawal Reasons The IRS automatically recognizes these six reasons for hardship withdrawals: Purchase of your primary residence (excluding mortgage payments) Mortgage or rent payments required to prevent eviction or foreclosure on your primary residence Tuition, related educational fees, and room and board expenses for post-high school education for yourself or your dependents (for the next 12 months) Major non-reimbursed medical expenses for yourself or your dependents Exelis Salaried Investment and Savings Plan Page 29

31 Burial or funeral expenses for your deceased parent, spouse, child or other dependent Expenses for the repair of damage to your primary residence that would qualify as a casualty loss under IRS rules. IRS Requirements for Hardship Withdrawals The rules for withdrawing before-tax savings before age 59½ are administered by the Benefits Administration Committee or its designee, which reviews requests for hardship withdrawals in accordance with IRS rules. You must provide supporting documentation, including a letter describing the reason for the hardship withdrawal request, to the Committee to show your financial need, and complete the hardship withdrawal application. In addition, you must suspend all your own savings to the Plan for at least six months after the hardship withdrawal (of course, matching contributions on your behalf will also be suspended during this period; the base contribution is not suspended). In-Service (Non-Hardship) Withdrawals After you reach age 59½, you can withdraw your before-tax savings, including all investment earnings, while you are still working, at any time and for any reason. You can also withdraw your Base contributions and Matching contributions, plus any related investment earnings. You can also withdraw the balances below at any time, regardless of your age, without claiming a financial hardship. These balances are available through an in-service withdrawal in the following order: After-tax savings and investment earnings Prior plan contributions and investment earnings Rollover contributions and investment earnings Prior ESOP contributions and investment earnings Company floor contributions, your vested Company matching contributions (and related earnings) made to the ISP before October 1, 1996 Company floor, vested Company matching contributions and related earnings made to the ISP or this Plan on or after October 1, 1996, and before January 1, 2012, as long as they have been in the Plan for at least 24 months. If your withdrawal includes any of your Company contribution account balances, future matching contributions on your behalf will be stopped for three months. (The base contributions are not suspended.) If your withdrawal includes only after-tax, rollover and prior plan balances, there will be no suspension. You may not withdraw Company contributions made to your account in the previous 24 months. Exelis Salaried Investment and Savings Plan Page 30

32 Requesting a Withdrawal You may request an in-service or age 59½ withdrawal, or request hardship withdrawal forms on or by calling the Benefits Center. All amounts withdrawn are generally paid to you in the form of cash. However, if your withdrawal includes any amounts invested in the Exelis Stock Fund, you may request that this portion of your withdrawal be paid in shares of Exelis stock in lieu of cash. How Withdrawals Are Paid Amounts are withdrawn from your investment funds on a pro-rata basis from each account. Amounts in the Exelis Stock Fund are withdrawn last from each account. Please note that if you have a self-directed brokerage account and your withdrawal request cannot be completely funded without using assets in your brokerage account, your withdrawal will be processed to the extent possible from your other Plan assets. In order to have the balance of your withdrawal request processed, you will need to sell assets in your brokerage account and transfer the proceeds to a core investment fund in the Plan. If you request a hardship withdrawal, you will be sent forms that must be completed and returned to the Benefits Center for review by the Benefits Administration Committee or its designee. If your request is approved, the withdrawal will generally be valued as of the end of the business day the request is approved. Your withdrawal check will generally be mailed to you within approximately 10 business days after the date your request is approved. If you request an in-service or age 59½ withdrawal, no forms are required, and your withdrawal is valued as of the end of the business day you make your request (if you make your request by 4 p.m. Eastern time or, if earlier, the time the New York Stock Exchange closes that business day). Your withdrawal check will generally be mailed to you within approximately 10 business days. If your in-service or age 59½ withdrawal includes taxable monies, you may elect to roll over your taxable distribution from the Plan into an IRA or another employer s eligible retirement plan. If permitted by the IRA or another employer s eligible retirement plan, you may also roll over the nontaxable portion of your distribution from the Plan. Hardship withdrawals cannot be rolled over. Exelis Salaried Investment and Savings Plan Page 31

33 Summary of Withdrawals permitted by the Plan This table summarizes the withdrawals available under the Plan. Type of Withdrawal/ Rollover Eligibility In-service (Non-Hardship) Withdrawal for any specific dollar amount. Rollover eligible. Hardship Withdrawal. Not Rollover eligible. Age 59½ Withdrawal. Rollover eligible. The money will be withdrawn in this order After-tax savings and earnings Prior plan contributions and earnings Rollover contributions and earnings Prior ESOP contributions and earnings Company floor contributions, your vested Company matching contributions (and related earnings) made to the ISP before October 1, 1996 Company floor, vested Company matching contributions (and related earnings) made to the ISP or this Plan on or after October 1, 1996, and before January 1, 2012, as long as they have been in the Plan for at least 24 months Base contributions and earnings if you are at least age 59½ (most recent 24 months of contributions cannot be withdrawn) Matching contributions and earnings if you are at least age 59½ (most recent 24 months of contributions cannot be withdrawn) Before-tax savings (including Catch-up Contributions), if you have a financial need that qualifies under IRS regulations before age 59½. Investment earnings after 1988 are not available. Before-tax savings (including Catch-up Contributions) and earnings after age 59½, at any time and for any reason Effects on contributions. None Matching contributions are suspended for three months Your own savings and matching contributions are suspended for six months None Exelis Salaried Investment and Savings Plan Page 32

