Pension Elections, Deferred Comp, and the Honeywell HONA Spinoff at Arizona's Aerospace Employers.
Honeywell's completed aerospace spinoff (HONA) reshaped your equity holdings. RTX's $2.5B pension transfer to Prudential changed who pays 60,000 retirees. Boeing Mesa and Northrop Grumman Chandler carry two of the richest 401(k) designs in the industry. The 401(k) match arrives as company stock and compounds concentration. Deferred comp sits under Section 409A and has to be coordinated with the rest.
Schedule Your Aerospace & Defense Strategy CallHoneywell's Match-as-HON-Stock structure, the upcoming HONA spinoff conversion, RTX's CDP and PSU Deferral Plan, the pension lump-sum election, the 401(k) match arriving as company stock. These come up constantly in the work, and they each interact with the others in ways the documents don't make obvious.
The spinoff isn't an abstract corporate event. Your Honeywell equity automatically converts to two stocks. Tax basis, the timing of the ex-date, dividend reinvestment, whether your deferred comp plan treats the spinoff as a taxable event (it doesn't, under Section 409A). Each piece feeds into the next.
The work is mapping all of that and walking through the decisions in the order they need to be made.
- Jay Chang, VP, Wealth Advisor
Two Transformational Events Reshaping Your Retirement
Honeywell Aerospace → HONA Spinoff (Completed June 2026)
The Event
Honeywell separated its aerospace business, including Defense & Space, into an independent public company (ticker: HONA) in June 2026. Shareholders received 1 HONA share for every 2 HON shares held on the June 15 record date. The remaining HON is the automation business; Performance Materials had already spun off as Solstice (SOLS) in October 2025.
Your Equity Conversion
You kept your HON shares (now the automation business) and received 1 HONA share per 2 HON. Unvested RSUs converted per the spinoff's Employee Matters Agreement, typically into equity of your post-spinoff employer; your award notice shows the exact conversion. The 401(k) match fund, which arrived as HON stock, now reflects both stocks. The distribution was tax-free under Section 355, but your basis allocation, dividend treatment, and capital gains timing all shifted.
What Changes for Your Plan
- • Concentration Risk Resets: You now hold two stocks instead of one. Neither may be a "hold forever" position.
- • RSU Treatment: Restricted stock units settle at spinoff under the same proportional structure. Vesting dates don't change.
- • Tax-Free Reorganization: You owe no federal income tax on the separation itself. But your cost basis splits between the two stocks, requiring precise documentation.
- • Dividend Reinvestment: If you reinvest HON dividends, confirm your brokerage splits dividends post-spinoff for both entities.
- • Action Now: Pull your post-distribution share counts, update your investment policy, and model concentration across both stocks (not just HON), including what your converted RSUs now vest into.
RTX $2.5B Pension Transfer to Prudential
The Event
RTX (Raytheon Technologies) announced a $2.5B de-risking transaction in November 2025: transferring pension liabilities and assets for roughly 60,000 participants, about one-third of plan participants, to Prudential. The transfer closed at the end of 2025. Your monthly benefit amount is unchanged, but your statements and payment election method move to Prudential's platform.
Impact on Your Pension Decision
The Raytheon pension closed to new hires in 2007 and stopped accruals at the end of 2022, so anyone employed through those years holds a frozen benefit. At retirement you face a critical election from the plan: take a lump sum (valued using IRS 417(e) rates and mortality tables) or a monthly annuity. Higher IRS rates shrink lump sums, so the rate environment when you commence matters. The Prudential transfer covered retirees already receiving payments; it does not change future retirees' elections, which stay with the plan.
What Changes for Your Plan
- • Lump Sum vs. Annuity: Higher IRS discount rates make lump sums mathematically more attractive. Breakeven age on the annuity is rising.
- • Rule of 75 Consideration: The legacy non-bargaining plan pays an unreduced pension at 55 or later when age plus service reaches 75. Check your eligibility date before picking a retirement date; months matter.
