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Healthcare Provider Update: Healthcare Provider for Northrop Grumman: Northrop Grumman provides various healthcare benefits through multiple providers, including major insurers such as UnitedHealthcare, Aetna (CVS Health), Anthem (Elevance Health), and Cigna. Their offerings include comprehensive health insurance plans, which encompass medical, dental, and vision coverage to address the diverse needs of their employees. Potential Healthcare Cost Increases for Northrop Grumman in 2026: As Northrop Grumman navigates the complex landscape of healthcare costs, employees may face significant increases in their out-of-pocket expenses in 2026. Healthcare premiums are projected to rise sharply, with many states experiencing hikes of over 60%, driven by a combination of escalating medical costs and the potential loss of enhanced federal subsidies. A report from the Kaiser Family Foundation indicates that approximately 92% of ACA marketplace policyholders could see their premiums swell by more than 75%, reflecting the profound impact of regulatory changes and heightened insurer rate demands. This environment calls for proactive planning and financial preparation to mitigate the impending financial challenges associated with healthcare coverage. Click here to learn more
“Northrop Grumman employees reviewing IDGTs can benefit from understanding how these trusts may support long-term legacy planning, although qualified legal and tax professionals should review these strategies to determine whether they fit into their overall goals.” ~ Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.
“Northrop Grumman employees considering an IDGT should recognize how this strategy may support long-term wealth transfer goals, although these structures should be reviewed with qualified legal and tax professionals to determine whether they align with each household’s broader plan.” ~ Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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How intentionally defective grantor trusts (IDGTs) work.
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The advantages and potential limitations of using an IDGT.
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Key considerations for Northrop Grumman employees evaluating this type of planning strategy.
An irrevocable trust arrangement known as an intentionally defective grantor trust (IDGT) allows the grantor to move assets out of their taxable estate while still being treated as the owner of those assets for income tax purposes. Many people, including Northrop Grumman employees with high-growth or income-producing holdings, may benefit from using this strategy to support long-term wealth preservation.
How an Intentionally Defective Grantor Trust Works
For tax purposes, different kinds of trusts receive different treatment, and understanding the distinctions can help Northrop Grumman professionals review planning strategies more effectively.
Revocable Trusts
In a revocable trust, the grantor is taxed on trust income and is regarded as the owner for income tax purposes. A separate trust income tax return is usually unnecessary. These assets generally remain inside the grantor’s taxable estate because the grantor maintains full control.
Irrevocable Trusts
An irrevocable trust is treated as its own tax entity, filing its own return and taking its own deductions. When properly drafted so the grantor does not retain certain powers or interests, assets transferred to an irrevocable trust are generally removed from the taxable estate, a detail that can matter for Northrop Grumman professionals with substantial savings or investment holdings.
How IDGTs Combine These Features
An IDGT is structured as an irrevocable trust for estate and gift tax purposes, removing assets from the taxable estate, but is treated as a grantor trust for income tax purposes. As long as the grantor pays income taxes on trust earnings, the trust’s assets can grow outside the estate, which may appeal to Northrop Grumman professionals with long-term legacy goals.
Why It’s Called “Intentionally Defective”
The trust is drafted so that, under IRS grantor-trust rules, the grantor remains the owner for income tax purposes due to certain retained powers. At the same time, the trust is irrevocable for estate tax purposes, allowing the assets to remain outside the taxable estate—a structure that may assist with multigenerational planning.
Advantages of an Intentionally Defective Grantor Trust
Because an IDGT is a grantor trust for income tax purposes, the grantor pays income tax on trust earnings. This leads to two important benefits that may interest Northrop Grumman employees with high-value assets:
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- Trust assets can grow for beneficiaries without being reduced by income tax payments.
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- Income tax paid by the grantor reduces the taxable estate without being classified as a gift.
- This dynamic—where grantors use personal funds to pay taxes that would otherwise reduce trust assets—is often referred to as a “tax burn.”
How Assets Are Transferred to an IDGT
Northrop Grumman employees reviewing wealth transfer strategies may encounter two common approaches:
1. Gift or Partial Gift/Sale
A grantor can move assets to an IDGT as a gift. If the gift stays within the lifetime gift and estate tax exemption, it typically does not create out-of-pocket gift tax. Some planning approaches combine a partial gift with a sale to balance estate goals.
2. Sale to the IDGT
Many grantors sell assets to an IDGT in exchange for a promissory note with an interest rate at or above the IRS Applicable Federal Rate (AFR).
