| Company Name | For plan years beginning in | Year | Month | First Segment | Second Segment | Third Segment | Plan Type |
| L3Harris | All | 2025 | January | 4.74% | 5.55% | 5.92% | |
| L3Harris | All | 2024 | January | 4.89% | 5.14% | 5.29% |
Have you looked at the news recently? Every news site that you visit, the headlines are plastered with “HISTORICAL INFLATION RATES” or “HIGHEST INFLATION RATES IN THE LAST 39 YEARS”. As an employee of L3Harris, what does this actually mean for you as you approach retirement?
First off, let us define what inflation is. Inflation is known as the increase in general price levels of goods and services. Inflation is measured through the CPI, the Consumer Price Index, which is produced by the Bureau of Labor Statistics. The U.S. Bureau of Labor Statistics found that a gallon of whole milk cost $3.66 in October 2021, which is 8% more from October 2020 at $3.38 per gallon. Combined with the other goods and services, we would find an average increase in prices and calculate how much prices have increased within a given time period. Normally, the Federal Reserve targets an inflation rate of 2% and since 2016, it has been pretty consistent, only off by about a half percentage point. However, in 2021, the annual inflation rate was 7%, drastically different from the 1.4% increase in 2020 and the 2.3% increase in 2019. To put this in perspective, from 2018 to the end of 2020, CPI grew at a cumulative 5.7%. So within a single year, inflation grew faster than the three years prior.
Inflation is an expected occurrence and many people who retire tend to expect a consistent rate over their life span and calculate their retirement expenses with this in mind. However, these calculations quickly change when there are abrupt increases in inflation. Unexpected inflation can have devastating effects on a L3Harris employee’s savings as it whittles away at your spending power faster than you expect it to. Today, you might be able to buy groceries within a certain budget, but during an inflation spike, groceries will outpace your budget and soon enough, you’ll find yourself spending considerably more for your normal grocery bundle.
In order to control the rapid rise of inflation, the Federal Reserve uses interest rates to dissipate inflationary pressures. As interest rates increase, inflation generally decreases. This relationship is caused by how interest rates affect the rate of borrowing money. When interest rates are low, people will borrow money as they pay less in interest. This fuels the economy and increases inflation. As interest rates rise, people will borrow less and the markets will move slower as there is less fuel to add to the fire. These factors go hand in hand in an economic balancing act.
You may be wondering: “How does this affect my L3Harris pension? Should I be choosing lump-sum or annuity?” As pension lump sum amounts are calculated using the current interest rates, choosing lump-sum versus annuity can be a difficult decision. Since lump-sum pensions are inversely affected by interest rates, the higher interest rates rise, the less you will receive from your L3Harris lump-sum pension. As interest rates rise however, annuity pensions become a lot more attractive as they use current interest rates to calculate your lifetime monthly payments.
In regards to healthcare, it is lagging behind the country’s 7% inflation rate and has only risen 2.5% over this past year. However, we are seeing a labor shortage in the healthcare sector, which can lead to a rise in wages to attract workers and would ultimately increase prices and insurance premiums for patients. Many L3Harris retirees typically rely on Medicare to support them in their healthcare costs, however, Medicare rarely covers all costs and patients are required to pay a premium on top of out-of-pocket expenses. These premiums will increase as inflation continues to increase, leading to an overall increase in expenses for healthcare. For the upcoming 2022 year, Medicare Part B premiums increased by 14.5%, pushing the standard monthly premium to $170.10. Even though, as a whole, healthcare costs have not risen in line with inflation, we have seen very high inflation for those nearing or at retirement age.
With increasing prices in drug expenses and Medicare premiums, the Employee Benefit Research Institute (ERBI) found in their 2022 report that couples with average drug expenses would need $296,000 in savings to cover those expenses in retirement - a 10% increase from the year prior. Couples with higher drug expenses would need $361,000 to cover those healthcare costs - an 11% increase from the year prior.
