RTX / Raytheon Pension Lump Sum vs. Annuity: A Guide for RTX Employees (2026)

RTX Corporation — formed from the April 2020 merger of United Technologies Corporation (UTC) and the legacy Raytheon Company, and known as Raytheon Technologies until its July 2023 rename — carries one of the largest defined benefit pension obligations in the U.S. defense and aerospace sector. If you are a current or former Raytheon employee hired before the 2007 pension freeze, or a former UTC employee with benefits from a Collins Aerospace or Pratt & Whitney predecessor plan, you may be evaluating whether to take your accrued pension benefit as a lump sum or a lifetime monthly annuity. The decision has been complicated significantly by two pension risk transfers to Prudential Insurance — most recently a $2.5 billion transfer covering approximately 60,000 retirees and beneficiaries that closed December 30, 2025. For those participants, PBGC protection ended when Prudential assumed the obligation. This guide explains the RTX plan structure, how the lump sum is calculated under IRS §417(e), what the 2025 Prudential transfer means for your risk exposure, and how to approach the decision in the current 2026 rate environment.

How RTX's pension situation evolved: from Raytheon Company to RTX Corp

Today's RTX Corporation is the product of several major corporate events that you must understand to know which plan covers your benefit:

• Raytheon Company pension freeze (2007): The legacy Raytheon Company froze its defined benefit pension plan for most non-union salaried employees in 2007 — accruals stopped, meaning salary increases and additional service years after the freeze date no longer increased pension benefits. All benefits accrued through the freeze date remain fully vested and payable at retirement for eligible participants.¹
• UTC merger and spinoffs (April 2020): United Technologies Corporation merged with Raytheon Company on April 3, 2020 to form Raytheon Technologies. On the same day, UTC spun off Otis Elevator Company and Carrier Global as independent public companies. Employees of Otis and Carrier retained benefits in their respective legacy plans after separation. UTC brought its own frozen defined benefit obligations into Raytheon Technologies — these cover employees of the businesses that became the Collins Aerospace and Pratt & Whitney segments.
• Rename to RTX Corp (July 2023): Raytheon Technologies Corporation changed its name to RTX Corporation in July 2023. Plan documents and benefits correspondence may reference either name depending on timing of the communication.
• 2018 Prudential transfer: RTX transferred approximately $1 billion in pension obligations to The Prudential Insurance Company of America in 2018, covering approximately 13,000 retirees and beneficiaries. PBGC protection ended for that group when the group annuity contract was purchased.²
• 2025 Prudential transfer (December 30, 2025): RTX announced on November 13, 2025 and closed on December 30, 2025 a $2.5 billion pension risk transfer to Prudential Insurance covering approximately 60,000 retirees and beneficiaries — one of the largest single-employer pension risk transfers in the United States in 2025. PBGC protection ended for all participants included in this transfer when the group annuity contract closed. RTX recorded a one-time non-cash pretax charge of approximately $300 million in Q4 2025.²

Action step: To determine which plan covers your benefit and whether it was included in the 2018 or 2025 Prudential transfer, contact the RTX Benefits Center. If you have received ERISA §204(h) notices or benefit payment correspondence from Prudential (rather than RTX or its plan administrator), your benefit is in the Prudential group annuity — not the RTX plan.

How RTX calculates your lump sum: IRS §417(e) segment rates

For participants in the traditional final-average-pay pension formula who have not had their benefits transferred to Prudential, the lump sum is calculated under IRC §417(e)(3), which requires using IRS-published segment rates to discount future monthly benefit payments to a present-value lump sum. The relationship is inverse: higher segment rates produce a smaller lump sum; lower rates produce a larger lump sum.³

The segment rate structure has three tiers based on payment timing:

Most large corporate pension plans use the IRS segment rates published in a designated look-back month to set lump-sum values for retirements throughout a calendar year. Many major employers use the November rates from the prior year to govern lump sums for the entire following year — meaning the same rates apply whether you retire in January or December. Confirm the specific look-back month and stability period for your RTX plan by contacting the RTX Benefits Center, since the exact mechanics determine whether the month you retire within a given year affects your offer.

The practical consequence of the 2025–2026 rate environment: today's RTX lump-sum offers are meaningfully smaller than they would have been in 2020–2021 when segment rates were near zero. A $4,500/month pension that would have produced a lump sum near $975,000 in 2021 may produce roughly $680,000–$780,000 under 2025 segment rates — a $195,000–$295,000 difference driven entirely by rate movement. See our interest rate timing guide and break-even calculator to model what a potential rate decline would mean for a future offer.

The 2025 Prudential transfer: what it means for 60,000 RTX retirees

On December 30, 2025, RTX completed the transfer of approximately $2.5 billion in pension obligations to The Prudential Insurance Company of America, covering approximately 60,000 retirees and beneficiaries.²

When RTX transferred these obligations to Prudential:

• PBGC protection ended for those 60,000 participants. A group annuity purchase accompanies a plan termination for the transferred liabilities, removing those participants from PBGC coverage. RTX is no longer responsible for those benefits — Prudential is the payor of record.
• State insurance guaranty associations are now the backstop. If Prudential were to fail, affected participants would rely on their state's insurance guaranty association — not PBGC — for benefit protection. State guaranty association coverage varies by state but is typically $250,000 to $500,000 in lifetime present value per person. This is significantly less protection than PBGC's $7,789.77/month guarantee for a 65-year-old straight-life annuitant.⁴
• Benefit amounts did not change. The monthly payment amount, survivor election, and any COLA provisions are unchanged — only the payor entity shifted from RTX's plan administrator to Prudential.
• RTX recorded a one-time non-cash pretax charge of approximately $300 million in Q4 2025. This reflects the difference between the plan's liability on RTX's books and the premium Prudential charged to assume the obligation.