- • Already Retired? If your pension was in the transferred group, Prudential now pays it. Your amount is unchanged; confirm your beneficiary elections carried over correctly.
- • Net Unrealized Appreciation (NUA): A separate 401(k) opportunity: RTX stock distributed in kind to a taxable account at separation gets capital-gains treatment on the appreciation. Rolling that stock into an IRA destroys the option, so decide before you roll. Worth modeling.
- • Action Now: Model both scenarios (lump vs. annuity) under current IRS rates. Coordinate with your 401(k), deferred comp, and Social Security timing.
Honeywell 401(k) & Equity: Built for Complexity, Often Managed Simply
Honeywell's retirement benefits are designed for aerospace professionals. But too many employees treat them like a generic 401(k). They're not.
401(k) Match: 87.5% of First 8%, Delivered as HON Stock
How It Works
Honeywell matches 87.5% of the first 8% of salary you defer. If you earn $100,000 and defer $8,000 (8%), Honeywell deposits $7,000 (87.5% × $8,000) into your 401(k), delivered into the Honeywell Common Stock Fund as a single annual deposit each January (you generally must be employed through mid-December to receive it). The match vests on a three-year cliff, and you can move it into other funds once vested. Until you act, it sits in company stock.
The Concentration Problem
Most Honeywell employees don't realize the consequences. Over 10 years, the match compounds. You've also received RSU grants (if you're a manager), directed your own contributions into the stock fund, and held unvested restricted stock. Now you own 40%, 50%, sometimes 60% of your 401(k) in Honeywell stock. The rest of your portfolio is diversified, but your largest financial asset, your balance, is concentrated in one stock.
The Spinoff Multiplier
When HONA spins off, your HON 401(k) balance splits. You now own two aerospace/defense stocks in the same account. The concentration is still there, but it's now split between two highly correlated holdings. This is not diversification. Your plan requires explicit action: selling a portion of both HON and HONA positions and reallocating to fixed income, international equities, or broad-market index funds. Delaying this action means accepting concentrated risk in a slow-growing, highly-regulated sector.
Our Approach
We calculate your true stock concentration (including RSUs, stock-fund balances, and deferred comp holdings). We model the post-spinoff position. We build a multi-year transition strategy that harvests tax losses in downturns and rebalances systematically. The goal: align your 401(k) with your overall asset allocation, not let company stock decisions dictate your portfolio.
RSU Grants: 3-Year Vesting with Tax at Grant Price
What You Receive
Honeywell grants Restricted Stock Units (RSUs) to managers and above. Grants vest over multi-year schedules, commonly three to six years depending on the award; executive grants vest in thirds on the second, third, and fourth anniversaries. Nothing vests at grant. At vesting, each unit converts to one share of stock, and you cannot sell before the vesting date.
Tax Consequence at Vesting
When your RSUs vest, you recognize ordinary income tax equal to the fair market value of the shares on the vesting date. If you received 100 RSUs at a grant price of $80, and they vest when HON is trading at $95, you owe federal, state, and FICA tax on $9,500 (100 shares × $95). The tax is due in the same calendar year. Most employees don't set cash aside; they sell a portion of the vested shares to cover withholding. This forced sale can lock in losses or gains depending on the vesting date.
Planning Opportunity
Coordinate your RSU vesting with your tax bracket. High-income years (promotions, bonuses, spouse's income events) may push you into a higher tax bracket, making that vesting year expensive. In low-income years, the same vesting amount triggers lower tax rates. We also monitor whether a portion of your RSU shares should be held long-term or sold immediately for rebalancing. After vesting, HON shares become part of your overall equity allocation decision. Holding them automatically because they vested is not a strategy.
HONA Spinoff: What the June 2026 Distribution Did to Your Equity
What Happens to Your Shares
In the June 2026 distribution, you kept your HON shares (now the automation-focused Honeywell) and received 1 HONA share for every 2 HON. Defense & Space went with HONA, and Performance Materials had already left as Solstice in October 2025. You took no action; brokers handled it. Unvested RSUs converted per the Employee Matters Agreement (check your award notice), and the stock-fund match you accumulated now spans both tickers.