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- The sale is typically not treated as a taxable gift if conducted at fair market value.
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- Appreciation above the AFR occurs outside the grantor’s estate for beneficiaries.
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- When AFR rules and loan requirements are followed, the note is treated as valid consideration and carries an interest obligation.
Potential Drawbacks of an IDGT
Once established, an IDGT is difficult to modify, similar to other irrevocable trusts. Outcomes also depend on the trust assets growing at a rate higher than the AFR. If that does not occur, the intended estate planning benefits may fall short—an important consideration for Northrop Grumman employees reviewing various asset types.
Who Might Consider an IDGT?
An IDGT can be appealing for families facing potential estate tax exposure, especially when transferring assets with strong growth potential. This approach works best when the grantor has sufficient liquidity to continue paying the trust’s income taxes personally, a factor some Northrop Grumman employees review when assessing retirement and estate liquidity. Because the structure requires precise legal drafting, it should be established with qualified legal counsel.
Need Support with IDGTs or Retirement Planning?
The Retirement Group can assist you in reviewing whether an IDGT fits into your broader retirement and estate plan as a Northrop Grumman employee. For guidance tailored to your long-term goals, call us at (800) 900-5867 .
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Sources:
1. BMO Wealth Management.
Herman, Brad.
Intentionally Defective Grantor Trust.
BMO Financial Group, Oct. 2021,
https://uswealth.bmo.com/media/filer_public/8b/3f/8b3f85c6-21b0-407e-bfbf-0f9b181c1673/bwm_idgtarticle_1103.pdf
.
2. Fidelity Wealth Management.
“What Is an Intentionally Defective Grantor Trust (IDGT)?”
Fidelity Viewpoints
, 4 Dec. 2025,
https://www.fidelity.com/viewpoints/wealth-management/insights/intentionally-defective-grantor-trusts
.
3. Hirtle, Callaghan & Co.
Estate Planning With Intentionally Defective Grantor Trusts.
Hirtle, Callaghan & Co., 2020,
https://www.hirtlecallaghan.com/wp-content/uploads/2020/08/Intentionally-Defective-Grantor-Trusts.pdf
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4. Nevada Trust Company.
Ford-Grella, Jaclyn. “How Intentionally Defective Grantor Trusts Can Safeguard Assets for Future Generations.”
Nevada Trust Company
, 10 Dec. 2024,
https://www.nevadatrust.com/how-intentionally-defective-grantor-trusts-can-safeguard-assets-for-future-generations/
.
How can Northrop Grumman employees effectively maximize their retirement income, and what role do pension plans and personal investments play in this strategy? It's important for employees to understand how components like the Pension Plan Benefits, Savings Plan Benefits, and Social Security Benefits collectively provide a robust retirement framework. This question invites a detailed exploration of how Northrop Grumman's various programs interact, and what actions employees can take to ensure they are optimizing their retirement savings.
Maximizing Retirement Income at Northrop Grumman: Northrop Grumman employees can maximize their retirement income by effectively leveraging the combination of Pension Plan Benefits, Savings Plan Benefits, Social Security Benefits, and Personal Savings and Investments. Each component plays a crucial role: the pension plan provides a defined benefit based on salary and years of service, the savings plan offers a vehicle for tax-advantaged growth through employee and employer contributions, and social security offers a baseline of income adjusted for inflation. Employees should aim to maximize their contributions, particularly to the 401(k) plan, and manage their investments according to their individual retirement timelines and risk tolerance.
What are the different types of retirement benefits available to Northrop Grumman employees, and how do these benefits impact retirement planning? Employees should be aware of the distinctions between defined benefit plans, like the Heritage TRW, and defined contribution plans, such as the 401(k) Savings Plan. This question will allow an in-depth examination of how these benefits function and their significance in the context of Northrop Grumman's overall compensation structure.
Types of Retirement Benefits: Northrop Grumman offers both defined benefit and defined contribution retirement plans. The Heritage TRW Pension Plan, a defined benefit plan, bases pensions on final average earnings and years of service. The 401(k) Savings Plan, a defined contribution plan, allows employees to save and invest with tax advantages, with contributions from both the employee and employer. Understanding these plans' structures and benefits is essential for employees to plan effectively for retirement.
In what ways have recent changes to the Northrop Grumman Pension Program affected employees who are planning to retire in the near future? Understanding the specifics of benefit adjustments or freezing final average earnings will be pivotal for employees' retirement planning. This inquiry will encourage discussion around how these changes influence both current and future retirees regarding their readiness for retirement and their financial planning.
