Withdrawal 401K Before 59 Fully Retired by kcb19867

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									2007 SSIP/401(k) and Pension Plan Changes



DISCLAIMER: This presentation is for information purposes only and summarizes certain changes in the General
Dynamics Corporation Savings and Stock Investment Plan (“SSIP”) and in the General Dynamics Corporation
Retirement Plan for Salaried Employees, sub-plan of the General Dynamics Retirement Plan (Government), (“Pension
Plan”), as described herein. This presentation does not represent an agreement or contract of employment. In the
event of any discrepancy between the terms of this presentation and the terms of the SSIP’s or Pension Plan’s final
legal plan documents, the terms of the applicable final legal plan documents shall govern.
Why We’re Here Today

   Describe changes to the Savings and Stock Investment
    Plan (SSIP)
   Describe changes to the Retirement Plan for Salaried
    Employees (―Pension Plan‖)
   Describe how these changes will affect your financial
    resources for retirement
   Demonstrate tools you can use and actions you can
    take to prepare for these changes
   Answer your questions



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The Big Picture

Changes to the Savings and Stock Investment Plan (SSIP)
   New matching contribution formula
   New definition of pay
   Immediate vesting in future General Dynamics
    matching contributions
   Ability to contribute before-tax and after-tax dollars
   Ability to diversify your General Dynamics Stock Fund
    balance

         All changes effective January 1st

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The Big Picture

Changes to the Pension Plan
    December 31st: 1.3333% formula for calculating your
     retirement benefit ends
    January 1st: 1% formula begins for future service
    New early retirement factor applies for benefit under
     1% formula
    New 100% pre-retirement surviving spouse annuity
    January 1st: Pension Plan closed to new hires
    • Whatever you have earned through 12/31/2006 is protected
    • Your pension benefit will continue to grow but not as fast

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Your Resources




      General Dynamics Benefits Web Site
              www.gdbenefits.com
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Changes to the SSIP/401(k)
How Does the SSIP/401(k) Work?

The Savings and Stock Investment Plan (SSIP):
A tax-advantaged way to save for retirement
   You contribute dollars: 1% - 50% of pay (combined before- and
    after-tax, up to IRS limits)
   Your before-tax contributions are deducted from pay before
    income taxes are calculated
   General Dynamics matches part of your contributions
   You decide how to invest your account: 7 funds plus General
    Dynamics Stock Fund
   Account grows tax free until withdrawal



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Changes to the SSIP/401(k)

New matching contribution calculation
When you contribute:              General Dynamics matches:
                                                                Fully
First 4% of pay (1% - 4%)         $1 for $1                     vested
                                                                1/1/07
Next 2% of pay (5% - 6%)          $0.50 for $1                  and after

      Total potential match = 5.0% of pay
                To receive the maximum match,
             you must contribute at least 6% of pay

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Changes to the SSIP/401(k)
                 New Matching Formula
    Prior to 1/1/2007                 Prospective of 1/1/2007
   Base pay =          $70,000      Base pay =                   $70,000
   GD Match =           $2,500      GD Match =                    $2,800
    Basic (10% of 1st                 4% of Pay
    $25,000 at *100%)                 at 100%
   GD Match =          $2,700       GD Match        =              $700
    Excess(6% of                      2% of Pay
    $45,000 at *100%)                 at 50%
Total GD Match =         $5,200   Total GD Match =                  $3,500


* For GD Stock Only

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Changes to the SSIP/401(k)

New definition of pay
 Current definition—base pay
 New definition—401(k) Eligible Pay, which
  includes:
   Base pay (regular salary or wages) +
   (As applicable) commissions, overtime,
    bonuses, etc.




