HERNDON, Va. -- Northrop Grumman Corp. has concluded that competitive retirement benefits are a must in the information technology industry.
On Jan. 1, the defense and aerospace conglomerate set up a cash balance plan for the 5,400 employees of Logican Inc., the Herndon, Va., high-tech subsidiary that the company acquired in 1997. At the same time, it also gussied up Logican's existing 401(k) plan.
The cash balance plan's assets will be run as part of the conglomerate's $13.8 billion traditional pension plan.
Logican's employees never were covered by Northrop Grumman's traditional pension plan.
"We designed this plan to accommodate information technology industry employees," said Tai-Ann Ma, director of Northrop Grumman's benefits analysis and accounting. Because of the tight job market, high-tech companies fight to hire and keep employees.
Under the new plan, employees receive hypothetical investment accounts, which grow annually in line with a fixed interest rate linked to that of the 30-year Treasury bond.
At the same time, Northrop has increased the number of investment options in Logican's 401(k) plan and added an employer match in line with that offered to other Northrop Grumman employees of 50 cents for every dollar they contribute up to 8% of pay. Logican employees previously did not receive an employer match for their plan contributions.
The corporation preserved the investment options Logican employees had through their old 401(k) plan and added others, including a discount brokerage window that enables them to invest part of their account balances directly in stocks through Charles Schwab & Co., San Francisco.