34 WHEN YOUR ACCOUNT IS PAYABLE When you terminate employment for any reason, you may receive the full value of your account. If your vested account balance is $1,000 or less when you leave the Company, the entire balance will be paid directly to you in a single lump sum (minus mandatory 20% withholding for federal taxes) after your service ends, unless you elect to have all or part of your balance directly rolled over to your new employer s eligible retirement plan or to an IRA of your choice. You will need to check with the new plan or IRA provider to determine if it will accept a rollover. If your vested account balance is over $1,000 but is not greater than $5,000, you can have the account balance paid directly to you in a single lump sum, or you can have all or part of your account balance rolled over to your new employer s eligible retirement plan or to an IRA of your choosing. Again, you will need to check with the new plan or IRA provider to determine whether it will accept rollovers. If you do not elect one of these options within 90 days after you terminate your service, your entire account balance will be rolled over automatically on your behalf into an IRA with Millennium Trust Company, LLC (a Rollover IRA ). You will be the owner of the Rollover IRA established on your behalf. Rollovers to the IRA will initially be invested in the FDIC Insured Money Market Account. This is an FDIC-insured investment product designed to preserve principal and provide a reasonable rate of return and liquidity. Millennium Trust Company, LLC will deduct an account set up fee and annual maintenance fees directly from your IRA. You will receive a written explanation from Millennium Trust describing the investment product in which your distribution will be invested, as well as how to communicate with them about your account. NOTE: Your beneficiary designation under the Plan is no longer valid once the money is rolled over to a Rollover IRA. Therefore, you will need to file a new beneficiary designation with Millennium Trust Company, LLC. If your account balance is more than $5,000, a distribution from the Plan will generally not be made without your consent. You can choose to receive an immediate payment from your account, or you can defer payment of your account until you reach age 70½. If you defer your account in the Plan for distribution at a later date, you may continue to direct the investment of your account balance in all of the investment options available under the Plan. Receiving Your Account Balance If you leave the Company, your account balance is payable to you in a lump sum, unless you choose to have your account paid under one of the optional payment methods. Payment from the Exelis Stock Fund may be in cash or in shares of Exelis stock. If you elect payment in shares of Exelis stock, any fractional share will be paid in cash. Payment from all of the other funds will be in cash. Please note that, if you have an outstanding loan balance when you leave the Company, you will not be able to continue to make periodic loan repayments if you elect a lump-sum distribution of your Plan account. Exelis Salaried Investment and Savings Plan Page 33

35 If you have a self-directed brokerage account, please note that, in order to request a lump sum distribution of your Plan account, you will need to sell all the assets in your brokerage account, and transfer the proceeds to one or more of the core investment funds in the Plan. This is a multiple step process which could take up to five business days to complete. You must initiate the process on or by contacting the Benefits Center. First, you need to liquidate the assets in your brokerage account, and wait for your transaction to settle. You will then need to transfer these assets to one or more of the core investment funds in the Plan. After the transfers have been completed, you will be able to request a lump sum distribution from the Plan. Please note that your lump sum distribution cannot be processed until the transfer from your brokerage account has been completed. Requesting Payment of Your Account You can request a lump-sum payment, annual installments or partial withdrawals from your account on or by calling the Benefits Center. You can request annual life expectancy installment payments by calling the Benefits Center. Partial Withdrawals After Termination of Employment If you leave the Company for any reason (including retirement) and elect to defer payment of your Plan account, you may elect partial withdrawals from the Plan. Payment from all funds will be in cash. However, if your partial withdrawal includes any amounts invested in the Exelis Stock Fund, you may request that this portion of your partial withdrawal be paid in shares of Exelis stock in lieu of cash. If you elect a partial withdrawal, amounts are withdrawn from your Plan accounts in the following order: after-tax account, prior plan account, rollover account, Prior ESOP account, Company floor contributions, Company base account, Company match account, before-tax account. In addition, amounts are withdrawn from your investment funds on a pro-rata basis from each account. Please note that, if you have a self-directed brokerage account and your partial withdrawal request cannot be completely funded without using assets in your brokerage account, your partial withdrawal will be processed to the extent possible from your other Plan assets. In order to have the balance of your partial withdrawal request processed, you will need to sell assets in your brokerage account and transfer the proceeds to one or more of the core investment funds in the Plan. Partial withdrawals are not available if you are receiving periodic installment payments from the Plan. Optional Payment Methods If the value of your Plan account is more than $5,000, in lieu of a lump sum, you may choose one of the following payment options: Fixed period installments or Life expectancy installments. Exelis Salaried Investment and Savings Plan Page 34