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Changes to the SSIP/401(k)

New definition of pay

Today (example):                     Today (example):
   Base pay =             $70,000      401(k) Eligible Pay = $80,000
   Employee                            Employee
    Contribution (6%) =      4,200       Contribution (6%) =     4,800
    (0.06 X $70,000)                     (0.06 X $80,000)
   GD match (5.0%) =        3,500      GD match (5.0%) =             4,000
    (0.05 X $70,000)                     (0.05 X $80,000)
   Total 401(k) cont. =     7,700      Total 401(k) cont. =          8,800



                    To receive the maximum match,
                 you must contribute at least 6% of pay
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Changes to the SSIP/401(k)
Past 3-tier payroll election becomes 1-tier election
(for salaried employees)
   Your 2006 election percentages (matched basic,
    matched excess, unmatched—as applicable) have
    been mapped to a single percentage of base pay
   The resulting percentage will be rounded down
    (1% minimum)
   This new percentage of 401(k) Eligible Pay will be
    deducted each pay period as a 401(k) contribution
   Company match will be based on that percentage of
    401(k) Eligible Pay

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Changes to the SSIP/401(k)

Effective 1/1/07:
You may immediately diversify your General
Dynamics Stock Fund balance
   All contributions (your own and the match) and
    earnings invested in General Dynamics Stock Fund
     Pre 1/1/07: You may not re-invest (diversify) for 5 years
     After 1/1/07: You may diversify immediately




    Current balance and future contributions
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Changes to the SSIP/401(k)

To diversify . . .
   General Dynamics
   Benefits Web Site
   www.gdbenefits.com




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Changes to the SSIP/401(k)

To diversify . . .




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Changes to the Retirement Plan for
      Salaried Employees
     (The “Pension Plan”)
Changes to the Pension Plan

   December 31st: 1.3333% formula for calculating your retirement
    benefit ended
     No further service included in current formula
     January 1, 2007 thru December 31, 2010: changes in pay
      continue to be credited
   January 1, 2007: 1% formula began
   December 31, 2010: 1.3333% formula benefit frozen, using service
    through 12/31/2006 and pay through 12/31/2010
   Early retirement: changes for 1% formula benefit
   Pre-retirement surviving spouse annuity benefit: increased
   Benefit options: condensed to simplify



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Changes to the Pension Plan

    What remains the same?
   Any benefit already earned (unless your
    compensation decreases)
   The definition of pay used to calculate your
    benefit
    (―eligible pay‖)
   Total continuous service for plan eligibility,
    vesting, and early retirement eligibility


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Changes to the Pension Plan
        Plan                                                                               When
Hire                                   1 Jan                      31 Dec
     Membership                                                                             you
Date                                   2007                        2010
        Date                                                                               Retire


                        Continuous Service (Vesting/Early Retirement)


            Plan Membership Time
            1.3333% Benefit Formula
             Final Average Pay used for 1.3333% Benefit Formula



                                         Final Average Pay used for 1% Benefit Formula
                                                          1% Benefit Formula
                                                        Plan Membership Time




           Your benefit under the Pension Plan will be a
           combination of the 1.3333% and 1% formulas

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Changes to the Pension Plan
The 1.3333% Formula:                           The 1% Formula:
          1.3333%                                        1%
X         final average pay*                   X         final average pay*
X         years of plan membership             X         years of plan membership
          as of 12/31/2006                               starting 1/1/2007
÷         12                                   ÷         12

 Your Pension Plan benefit at retirement will be a combination of:
 • Your Protected 1.3333% Benefit with pay updates
   through 12/31/2010; plus
 • Your 1% Benefit
* Final average pay = highest consecutive 60 months of last 120 months before retirement

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Changes to the Pension Plan

Example: Jill
• Current age: 58
• Current years of plan membership: 20
• Current base pay: $75,000
• Annual pay increase: 3.5%
• Projected retirement age: 65
• Projected retirement date: 01/01/2014




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Changes to the Pension Plan
If the Plan remained unchanged   After the Plan changes
FAP on 12/31/2013 = $89,182         Protected 1.3333% Benefit with
                                    eligible pay updates
Years of plan membership = 27
                                 FAP on 12/31/2010 =        $80,437
Benefit starting 1/1/2014 =
                                 Years under 1.3333% formula = 20
                                 Benefit (frozen) = $1,787/mo.
         $2,675/mo.                 1% Benefit with eligible pay updates
                                 FAP on 12/31/2013 =         $89,182
                                 Years under 1% formula =        7
                                 Benefit =          $520/mo.
                                 Combined benefit starting 1/1/2014 =

                                            $2,307/mo.


