Salaried Investment and Savings Plan
Summary Plan Description (SPD)
As of January 1, 2012
(Including updates through 7/31/2012)
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 ... 10
Eligible Pay ... 10
Before-Tax Savings ... 11
Catch-up Contributions ... 12
After-Tax Savings... 13
Rollover Contributions ... 13
Other Benefits and Social Security ... 13
Changing and Suspending Your Savings ... 14
COMPANY CONTRIBUTIONS ... 15
Base Contributions ... 15
Matching Contributions ... 15
YOUR PLAN ACCOUNTS ... 16
Limits on Your Accounts ... 16
YOUR INVESTMENT OPTIONS ... 17
How Your Account Can Grow ... 17
Risk vs. Return ... 17
Diversification ... 18
Reassessing Your Investment Strategy ... 18
Investment Elections ... 18
Investing in Company Stock ... 20
Self-directed Brokerage Account ... 21
Investment Assistance ... 22
Proxy Voting ... 23
Information Available from the Recordkeeper upon Request ... 23
How Plan Accounts Are Valued ... 24
VESTING ... 25
ACCESSING YOUR ACCOUNT ... 26
Loans ... 26
Exelis Salaried Investment and Savings Plan 2
Payment if You Become Totally Disabled ... 36
Payment to Your Beneficiary ... 36
Deferring Your Account When You Leave the Company ... 37
Inability to Locate Payee ... 38
SERVICE ... 39
Transfers ... 39
Reemployment ... 39
WHEN YOU PAY TAXES ... 40
Taxation of Distributions and Withdrawals ... 40
Early Withdrawal Penalty ... 40
Mandatory Withholding Requirements ... 40
SITUATIONS AFFECTING YOUR BENEFITS ... 42
How You May Lose Benefits ... 42
Military Leave ... 42
Claims Procedures ... 44
ADMINISTRATIVE INFORMATION ... 46
Official Plan Name and Number ... 46
Employer Identification Number ... 46
Plan Sponsor ... 46
Plan Administration ... 46
The Exelis Benefits Center... 46
QDRO Administrator ... 47
Plan Costs ... 47
Fund Management ... 47
Plan Trust Fund ... 47
Type of Plan... 47
Plan Records ... 48
Pension Benefit Guaranty Corporation ... 48
Legal Service ... 48
Company ... 48
Plan Continuance ... 48
Legal Limitations ... 48
Assignment of Benefits ... 48
Plan Documents ... 49
Your Rights Under ERISA ... 50
Receive Information About Your Plan and Benefits ... 50
Prudent Action by Plan Fiduciaries ... 50
Enforce Your Rights ... 50
Assistance with Your Questions ... 51
No Guarantee of Employment ... 51
ATTACHMENT A ... 52
Exelis Salaried Investment and Savings Plan (ISP) Investment Lineup ... 52
ATTACHMENT B ... 54
Current Investment Funds Subject to 30-day Restriction ... 54
ATTACHMENT C ... 55
Target Retirement Funds and Associated Years of Birth ... 55
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, 2012. Please read it carefully. If you have any questions about the Plan, log onto the Plan’s web site,www.benefitsweb.com/exelis.html, or call the Exelis Benefits Center at 1-866-488-4889. 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.
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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, www.benefitsweb.com/exelis.html. You can also speak with a Benefits Center representative toll-free at 1-866-488-4889, 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 1-703-480-0002 (this number is not toll-free). For TDD communication services for the hearing impaired, call toll-free at 1- 800-833-8334.
ELIGIBILITY AND PARTICIPATION
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.
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.
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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 www.benefitsweb.com/exelis.html, or by calling the Benefits Center at 1- 866-488-4889.
To stop automatic contributions, increase your savings rate above the 6% of eligible pay level, add after- tax 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 www.benefitsweb.com/exelis.html, 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 www.benefitsweb.com/exelis.html 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 www.benefitsweb.com/exelis.html, 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 www.benefitsweb.com/exelis.html 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 111-22-3333 and your birthday is September 7, your temporary User ID would be 111223333 and your temporary Passcode would be 33330907. 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.
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 www.benefitsweb.com/exelis.html, 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 www.benefitsweb.com/exelis.html 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.
Exelis Salaried Investment and Savings Plan Page 8 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 www.benefitsweb.com/exelis.html, 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 www.benefitsweb.com/exelis.html 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
www.benefitsweb.com/exelis.html 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 www.benefitsweb.com/exelis.html.
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.
The Exelis Benefits Center
When you log onto www.benefitsweb.com/exelis.html 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
www.benefitsweb.com/exelis.html. You can also speak with a Benefits Center representative toll-free at 1-866-488-4889, 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 1-703-480-0002 (this number is not toll-free). For TDD communication services for the hearing impaired, call toll-free at 1-800-833-8334.
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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 mustdecide 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 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.
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 Catch- up 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 $3,000 --
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 www.benefitsweb.com/exelis.html 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 12 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 www.benefitsweb.com/exelis.html under Documents & Forms in the Savings Plan section, and in the New Hire Kit.
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 www.benefitsweb.com/exelis.html or contact the Benefits Center at the beginning of the next calendar year to increase the catch-up contribution dollar amount per paycheck.
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 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.
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
www.benefitsweb.com/exelis.html 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.
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Changing and Suspending Your Savings
You may increase or decrease your overall savings rate, stop saving altogether, or change your before- tax or after-tax savings rates, including catch-up contribution rates, at any time by logging onto
www.benefitsweb.com/exelis.html 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 www.benefitsweb.com/exelis.html 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
www.benefitsweb.com/exelis.html or calling the Benefits Center. Your savings will resume as soon as administratively possible, depending on your payroll schedule.
The Company makes two types of contributions on your behalf: Base contributions and Matching 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.
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.
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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).
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 www.benefitsweb.com/exelis.html, 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 2550.404c-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 www.benefitsweb.com/exelis.html 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.
Exelis Salaried Investment and Savings Plan Page 18 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.
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.
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.
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 www.benefitsweb.com/exelis.html 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
www.benefitsweb.com/exelis.html 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
Exelis Salaried Investment and Savings Plan Page 20 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.
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.
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”).
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 www.schwab.com or by calling Schwab at 1-888-393-7272.
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 www.benefitsweb.com/exelis.html 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 www.schwab.com or by calling
Exelis Salaried Investment and Savings Plan Page 22
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.
To access Personal Online Advisor, log onto www.benefitsweb.com/exelis.html, 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.
For more information about the Personal Asset Manager program, or to enroll, log onto www.financialengines.com/foritt, or call 1-800-601-5957.
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
www.benefitsweb.com/exelis.html 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.
Exelis Salaried Investment and Savings Plan Page 24
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 www.benefitsweb.com/exelis.html or by calling the Benefits Center.
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, 2012.
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, 2011.
Exelis Salaried Investment and Savings Plan Page 26
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.
You can request a loan from your vested account in the Plan by logging onto
www.benefitsweb.com/exelis.html 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.
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
www.benefitsweb.com/exelis.html or by calling the Benefits Center.
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
Exelis Salaried Investment and Savings Plan Page 28 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 pro- rata 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.
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 www.benefitsweb.com/exelis.html 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 www.benefitsweb.com/exelis.html 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 www.benefitsweb.com/exelis.html or from the Benefits Center.
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.
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 before- tax 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
Exelis Salaried Investment and Savings Plan Page 30
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.