36 If you elect either of the optional payment methods, you may, at a later date, ask to stop these installment payments. You may then elect a lump-sum payment of your remaining account balance, or you may elect partial withdrawals. You may make this election at any time after your installment payments end. Once you reach age 70½, although you can elect to have installment payments end, you must receive the minimum required distributions each year, as required by law. If you elect either of the optional payment methods, any amounts remaining in the Plan will continue to share in the Plan s investment results until they are paid out. You designate your payment method when you request payment of your account. Under the optional payment methods, payment from all funds, including the Exelis Stock Fund, will be in cash. However, if your installment payment includes any amounts invested in the Exelis Stock Fund, you may ask to have this portion of your installment payment be paid in either cash or in shares of Exelis stock. If you elect installment payments, amounts are withdrawn from your Plan accounts in the following order: after-tax account, before-tax account, prior plan account, rollover account, prior ESOP account, Company floor account, Company base account, Company matching account. In addition, amounts are withdrawn from your investment funds within each account on a pro-rata basis. Fixed Period Installments You may elect to have your account balance paid in the number of annual installments that you elect. To elect this method, your account balance must be more than $5,000, and you must have enough money in your account so that your first payment (your total account balance divided by the number of installments you elect) will be at least $1,000. The minimum number of installments that you may elect is two and the maximum number of installments is the number of whole years that approximates your life expectancy at the time you elect the installments (based upon the actuarial table used by the Plan). If you are married, you may use the joint life expectancies of you and your spouse to determine the maximum number of installments (you must submit proof of birth for your spouse). If you are unmarried, the single life expectancy table will be used to determine the maximum number of installments. Life Expectancy Installments You may elect to have your account balance paid in annual payments spread over your life expectancy. To elect this method, your account balance must be greater than $5,000, and you must have enough money in your account so that your first payment will be at least $1,000. Your life expectancy will be actuarially determined at the time of the first installment (based upon the actuarial table used by the Plan) and re-determined each year thereafter. If you are married, you may use the joint life expectancies of you and your spouse to determine the number of life expectancy installments (you must submit proof of birth for your spouse). Exelis Salaried Investment and Savings Plan Page 35

37 Payment if You Become Totally Disabled If you are totally disabled when you terminate your employment, all of the money in your account may be payable to you in a lump sum. Instead of a lump sum, and if your account balance is greater than $5,000, you can: elect either of the optional payment methods, or choose to defer your account under the Plan. For the first 18 months, you are considered totally disabled if you are unable to perform the duties of your own occupation. After 18 months, you are considered totally disabled if you are unable to engage in any substantial gainful employment for which you are reasonably fitted by education, training or experience. You will not be considered totally disabled during any period in which you are gainfully employed in any occupation except for approved rehabilitative employment. All determinations of disability will be made by the Benefits Administration Committee or its designee. Payment to Your Beneficiary If you die while still actively employed, all of the money in your account will be payable to your beneficiary. If your beneficiary is your spouse and your account balance is more than $5,000, your spouse may leave the money in the Plan until no later than the year in which you would have reached age 70½. If your spouse decides to wait until then, he or she must receive a minimum distribution at that time as calculated under the tax laws. If your beneficiary is not your spouse and the total value payable is more than $5,000, your beneficiary may leave the money in the Plan for up to five years following your date of death. Your beneficiary may also elect a partial or a lump-sum distribution during those five years. However, your Plan account must be distributed in its entirety to your non spouse beneficiary by the close of the calendar year which contains the five year anniversary of your date of death. If you die without a valid beneficiary designation on file and you are married, your spouse will automatically be your beneficiary. If you are unmarried and you die without a valid beneficiary designation on file, your account balance will be payable to your estate. Instead of a lump-sum payment, your beneficiary may elect to receive partial withdrawals, fixed period installments or life expectancy installments. Keep in mind that: If your beneficiary is not your spouse, fixed period installment payments or partial withdrawals cannot extend beyond the close of the calendar year which contains the five-year anniversary of your date of death. Life expectancy installments are not available to a non-spouse beneficiary. Exelis Salaried Investment and Savings Plan Page 36