Overall, the landscape of the economy is rapidly changing and these recent developments have been shifting people’s expectations and forecasts for retirement. Understanding how inflation and interest rates will affect your retirement is a vital step in crafting a successful retirement plan.
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What specific factors should L3Harris Technologies employees consider when determining the most suitable form of pension benefit at retirement? Employees of L3Harris Technologies may have various options, such as life annuities, contingent annuities, and lump-sum payouts. Understanding the implications of each option, including tax treatments and benefit guarantees, can be crucial in making a decision that aligns with long-term financial goals. It is also important to consider how the selected form may affect survivor benefits and overall retirement income planning.
Pension Options at Retirement: L3Harris Technologies employees have various pension benefit options to consider at retirement, such as life annuities, contingent annuities, and lump-sum payouts(L3Harris Technologies I…). Each option has different tax treatments, survivor benefits, and guarantees. For example, selecting a life annuity ensures a fixed monthly payment for life, while a lump-sum payout might offer more flexibility but comes with immediate tax implications. Employees should evaluate how each option aligns with their long-term financial goals and whether it provides adequate survivor protection for dependents(L3Harris Technologies I…).
How does L3Harris Technologies determine eligibility for early retirement, and what implications does this have for pension benefits? Employees should familiarize themselves with the criteria for qualifying for early retirement, including age and service requirements. Additionally, understanding the benefits that are available should retirement occur before the standard retirement age can affect financial planning, as these benefits can differ significantly from those available at normal retirement age due to reduction factors or penalties.
Early Retirement Eligibility: L3Harris Technologies determines eligibility for early retirement based on age and years of service. Employees may qualify for early retirement if they are at least 55 years old and have completed 10 years of service(L3Harris Technologies I…). Opting for early retirement can result in a reduced pension benefit due to the longer payment period. These reductions, known as early retirement penalties, affect financial planning since the payout is lower compared to waiting until the normal retirement age(L3Harris Technologies I…).
In what ways do the pension formulas at L3Harris Technologies differ, and how can employees assess which plan is most advantageous for their retirement? Employees participating in the L3Harris pension plan can choose between different formulas, such as the Traditional Pension Plan and the Pension Equity Plan. Assessing which formula may yield higher benefits involves understanding the benefits calculation processes, including how each formula accounts for years of service, salary history, and participation criteria, which can significantly impact total retirement income.
Pension Formulas: L3Harris employees can choose between different pension formulas, such as the Traditional Pension Plan and Pension Equity Plan(L3Harris Technologies I…). The Traditional Plan is based on years of service and final average pay, while the Pension Equity Plan uses a lump-sum formula that accrues value over time. Understanding how each formula calculates benefits is essential for employees to determine which plan will provide higher retirement income, depending on their service years and salary history(L3Harris Technologies I…).
How should L3Harris Technologies employees prepare for the selection of a beneficiary, and what are the potential impacts on their pension benefits? Selecting a beneficiary is an important component of retirement planning. Employees at L3Harris Technologies must understand the implications that come with adding a spouse or other individuals as beneficiaries, including the effect on benefit amounts and how beneficiary selection can influence survivor payouts. Moreover, they should familiarize themselves with the requirements for updating beneficiary information and the legal implications of such designations.
Beneficiary Selection: Choosing a beneficiary is a crucial step for L3Harris employees. Adding a spouse or another individual as a beneficiary may reduce the employee's pension benefit but ensures that a portion of the pension continues after the employee's death(L3Harris Technologies I…). Employees should be aware of the survivor benefit provisions, spousal consent requirements, and the need to regularly update their beneficiary information(L3Harris Technologies I…).
What procedures must L3Harris Technologies employees follow to appeal a denied pension benefit claim, and what timelines should they be aware of? Employees should be well-informed about the steps involved in the appeals process for denied claims, including how and when to file an appeal and the importance of providing adequate documentation. Understanding the statutes of limitations related to claims and appeals can significantly influence the outcomes for employees seeking to reinstate or secure their benefits.