Tax Implications
The IRS does not treat this as a taxable event. No capital gains tax is due. You do not need to report it as income. But your cost basis must be allocated between the two new stocks. If you bought Honeywell at $60 per share in 2015 and now own 1,000 shares (cost basis $60,000), the IRS requires you to split that basis between HON and HONA using the ex-date fair market values. This is critical for future sales. If you sell HONA shares three years from now, your cost basis determines your gain or loss. Proper documentation now prevents disputes later.
Action Items Before Spinoff
- • Gather Cost Basis: Collect purchase confirmations, dividend reinvestment dates, and lot information for all HON shares you own directly.
- • Communicate with Your Custodian: Confirm your broker will properly allocate basis between HON and HONA at ex-date. Request written confirmation.
- • Plan Your Transition: Decide which shares (if any) you will sell in year one post-spinoff. High-basis lots should be prioritized (specific ID method).
- • Update Your Investment Policy: You now own two stocks. Rebalance by selling a portion of both (not just HONA) to reduce concentration.
- • Check Your Deferred Comp Plan: If you have outstanding deferred compensation holdings, confirm they do not include restricted HON stock. If they do, model how the spinoff affects your distribution timing and tax treatment.
RTX 401(k), Pension & Deferred Comp: Layered Retirement, Layered Decisions
RTX (Raytheon Technologies) offers a three-tier retirement structure. Most employees optimize one tier and ignore the other two. That's leaving money on the table.
401(k) Age-Based Contribution: Match + RSC Scaling
How It Works
RTX offers a base match (100% of the first 3% you defer, plus roughly a third of the next 3%, about 4% total when you defer 6%) plus an age-based retirement savings contribution (RSC). The RSC is the important part: RTX deposits it whether or not you defer, and it scales with age from about 3% of pay for the youngest employees to about 7% at 55 and older (your plan documents show the exact brackets for your hire cohort).
What This Means
If you're 57, earning $120,000, and defer 6%, you receive roughly: (1) match of $4,800 (100% of your first 3% plus a third of the next 3%), and (2) age-based RSC of $8,400 (7% × $120,000). Total company contribution: about $13,200 in one year. If you've been at RTX for 15+ years in an age 50+ role, your cumulative RSC contributions are substantial. This is accelerated wealth building in your final 15 years before retirement.
What Not to Do
Do not defer less than 6% just because RTX contributes the RSC regardless. The base match still requires your deferral. Also, do not let the RSC sit in a default investment. RTX deposits it in an age-based fund or conservative allocation if you don't direct it elsewhere. At age 52, a conservative allocation may be too cautious if you plan to work until 65. Model your target retirement date and adjust the RSC investment accordingly.
Pension: Lump Sum vs. Annuity
Your Pension, Explained
The Raytheon pension closed to new hires on January 1, 2007, and participants kept accruing until benefits froze on December 31, 2022. If you were hired before 2007, you hold a vested benefit based on your salary and service through the freeze date. No new credits accrue now, but everything earned through 2022 is yours. Early retirement provisions (including the Rule of 75: unreduced at 55 or later when age plus service reaches 75) determine when you can start without reductions.
The Election: Lump Sum or Annuity?
When you become eligible, RTX presents a one-time election: take a lump sum (a cash payout of the present value of your lifetime pension) or take a monthly annuity for life. The lump sum is calculated using IRS discount rates published each month. When those rates are elevated, lump sums shrink; when rates fall, lump sums grow. A 55-year-old with a $30,000/year pension might see a lump sum in the range of $450,000–$500,000, depending entirely on the IRS 417(e) rates and mortality tables in effect when benefits commence.
Lump Sum Pros & Cons
Pros: You control the money. You can invest it aggressively if you're young. If you die before reaching break-even age (~82), your beneficiaries inherit the balance. You are not locked into Prudential's annuity rates. If your health is poor, a lump sum avoids longevity risk.