38 If your spouse beneficiary chooses installment payments, he or she may stop those payments at any time and then elect to receive a lump-sum payment of your remaining account balance or partial withdrawals. This election may be made at any time after installment payments stop. Deferring Your Account When You Leave the Company If you leave the Company for any reason and your account balance is greater than $5,000, you may elect to keep your account balance in the Plan. Your account is automatically deferred (kept in your account) if you do not request payment at the time you leave the Company. Once you reach age 70½, you must begin receiving minimum distributions from your Plan account in accordance with IRS rules. You may request a full distribution, installment payments or partial withdrawals from your account at any time. However, new loans from deferred accounts are not allowed. While your account is deferred, you (or your surviving beneficiary) will have the same rights with respect to investment of your deferred balance as you would if you were an actively employed Plan member. If You Are Age 70½ Under IRS rules, if you leave the Company and reach age 70½, or are actively employed by the Company and reached age 70½ before January 1, 1999, you must begin taking payments from the vested portion of your account. This is called a minimum required distribution. Your first minimum required distribution payment is made in December of the year in which you turn age 70½. If you are still actively employed by the Company and reach age 70½ on or after January 1, 1999, your minimum required distribution will not begin until December of the year in which you retire or leave the Company. The Benefits Center will notify you if you must begin receiving your account under these rules. When Payment of Your Account Will Be Made Your account will generally be valued as of the end of the business day you make your payment election (if you make your election before 4 p.m., Eastern time, or, if earlier, the time the New York Stock Exchange closes that business day), but no sooner than the date the Benefits Center has confirmed your termination of employment. Your check will generally be mailed to you within 10 business days of the date your account is valued. If you elect to receive shares of Exelis stock as part of your distribution, the shares will be delivered to you separately from the cash portion of your distribution, within approximately three weeks from your request. Exelis Salaried Investment and Savings Plan Page 37

39 Inability to Locate Payee If the Plan Administrator cannot locate you or your beneficiary to make a payment, the amount of the payment will be forfeited on a date determined by the Benefits Administration Committee. The benefit amount will be reinstated and payment will be made without any interest earned when you (or your beneficiary) make a valid claim for the forfeited amount, or the Plan Administrator receives valid proof of death of that person. Exelis Salaried Investment and Savings Plan Page 38

40 SERVICE Service means your employment with the Company or any subsidiary, division, or unit of the Company, as well as any service with an acquired company. Transfers If you transfer from one Participating Company to another Participating Company, your status in the Plan does not change. If you transfer from a non-participating division or subsidiary to a Participating Company you will become eligible to participate in the Plan as of your transfer date. You will also receive the base contribution beginning on your transfer date. See Eligibility and Participation and Your Contributions for more information on how to make your contribution election, automatic contributions, how to change your savings rate and/or your investment elections, as well as information about beneficiary designations and the forms which should be completed immediately upon your transfer. If you transfer from a Participating Company to a non-participating division or subsidiary, your account remains in the Plan and continues to participate in the earnings results of the funds in which it is invested. You may continue to request loans and withdrawals, and reallocate or transfer your balances among the Plan s investment funds. However, you may not make further contributions or request a full distribution of your account, and no further Company contributions will be made on your behalf. Reemployment If you are reemployed by the Company or a division, subsidiary, affiliate or unit that is participating in the Plan, and were eligible to participate in the Plan during your previous period of employment, you will automatically participate in the Plan as of your reemployment date. Your contributions will begin as soon as administratively possible based on your payroll schedule. Exelis Salaried Investment and Savings Plan Page 39

41 WHEN YOU PAY TAXES Taxation of Distributions and Withdrawals When you receive a distribution or withdrawal, you must pay income taxes on the value of your Before- Tax Contributions, Company Matching Contributions, Company Base Contributions, Rollover Contributions and any investment earnings on these contributions, as well as on the earnings on your After-Tax Contributions. In many cases, 20% of your taxable distribution must be withheld for taxes. You also may have to pay a 10% early withdrawal penalty on your distribution. You may defer part or all of your taxes by initiating a direct rollover of the taxable portion of your account balance into another employer s eligible retirement plan or an Individual Retirement Account (IRA). If you were born before January 1, 1936, and you receive a lump-sum distribution, you may be eligible for special 10-year averaging, which may reduce your tax liability. Early Withdrawal Penalty When you withdraw money or receive a distribution from your Plan account, some or all of it may be subject to income taxes. In addition, the IRS may require you to pay a 10% early withdrawal penalty on the taxable part of your distribution. However, you will not have to pay the penalty if: You leave the Company during or after the year you reach age 55, and you receive your account balance because you have terminated your employment, You are at least age 59 ½ when you receive the payment, whether or not you are actively employed, Your account is paid because of your disability or death, The withdrawal is used to pay unreimbursed medical expenses that exceed 7½ of your adjusted gross income, The payment is made to someone else under a Qualified Domestic Relations Order (QDRO), The distribution is rolled over to an IRA or another employer s eligible retirement plan within 60 days, The distribution is part of a series of substantially equal periodic payments made for your life expectancy or joint life expectancy for you and your spouse (if married), or The distribution is a qualified reservist distribution. Mandatory Withholding Requirements The Plan will withhold 20% on most taxable withdrawals or distributions you receive even if you plan to roll over your withdrawal or distribution on your own (which you have 60 days to do). This 20% withholding is required by law as a partial payment of the income taxes you will owe on a taxable distribution. It does not include the additional 10% early withdrawal penalty you may have to pay the IRS. Exelis Salaried Investment and Savings Plan Page 40