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Changes to the Pension Plan

Early Retirement Changes Effective 01/01/2007
Your benefit will be reduced if you retire before normal retirement age
  Normal retirement = age 65
  Earliest retirement = age 55 (with 10 years of continuous service)


Current:                             New:
(applies to benefits earned under    (applies to benefits earned under
Protected 1.3333% Benefit)           1% Benefit)

2.5% reduction for each year         4.8% reduction for each year
preceding age 62                     preceding age 65



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Changes to the Pension Plan
           Requirement – Age 55 with 10 years of service

           Age When    Protected     Age When
            Benefit     1.3333%       Benefits     1%
            Begins      Benefit        Begin     Benefit
               65        100%            65       100%
               64        100%            64       95.2%
 100%
               63        100%            63       90.4%
               62        100%            62       85.6%
               61        97.5%           61       80.8%
               60        95.0%           60       76.0%            4.8%
               59        92.5%           59       71.2%            per year
2.5%           58        90.0%           58       66.4%
per year
               57        87.5%           57       61.6%
               56        85.0%           56       56.8%
               55        82.5%           55       52.0%


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Changes to the Pension Plan

Example: Thomas
• Age at retirement (1/1/2012): 60
• Years of plan membership: 20
  (Protected 1.3333% Benefit = 15 years; 1% Benefit = 5 years)
• Final average pay = $68,822
Protected 1.3333% Benefit           1% Benefit
 Frozen benefit =   $1,108          Normal (age-65) benefit = $287
 Reduced benefit    $1,053          Reduced benefit           $218
 (0.025 X 2 years: 95%)               (0.048 X 5 years: 76%)


    Age 60 benefit (combined benefits) = $1,271/mo.

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Changes to the Pension Plan

New pre-retirement surviving spouse annuity
   Effective 1/1/07: Your surviving spouse
    qualifies for a 100% survivor annuity
   Applies if you die before commencing benefit
   Calculated: As if you had retired and elected
    100% contingent annuity option (adjusted by
    early retirement factor)



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Changes to the Pension Plan
New simplified benefit payment options
   Effective 1/1/07 for 1% benefit:
       Single-life annuity (―normal‖ form)
       100% contingent annuity (default if married)
       50% contingent annuity
       10-year certain and life annuity
   All benefit payment options available for protected
    1.3333% benefit through 2010
   Starting 1/1/2011: 4-8 diverse payment options for the
    protected 1.3333% benefit


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What Do These Changes
    Mean for You?
What Do These Changes Mean for You?

   If you retire after 2006, your pension will be a
    combination of your protected 1.3333% and 1%
    benefits
   Whatever you have earned through 12/31/2006 is
    protected
   Your pension benefit will continue to grow but not
    as fast
   The longer you have to retirement, the longer you have
    to save through SSIP/401(k), personal savings, and
    other assets


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In Summary . . .

Now is the time to reexamine your retirement
              planning strategy!
   Identify the dollars you’ll need in retirement and the
    dollars you’ll receive from:
     Pension +
     SSIP/401(k) +
     Social security +
     Personal savings

   Start saving more now!

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In Summary . . .

   If you retire after January 1, 2007:
    Your future pension benefit will be a combination of
    your protected 1.3333% benefit and 1% benefit
   If you save in the SSIP/401(k):
      Company matching contributions change on 1/1/07
      Your payroll contributions will be based on 401(k)
        Eligible Pay
      You’re immediately vested in Company matching
        contributions allocated after 1/1/07
      You may immediately diversify your investments
        beginning 1/1/07
      You may contribute before-tax and after-tax dollars

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  General Dynamics Service Center
1-888-GD-BENEFITS (1-888-432-3633)
          Monday-Friday
 9:00 am – 9:00 pm (Eastern Time)

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