Appealing Denied Claims: L3Harris Technologies employees must follow a formal process to appeal denied pension benefit claims(L3Harris Technologies I…). The process includes submitting an appeal within a specific timeframe and providing supporting documentation. It is important to be familiar with the statute of limitations and administrative remedies to ensure the best chance of success when appealing a decision(L3Harris Technologies I…).
How does L3Harris Technologies handle survivor benefits, and what actions should employees take to ensure that their surviving spouses or partners have access to these benefits? Understanding the components of survivor benefits at L3Harris Technologies is crucial. Employees should learn about the eligibility of their spouses or partners following their death, the type of benefits due, and any actions required to secure these benefits. Familiarity with the plan’s rules surrounding survivor benefits and timelines for elections can also affect the financial security of beneficiaries.
Survivor Benefits: L3Harris offers survivor benefits to spouses or designated beneficiaries(L3Harris Technologies I…). Employees must ensure that their spouse or partner is properly designated to receive these benefits, which may involve selecting an annuity option that provides continued payments to the survivor. Understanding the timelines for making these elections and the rules governing survivor benefits is crucial for securing financial support for loved ones(L3Harris Technologies I…).
What resources are available for L3Harris Technologies employees for receiving personalized retirement counseling, and how can these resources aid in making informed financial decisions? Employees may benefit from accessing professional counseling services or informational resources provided by L3Harris Technologies. These resources can include individual retirement planning sessions that help employees align their pension benefits with their overall retirement strategy, ensuring that they utilize their benefits effectively and are informed about their options.
Retirement Counseling Resources: L3Harris provides personalized retirement counseling services to assist employees with their pension and retirement planning(L3Harris Technologies I…). These resources include individual sessions to discuss how pension benefits fit into overall retirement strategies. By leveraging these services, employees can make well-informed decisions about their financial future(L3Harris Technologies I…).
How can employees of L3Harris Technologies find out more about their eligibility for the Cash Balance Plan and the advantages of this plan over traditional pension formulas? Employees should research what defines an "active Cash Balance Plan Participant" as well as the benefit calculations associated with it. Investigating the elements that set this type of plan apart—specifically regarding lump-sum distributions and the ability to track benefits—can better inform employees about the potential advantages for their future retirement income.
Cash Balance Plan: Employees interested in the Cash Balance Plan can research its advantages over traditional pension formulas. The Cash Balance Plan allows for lump-sum distributions and provides clear benefit tracking, which can be more appealing to employees looking for flexibility and control over their retirement funds(L3Harris Technologies I…).
What impact do potential changes to the L3Harris Technologies pension plan have on current employees, and what steps should they take to stay informed about such changes? Employees should remain vigilant regarding any amendments to the pension plan that could influence their retirement benefits. This includes understanding their rights under ERISA and staying engaged with communication from L3Harris regarding plan updates, ensuring that they are equipped to make timely decisions based on the latest information.
Plan Changes: L3Harris employees should stay updated on any changes to the pension plan, which could impact their benefits(L3Harris Technologies I…). Monitoring communications from the company and understanding their rights under ERISA is essential to making timely decisions based on new plan terms or amendments(L3Harris Technologies I…).
How can employees of L3Harris Technologies contact the Benefits Service Center to address specific questions regarding their pension plan or retirement strategy? It is essential for employees seeking clarity on their pension benefits or retirement planning to know how to reach out to the L3Harris Benefits Service Center. This center acts as a vital resource, and understanding its operations—including contact times, methods of contact, and the types of inquiries that can be addressed—will enable employees to receive the guidance they need regarding their benefits.
Benefits Service Center: L3Harris employees can contact the Benefits Service Center for any questions regarding their pension or retirement strategy. The center provides assistance with understanding pension benefits, resolving issues, and addressing specific inquiries related to retirement planning(L3Harris Technologies I…)(L3Harris Technologies I…).