42 Because everyone s financial situation is different and tax laws relating to retirement plans are complex, we urge you to get professional tax advice about your Plan distribution. The mandatory 20% withholding does not apply if: You elect a direct rollover into another employer s eligible retirement plan, or you or your surviving spouse elect a direct rollover into an Individual Retirement Account (IRA), The total amount of your accumulated distributions is less than $200, You are 70½ or older, are no longer working for the Company, and receive only the Required Minimum Distribution from your account, You receive your Plan balance after retirement in substantially equal installment payments over at least 10 years, Payments are made to someone other than you or your spouse (or former spouse), pursuant to a Qualified Domestic Relations Order, or You elect a hardship withdrawal. Exelis Salaried Investment and Savings Plan Page 41

43 SITUATIONS AFFECTING YOUR BENEFITS How You May Lose Benefits Under certain circumstances, you or your beneficiary may lose Plan benefits you expected to receive. For example, if as the result of a divorce, you are responsible for child support, alimony or marital property rights payments, your benefits could be assigned to meet these payments if a Qualified Domestic Relations Order has been issued by a court. Qualified Domestic Relations Order (QDRO) A Domestic Relations Order (DRO) is a judgment, decree or order that includes a property settlement agreement that is made pursuant to state domestic relations law (including community property law) relating to child support, alimony payments or marital property rights for the benefit of your spouse, former spouse, child or other dependent. Such an order may have an effect on your accounts once it is deemed qualified under the Plan. Such an order is then known as a Qualified Domestic Relations Order (QDRO). The determination of a QDRO is made by the Plan s QDRO Administrator. A DRO should be sent immediately to the QDRO Administrator to determine if the Order is qualified and for processing. This will prevent the plan from processing any transactions that may be restricted by the DRO. For purposes of this section, restricted transactions include withdrawals, distributions, and initiating Plan loans. You are not restricted from contributing to the Plan, from suspending savings or from reallocating investments. An Alternate Payee pursuant to a QDRO may not name his or her current spouse as a beneficiary under the Plan. A copy of the Plan s procedures for reviewing QDROs is available, at no cost, from the QDRO Administrator. Military Leave The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) gives certain reemployment and benefits rights to employees who take a leave of absence to serve in the uniformed services of the United States. You should contact a Benefits Center representative if you think you may be entitled to any of these rights. Missed Contributions While on Leave If you return from a qualified military leave, you may be eligible to make up any missed contributions. You must meet the requirements of USERRA, which include giving notice within certain timeframes to your employer, and returning to employment within prescribed time periods. If you have any questions, please call the Benefits Center. Exelis Salaried Investment and Savings Plan Page 42

44 In general, you can make up any contributions you would have made if you had remained employed during your period of qualified military service. These contributions can be repaid over a period of three times the period of military service, but no longer than five years. If your repayment of contributions relates back to years other than the current calendar year, then these contributions will count toward the IRS annual defined contribution plan limits for the years to which the repayments relate, rather than toward the current year s limits. Any Company Matching Contributions will be based on the amount of basic contributions that you repay. To request Make-up Contributions, please call the Benefits Center and speak to a representative. Loans and Repayments for Employees on Military Leave Loans are available during your qualified military leave. If you have an outstanding Plan loan when you begin a qualified military leave, loan repayments may be suspended during qualifying periods of military service. When you return to work, payments may be recalculated over a period not to exceed the maximum loan period allowed by the Plan, measured from the original date of the loan plus your period of military service. Interest on your loan will continue to accrue during your leave but will not exceed six percent as long as you supply a copy of your military orders to the Company and ask that the six percent interest rate limit be applied. If you want to continue repaying your loan while on active military leave, coupon books are available upon request by calling the Benefits Center. Your loan will not default during the period of your military leave. Distributions during Military Leave If you are called to active duty for more than 30 days, you may request an early distribution from your Account. This distribution may be subject to a 10% early distribution penalty if you are under age 59½unless an exception applies. If you take this distribution, your future before-tax contributions are suspended for the six-month period after the date of distribution. You must re-enroll after the six-month period. If You Die While Performing Military Service If you die while absent from employment performing qualified military service, your beneficiary(ies) will be entitled to your account balance. Exelis Salaried Investment and Savings Plan Page 43