Impact of Recent Changes to Pension Program: Recent changes to the Northrop Grumman Pension Program, such as the freezing of the final average earnings calculation as of December 31, 2014, affect employees planning to retire soon. These changes may alter the expected retirement benefits for some employees, making it crucial for near-retirees to reassess their projected pension benefits under the new rules and plan accordingly to meet their retirement goals.
How do Northrop Grumman employees qualify for early retirement under the current pension plan, and what benefits can they expect? This question should delve into the eligibility criteria for early retirement based on age and years of service, as well as highlight the benefits associated with this option. It provides an opportunity to explore the trade-offs and advantages of opting for early retirement versus working longer.
Early Retirement Qualifications and Benefits: Northrop Grumman employees can qualify for early retirement if they are at least 55 years old with 10 years of vesting service, receiving benefits reduced based on early retirement factors. Understanding these factors and the impact on the retirement benefits can help employees decide the best age to retire to maximize their pension benefits while considering their personal and financial circumstances.
What essential steps should Northrop Grumman employees take to prepare for retirement, including understanding their pension plan and social security benefits? This question can explore the various resources available, such as tools and calculators provided by Northrop Grumman, and the importance of proactive planning. Employees should consider how their decisions today will influence their retirement lifestyle, including the necessity of accumulating both pension and social security benefits.
Preparation Steps for Retirement: Employees should take proactive steps such as utilizing Northrop Grumman’s retirement calculators, attending planning seminars, and consulting with financial advisors available through the Northrop Grumman Benefits Center. It's also important for employees to understand how their pension benefits interact with Social Security and personal savings to create a comprehensive retirement strategy.
What options do Northrop Grumman employees have for managing their savings after retirement, and how can they choose the best strategy for their individual needs? Discussion here can encompass the different methods for drawing down retirement accounts, the importance of balancing withdrawals with ongoing expenses, and considerations for managing longevity risk. It is crucial for retirees to think about how they will provide for themselves throughout their retirement years.
Post-Retirement Savings Management: After retirement, Northrop Grumman employees need to manage their withdrawals from savings plans carefully to sustain their income throughout retirement. Considering factors like withdrawal rates, tax implications, and investment risk will help in maintaining a stable financial status in the retirement years.
How does Northrop Grumman determine the final average earnings (FAE) used in calculating pensions, and what factors should employees consider to impact this calculation positively? This question could lead to a discussion about the significance of high-earning years, the concept that only the top five consecutive earning years count, and how employees can strategically plan their careers to boost their FAE for retirement.
Determining Final Average Earnings (FAE): Northrop Grumman calculates FAE for pension benefits based on the highest five consecutive years of earnings. Employees should aim to maximize their earnings during these peak years, as this will directly increase the pension benefits they receive upon retirement.
What are the specific vesting requirements for Northrop Grumman's pension plans, and why is understanding these concepts critical for employees? As employees may leave the company at various stages of their careers, grasping how vesting works can significantly affect their financial security. This question allows for a detailed discussion on how years of service translate into non-forfeitable benefits.
Understanding Vesting Requirements: Vesting in Northrop Grumman's pension plans requires completing three years of service, after which the benefits earned become non-forfeitable. Employees should be aware of their vesting status, especially if considering changing jobs, as it impacts their eligibility for pension benefits.
How can Northrop Grumman employees effectively utilize the resources available through the Northrop Grumman Benefits Center for their retirement planning needs? This question invites exploration of what tools and guidance are obtainable through the Benefits Center, including contact methods, online resources, and personalized retirement evaluations, allowing employees to make informed decisions about their retirement.
Utilizing Northrop Grumman Benefits Center Resources: The Northrop Grumman Benefits Center offers tools, resources, and support for retirement planning. Employees should frequently use these resources, such as the retirement income calculator and personalized consultations, to plan effectively for their retirement.
How can Northrop Grumman employees find additional information regarding their retirement options and resources, including the most effective ways to contact the Northrop Grumman Benefits Center? With a focus on how to access support and information, this question emphasizes the role of company resources in assisting employees with their retirement strategies.ã€4:4†source】
Finding Retirement Information and Support: Additional information about retirement options and resources can be accessed through Northrop Grumman's Benefits Online portal and the Benefits Center. Employees are encouraged to actively use these channels for up-to-date information and personalized support to navigate their retirement planning effectively.
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