Cons: You take on investment risk. If you invest poorly or spend the lump sum, you have no guaranteed income. You lose the psychological security of a lifetime check. If you live past 85, the annuity would've paid more total dollars.
Annuity Pros & Cons
Pros: Guaranteed income for life. You don't bear investment risk. Inflation may erode the payment, but the amount never drops. Simple to plan around.
Cons: The annuity locks your payment. If you die at 70, payments stop (no beneficiary payout, unless you elect a survivor option, which reduces your annual payment). Inflation eats your purchasing power unless you select a COLA (cost-of-living adjustment) option, which also reduces your annual payment.
Our Approach
We calculate your break-even age under current IRS rates. We model both the lump sum and annuity scenarios under multiple investment returns. We layer in your Social Security timing, your 401(k) balance, and your deferred comp to determine whether the lump sum makes sense within your total retirement income picture. For most RTX employees in their mid-50s, today's elevated IRS rates favor lump sums, but only if you have a disciplined plan to invest the balance and avoid spending it on discretionary needs.
Retirement Income Coordination: Pension + 401(k) + Social Security
The Problem
Most RTX employees view their pension, 401(k), and Social Security as three separate buckets. They ask: "Should I take the pension lump sum?" without considering how that decision interacts with their 401(k) drawdown rate or their optimal Social Security filing age. This fragmented approach often leaves thousands of dollars on the table annually.
Our Framework
We build a "lifetime income waterfall" that coordinates all three. For example: if you take your pension lump sum at 55, we model investing it to generate a steady annual withdrawal. Meanwhile, your 401(k) compounds until age 73 (when Required Minimum Distributions begin). Your Social Security doesn't start until age 67, 70, or a selected date based on your longevity, spouse's situation, and household income needs. By timing each source optimally, we can increase your total retirement income by 15%–25% compared to a fragmented approach.
Special Consideration: Net Unrealized Appreciation (NUA)
If your pension lump sum is invested in RTX stock and you've held that RTX stock for more than one year in your name (not the plan), you may qualify for NUA treatment. This means you pay long-term capital gains tax on only the appreciation above your cost basis, not ordinary income tax on the full balance. This is extraordinarily valuable if your RTX holdings have significant gains. We model this opportunity annually.
Special Consideration: Estate Planning
If you elect the annuity option with a survivor component, your spouse receives a reduced monthly payment for life. If you elect no survivor option, your spouse receives nothing after your death. The election is permanent. We coordinate this with your overall estate plan and tax situation to ensure your family is protected and taxes are minimized.
Deferred Compensation: CDP & PSU Deferral Plan (Section 409A Compliant)
Who Participates
RTX's deferred compensation plans are available to M7+ executives. They allow you to defer a portion of your salary, bonus, and vested performance stock units. These deferrals are an unsecured obligation of RTX, not held in a protected trust: you track a menu of notional investment options while the money legally remains the company's. The deferred amounts compound tax-deferred until distribution.
Two Flavors: CDP and PSU Deferral Plan
The RTX Compensation Deferral Plan allows you to defer salary and bonus. The PSU Deferral Plan allows you to defer vested Performance Stock Units. Both operate under Section 409A of the tax code, which means: (1) deferrals must be elected before the year in which the pay is earned (RTX enrollment runs the prior June); (2) distribution dates are locked in when you make the deferral; and (3) if you violate 409A rules, all deferred amounts become immediately taxable plus a 20% penalty and interest.
Section 409A Compliance and Timing
You cannot simply withdraw your deferred comp whenever you want. You must elect a distribution date when you make the deferral. Common options: distribution at termination of employment, distribution at a specified date (e.g., retirement at age 65), or distribution in installments over a fixed number of years. If you terminate employment before the distribution date, the plan typically allows you to elect a distribution (subject to a six-month delay if you're a "specified employee" under 409A). Violating these rules is costly.