45 Claims Procedures The Plan Administrator has 90 days from the date your claim is received to determine what, if any, benefits are payable under the Plan. The Plan Administrator may require more time to review your claim, if needed due to circumstances beyond its control. If this happens, the Plan Administrator will notify you in writing before the end of the original period that its review period has been extended for up to 90 days. If this extension is made because you must provide more information, this extension will begin when the additional information is received. If your claim is approved, you will receive the appropriate benefit from the Plan. If your claim is denied, you will be notified in writing within the time periods outlined above. The notice will state the following, as applicable: Specific reasons for denial, Plan provisions that support the denial, A description of any additional information needed to review your claim request, and Instructions for requesting a review of your claim denial and the applicable time limits, including information regarding your right to bring a civil lawsuit under section 502(a) of ERISA following an adverse benefit determination on review. If disagreements arise about your Plan eligibility or benefits, we hope we can resolve them quickly and informally. However, if that is not possible, you may file a written claim with the Plan Administrator. If your claim is denied in whole or part, you have the right to request a review of (or appeal ) the decision. You or your authorized representative must make a written request for review to the Benefits Administration Committee within 60 days from the date you receive the claims denial. If you do not request a review within that time, you will have waived your right to appeal. You may file an appeal by contacting: Exelis Inc. Benefits Administration Committee 1650 Tysons Blvd., Suite 1700 McLean, VA The Benefits Administration Committee s review will take into account all comments, documents, records and other information you submit relating to the claim, whether or not such information was submitted or considered in the initial benefit determination. If you wish, you (or your authorized representative) may review the appropriate plan documents and submit written information supporting your claim to the Benefits Administration Committee. You will be provided, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant to your claim for benefits. Exelis Salaried Investment and Savings Plan Page 44

46 The Committee has 60 days from the date it received your request to review your claim and notify you of a decision. Under special circumstances, the Committee may need more time to review your claim. If this happens, you will be notified in writing before the end of the original 60-day period that the review period has been extended for up to an additional 60 days. Once the review is complete, the Committee will notify you, in writing, of the results of the review and the Plan provisions upon which the decision is based. If your claim is denied on review, in whole or part, you will receive a written notice from the Committee within the review period outlined above. The notice will include the following, as applicable: The specific reasons for the decision, Reference to the specific Plan provisions upon which the decision is based, A statement that you are entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to your claim for benefits, A statement describing any voluntary appeal procedures offered by the Plan and your right to obtain these procedures, and Where required, a statement that there may be other voluntary alternative dispute resolution options and a statement of your right to bring a timely civil lawsuit under section 502(a) of ERISA. Exelis Salaried Investment and Savings Plan Page 45

47 ADMINISTRATIVE INFORMATION Here is some additional information about the Plan: Official Plan Name and Number The official name of the Plan is the Exelis Salaried Investment and Savings Plan, which is identified by the plan number 100. Employer Identification Number The IRS has given Exelis Inc. the employer identification number Plan Sponsor The sponsor of the Exelis Salaried Investment and Savings Plan is: Exelis Inc Tysons Blvd., Suite 1700 McLean, VA Telephone: (703) Plan Administration The Exelis Benefits Administration Committee resolves any questions arising in the administration, interpretation and application of the Plan, including remedying possible ambiguities, inconsistencies or omissions on a fair and equitable basis for all Plan members. The address of the Benefits Administration Committee and the Plan Administrator is: Exelis Inc Tysons Blvd., Suite 1700 McLean, VA Telephone: (703) The Exelis Benefits Center The Plan has appointed Affiliated Computer Services (ACS) to provide the following services to the Plan: recordkeeping, web site, and the Benefits Center. You can access the Benefits Center 24 hours a day, seven days a week by visiting You can also speak with a Benefits Center representative toll-free at , Monday through Friday, 8:00 a.m. to 6:00 p.m., Eastern time, except on holidays. If you are outside the United States, you may call (this number is not toll-free). For TDD communication services for the hearing impaired, call toll-free at Exelis Salaried Investment and Savings Plan Page 46

48 QDRO Administrator A QDRO Administrator has been appointed by the Plan to review Domestic Relations Orders and to determine whether or not they are qualified. The address of the QDRO Administrator is: Buck Consultants 1801 Century Park East, Suite 500 Los Angeles, CA Telephone: (877) Plan Costs The investment management fees for each fund are charged against that fund s investment experience. You should consider these investment fees along with the historical performance of each fund when making your investment decisions. The management fees are provided on Attachment A as well as in your New Hire Kit. Other external costs for general Plan administration are paid from the assets of the Plan s trust. The maximum charge to the trust for these costs is 0.25% of the trust s assets; that is, up to one-quarter of 1% of the assets in each of the Plan s investments funds (including the self-directed brokerage account) is deducted each year. If actual Plan expenses for these costs exceed the 0.25% maximum deduction, the Company will pay these excess expenses. The Company pays all internal expenses of the Plan. Fund Management The Exelis Pension Fund Trust and Investment Committee (PFTIC) is responsible for the management of the assets of the Plan which are held by the trustee appointed by this Committee. Plan Trust Fund The Company s contributions and your Plan savings go into a trust fund managed by the trustee according to the terms of the trust agreement. This money is invested by the trustee in the Plan funds as described earlier in this booklet. The Plan s trustee is: Wells Fargo Institutional Trust Services 608 2nd Avenue South MAC N B Minneapolis, MN Type of Plan The Plan is known as a defined contribution type of pension plan under the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Exelis Salaried Investment and Savings Plan Page 47

49 Plan Records The Plan and all of its records are kept on a calendar year basis, beginning January 1 and ending December 31 of each year. Pension Benefit Guaranty Corporation As a defined contribution plan, the Plan is not covered by the plan termination insurance of the Pension Benefit Guaranty Corporation, a government corporation established under the Employee Retirement Income Security Act of 1974 (ERISA). Legal Service Process can be served on the Company by directing such legal service to: Corporate Secretary Exelis Inc Tysons Blvd., Suite 1700 McLean, VA Telephone: (703) Legal process can also be served on the Benefits Administration Committee or the Plan Trustee. Company The term Company, as used in this booklet, means Exelis Inc. and its participating divisions, subsidiaries, affiliates and units. From June 30, 2006, to October 30, 2011, the term Company referred to ITT Corporation and its participating divisions, subsidiaries, affiliates and units. Plan Continuance The Company expects and intends to continue the Plan indefinitely, but reserves the right to amend or terminate the Plan at its discretion, as described in the Plan document. Legal Limitations Government rules limit the total benefits payable under the Exelis retirement and savings plans. You will be notified if your benefits are affected by these rules. In addition, other government rules apply if the value of benefits payable to certain key employees exceeds 60% of the total benefits under all Exelis retirement and savings plans. In the unlikely event these rules would ever apply, certain steps would have to be taken to keep these plans qualified. You will be notified if your benefits are affected. Assignment of Benefits Your benefits under the Plan are solely for you (or your beneficiary). Generally, they cannot be assigned, transferred or pledged to anyone else, nor are benefits in the Plan subject to attachment, garnishment, execution or legal process. However, the Plan will honor Qualified Domestic Relations orders relating to provisions for child support, alimony payments or marital property rights. Exelis Salaried Investment and Savings Plan Page 48

50 Plan Documents This booklet describes only the highlights of the Plan and does not attempt to cover all its details. These are provided in the official Plan document and trust agreement which legally govern the operation of the Plan. These documents, as well as the annual report of Plan operations as filed with the U.S. Department of Labor, are available for review through your Human Resources representative during normal working hours. Upon written request to the Human Resources representative, copies of any of these documents will be provided to you or your beneficiary. You may be charged a nominal fee. Exelis Salaried Investment and Savings Plan Page 49

51 Your Rights Under ERISA As a member in the Exelis Salaried Investment and Savings Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan members shall be entitled to: Receive Information About Your Plan and Benefits Examine, without charge, at the Plan Administrator s office and at other specified locations, such as worksites, all documents governing the Plan, including insurance contracts, and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration. Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including insurance contracts and copies of the latest annual report (Form 5500 Series) and updated Summary Plan Description. The Administrator may make a reasonable charge for the copies. Receive a summary of the Plan s annual financial report. The Plan Administrator is required by law to furnish each member with a copy of this summary annual report. Obtain a statement telling you the value of your accounts under the Plan and whether you are vested in any portion of the Company's contributions on your behalf. The Company furnishes you with such a statement four times a year. Prudent Action by Plan Fiduciaries In addition to creating rights for Plan members, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your Plan, called fiduciaries of the Plan, have a duty to do so prudently and in the interest of you and other Plan members and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising any of your rights under ERISA. Enforce Your Rights If a claim for a Plan benefit is denied or ignored, in whole or in part, you or your beneficiary have the right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file a suit in a state or federal court, but only after you have exhausted the Plan s claims and appeals procedure. In addition, Exelis Salaried Investment and Savings Plan Page 50

52 if you disagree with the Plan s decision or lack thereof concerning the qualified status of a Domestic Relations Order, you may file suit in federal court. If the Plan fiduciaries misuse the Plan s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. Assistance with Your Questions If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration at , or online at No Guarantee of Employment Your participation or eligibility for benefits under the Plan described in this booklet is no guarantee of continued employment with Exelis. As provided in all Exelis benefit plans, the terms and conditions of the Plan documents will govern and while Exelis expects to continue the Plan(s), it reserves the right to change or discontinue the Plan or Plans at any time with respect to some or all members. Exelis Salaried Investment and Savings Plan Page 51