Our Role
We ensure your deferral elections are coordinated with your overall retirement plan. If you're planning to retire at 62, we confirm your CDP and PSU deferrals will distribute at that age without 409A penalties. We also model the tax impact: deferred comp is taxed as ordinary income in the year it distributes, regardless of how it was invested. If you defer a large bonus into the deferred plan and it grows to $500,000, you owe ordinary income tax on the full $500,000 in the distribution year. This can push you into a higher tax bracket. We plan around that.
Five Critical Conversations We Have With Aerospace & Defense Professionals
Honeywell Spinoff: What Should I Do With My HON Stock Before HONA Separates?
We build a glide path. If you're 40% concentrated in HON today, we don't recommend selling everything at once (you'll miss the run-up before spinoff and trigger a massive tax bill). Instead, we identify high-basis shares, harvest losses in downturns, and rebalance methodically over 12–18 months. After the spinoff, we continue rebalancing until you own both HON and HONA in proportion to your overall equity allocation, not as outsized positions.
RTX Pension Freeze: Should I Take the Lump Sum or the Annuity?
We calculate your break-even age using current IRS rates. We then layer in your 401(k) balance, your Social Security timing, and your longevity expectations. If you're 57, healthy, and expect to live past 85, today's elevated IRS rates make the lump sum highly attractive. If you're 62 and plan to spend heavily in your early retirement years, the annuity's certainty and simplicity might be preferable. There's no universal answer: it depends on your full financial picture.
401(k) Concentration: How Do I Rebalance My Honeywell/RTX Stock Without Triggering a Huge Tax Bill?
Inside your 401(k), you can buy and sell shares of company stock without any tax consequence. That's a free pass to rebalance. We recommend a systematic approach: every quarter or semester, sell a small percentage of your concentrated position and buy diversified index funds. Outside the 401(k), for shares you own individually, we use specific lot identification to sell high-basis lots first, minimizing gains. We also harvest capital losses in down markets to offset gains.
RSU Vesting: Should I Sell My Vested Shares Immediately or Hold for Long-Term Growth?
It depends on your total concentration and your tax situation. If you already own 35% of your portfolio in HON/HONA, selling vested shares into strength and rebalancing is wise. If your income is high in a given year (promotion, bonus spike), holding for long-term capital gains treatment and selling in a lower-income year later may save taxes. We model this annually based on your life circumstances.
RTX Deferred Compensation: When Should I Defer, and What's the Right Distribution Strategy Under Section 409A?
Deferral is a tax-planning tool, not a saving mechanism. If you expect your income to be lower in retirement than during your career, deferring now and distributing later saves taxes. But you must lock in a distribution date before the year the pay is earned, and you must comply with 409A rules or face 20% penalties. We manage the calendar, coordinate with your retirement plan, and ensure distributions sync with your optimal tax year.
What Aerospace & Defense Professionals Deserve
Precision Planning
Your career has been built on precision. Your financial plan should match. We don't make general recommendations. We calculate your exact HONA spinoff impact on your tax liability. We model the exact break-even age on your pension election. We know the precise amount of your HON stock match and coordinate it with your overall asset allocation.
Deep Benefits Knowledge
We don't rely on generic retirement planning templates. We understand Honeywell's match-as-stock structure, RTX's age-based RSC scaling, and how Section 409A affects your deferred comp election. We read your plan documents annually. We attend company benefits webinars. We know what changed and what stayed the same.
Proactive Outreach
You don't come to us every three months asking if your plan still works. We come to you. When HONA posts its standalone results, we call. When RTX plan terms change, we send analysis. When new IRS discount rates are published affecting your lump-sum calculation, we model it. Your plan evolves because we're paying attention.
Fiduciary Accountability
We are bound by fiduciary duty. That means we put your interests first, ahead of our own revenue. If we recommend reducing your HON concentration, it's because it's best for you, not because we earn a fee when you rebalance. We disclose conflicts explicitly. We can be held legally accountable if we breach this duty.
Honeywell's Spinoff. RTX's Pension Transfer. Your Retirement. These Events Are Happening Now.
You've built a remarkable career in aerospace and defense. Your financial plan should reflect the same sophistication, precision, and forward-thinking that got you here.
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