53 ATTACHMENT A Exelis Salaried Investment and Savings Plan (ISP) Investment Lineup The ISP offers a wide range of investment choices for your retirement savings. For detailed fund descriptions and a complete listing of the fund holdings, you can visit BenefitsWeb at Funds are shown in order of relative degree of investment risk and return. Asset Class Investment Name (Benchmarks are in the shaded areas) Fund Manager Total Annual Operating Expense 1 As a % Per $1,000 Inception Date 2 Stable Value Fund DB Advisors 0.39% $3.90 N/A Citigroup 3-Month U.S. Treasury Bill Index Core Bond Fund (Long-Term Bond Fund) J.P. Morgan Asset Management 0.38% $3.80 1/1/2003 Fixed Income Barclays Capital Aggregate Bond Index U.S. Fixed Income Index Fund BlackRock, Inc. 0.16% $1.60 7/2/2012 Barclays Capital Aggregate Bond Index US TIPS Fund BlackRock, Inc. 0.15% $1.50 7/2/2012 Barclays Capital US TIPS Index Target Retirement Income Fund J.P. Morgan Asset Management 0.63% $6.30 1/4/2006 S&P Target Date Retirement Income Index Target Retirement Fund 2015 J.P. Morgan Asset Management 0.76% $7.60 1/4/2006 S&P Target Date 2015 Index Target Retirement Fund 2020 J.P. Morgan Asset Management 0.81% $8.10 1/4/2006 S&P Target Date 2020 Index Target Retirement Fund 2025 J.P. Morgan Asset Management 0.87% $8.70 7/5/2007 S&P Target Date 2025 Index Target Retirement Fund 2030 J.P. Morgan Asset Management 0.91% $9.10 1/4/2006 Asset Allocation- S&P Target Date 2030 Index Target Retirement Fund 2035 J.P. Morgan Asset Management 0.97% $9.70 7/3/2007 S&P Target Date 2035 Index Target Retirement Fund 2040 J.P. Morgan Asset Management 0.96% $9.60 7/6/2007 S&P Target Date 2040 Index Target Retirement Fund 2045 J.P. Morgan Asset Management 0.98% $9.80 7/6/2007 S&P Target Date 2045 Index Target Retirement Fund 2050 J.P. Morgan Asset Management 1.06% $ /3/2007 S&P Target Date 2050 Index Balanced Fund Jennison Associates 0.35% $3.50 N/A S&P 500 Index 60% S&P 500 Index/40% Barclays Intermediate Government Credit Index 1 Total Annual Operating Expenses are expenses that reduce the rate of return of the investment alternative. The cumulative effect of fees can substantially reduce the growth of your retirement savings. Visit the Department of Labor s website for an example showing the long-term effect of fees at 2 If option has been in the Plan for less than 10 years. July 2012 Exelis Salaried Investment and Savings Plan (ISP) Page 52

54 Asset Class Investment Name (Benchmarks are in the shaded areas) Fund Manager Total Annual Operating Expense 1 As a % Per $1,000 Inception Date 2 Enhanced Equity Index Fund S&P 500 Index J.P. Morgan Asset Management T. Rowe Price 0.37% $3.70 7/2/2007 U.S. Equity Index Fund BlackRock, Inc. 0.15% $1.50 7/2/2012 S&P 500 Index Large Cap Core Plus Fund J.P. Morgan Asset Management 2.08% $ /3/2007 S&P 500 Index Large Cap Value Fund Eaton Vance Management 0.83% $8.30 9/1/2010 Russell 1000 Value Index Equities Large Cap Growth Fund Russell 1000 Growth Index Columbus Circle Investors INTECH 0.66% $6.60 7/2/2007 Global Equity Fund American Funds 0.87% $8.70 N/A MSCI ACWI Gross (Free) Equities International Equity Fund Dodge & Cox 0.83% $8.30 7/3/2007 MSCI EAFE Net (Free) International Equity Index Fund BlackRock, Inc. 0.22% $2.20 7/2/2012 MSCI All Country World ex-u.s. Index (net) Small Cap Value Fund Mesirow Financial Investment Management 0.96% $9.60 7/3/2007 Russell 2000 Value Index Small Cap Growth Fund Kornitzer Capital Management, Inc. 1.13% $ /3/2007 Russell 2000 Growth Index U.S. Small Cap Equity Index Fund BlackRock, Inc. 0.19% $1.90 7/2/2012 Russell 2000 Index Exelis Stock Fund N/A 0.10% $ /1/2011 Russell 3000 Index Xylem Stock Fund N/A 0.10% $ /1/2011 Russell 3000 Index ITT Stock Fund N/A 0.10% $ /1/2011 Russell 3000 Index 1 Total Annual Operating Expenses are expenses that reduce the rate of return of the investment alternative. The cumulative effect of fees can substantially reduce the growth of your retirement savings. Visit the Department of Labor s website for an example showing the long-term effect of fees at 2 If option has been in the Plan for less than 10 years. July 2012 Exelis Salaried Investment and Savings Plan (ISP) Page 53

55 ATTACHMENT B Current Investment Funds Subject to 30-day Restriction Global Equity Fund Large Cap Core Plus Fund Exelis Salaried Investment and Savings Plan Page 54

56 ATTACHMENT C Target Retirement Funds and Associated Years of Birth TARGET RETIREMENT FUND MEMBER YEAR OF BIRTH Target Retirement Fund Income Before 1950 Target Retirement Fund Target Retirement Fund Target Retirement Fund Target Retirement Fund Target Retirement Fund Target Retirement Fund Target Retirement Fund Target Retirement Fund or later Exelis Salaried Investment and Savings Plan Page 55