The 2018 Prudential transfer: 13,000 earlier retirees

RTX completed an earlier pension risk transfer in 2018, moving approximately $1 billion in pension obligations covering approximately 13,000 retirees and beneficiaries to Prudential.² Those participants have been in the Prudential group annuity for several years — their PBGC protection ended at that earlier date.

The mechanics are identical to those described for the 2025 transfer: Prudential is the payor, state guaranty associations backstop the benefit in a Prudential insolvency scenario, and RTX has no further pension obligation to that group. If you were among the 13,000 and have questions, contact Prudential directly.

PBGC cap for RTX participants not transferred to Prudential

For RTX defined benefit plan participants whose benefits were not included in either Prudential transfer and remain in the active RTX plan, PBGC single-employer coverage continues to apply. The 2026 PBGC maximum monthly guarantee for a straight-life annuitant at age 65 is $7,789.77 per month ($93,477 per year).⁴

RTX management employees and engineers with 25–35 years of pre-freeze service can have monthly pension benefits in the $5,000–$10,000+ range. If your accrued monthly benefit exceeds $7,789.77, the amount above the cap is not guaranteed by PBGC — it depends on RTX's plan funding status and RTX's corporate solvency. A lump-sum rollover to an IRA captures the full actuarial present value computed by the plan as of your retirement date, removing the PBGC-excess risk from your retirement picture.

RTX Savings Plan and the Rule of 55

RTX employees who separate from service in or after the calendar year they turn 55 can take withdrawals from their RTX Savings Plan (401k) without the 10% early distribution penalty under IRC §72(t)(2)(A)(v). This exception applies to distributions from the qualified plan at the employer from which you separated — it does not transfer to an IRA.⁵

The strategic implication for RTX retirees between ages 55 and 59½:

• Keep RTX Savings Plan funds in the 401(k) if you expect to need those funds before 59½. Rolling the Savings Plan to an IRA permanently eliminates the penalty-free early access window for those assets.
• Roll the pension lump sum to a separate IRA. The pension lump sum does not carry an independent Rule-of-55 benefit; it was either going to pay you monthly anyway, or you are electing the rollover as an alternative to annuity income. Rolling the pension to an IRA does not affect your RTX Savings Plan's Rule-of-55 availability — the two accounts are independent.
• If you need pre-59½ IRA access, consider the §72(t) substantially equal periodic payments (SEPP) election, described in our 72(t) SEPP guide.

RMD and IRMAA risk for large RTX pension rollovers

RTX management pensions for long-service employees — particularly those who accrued substantial benefits under the pre-2007 Raytheon formula — can produce lump sums in the $400,000 to $1,500,000+ range. A rollover of that size to a traditional IRA creates two long-term tax exposure points that are worth modeling before making the election:

Required minimum distributions (RMDs)

Under SECURE 2.0 Act, RMDs from a traditional IRA must begin at age 73 for participants born 1951–1959, and at age 75 for participants born 1960 or later.⁶ For a $900,000 IRA growing at 6% annually, the projected RMD at age 73 is approximately $38,000–$42,000 per year — and grows thereafter as the balance grows faster than the IRS divisor decreases. If you are also receiving Social Security, combined provisional income can push you into the zone where 85% of SS becomes taxable (an effective marginal multiplier of 1.85× the statutory bracket rate during the phase-in range).

Medicare IRMAA surcharges

IRMAA surcharges are based on MAGI from two years prior. In 2026, Tier 1 IRMAA begins at $109,000 for single filers and $218,000 for married filing jointly, adding $74.90/month to Part B premiums per person — with four higher tiers above that.⁶ A retiree with pension/IRA income and Social Security can be pushed up IRMAA tiers unexpectedly in their 70s as RMDs grow, even if lifestyle spending stays flat. The annuity option creates a known, fixed monthly income stream; the IRA option creates growing mandatory distributions that compound the IRMAA risk.

The Roth conversion window

The gap between your RTX retirement date and RMD onset (age 73 or 75) is your Roth conversion window — the years when income is typically lowest and each converted dollar faces a lower effective rate than it would under forced RMDs. Converting $80,000–$100,000 per year to a Roth IRA in this window can keep you below IRMAA Tier 1 thresholds while dramatically reducing future RMDs. Use our Roth Conversion Optimizer to find the optimal annual conversion amount, and our IRA RMD calculator to see the full RMD trajectory with and without conversions.

Joint-and-survivor election for RTX participants

If you are married and elect the monthly annuity, ERISA §205 requires the plan to default to a qualified joint-and-survivor annuity (QJSA) providing at least 50% of the participant's monthly benefit to the surviving spouse after death. Electing a different form — including life-only (no survivor benefit, highest monthly payment) or a higher survivor percentage — requires notarized spousal consent. The election is irrevocable once annuity payments commence.⁷

The cost of adding survivor coverage is actuarially driven by both spouses' ages and the life-expectancy gap between them. Use our J&S election calculator to model the NPV of each election under different longevity scenarios for both spouses, and our comprehensive J&S guide to understand the "pension max" life-insurance strategy and why it carries substantial risks that are often underestimated.

Lump sum vs. annuity: the RTX-specific decision framework

For most RTX / Raytheon defined benefit participants, the lump-sum vs. annuity decision rests on five questions:

1. Was your benefit transferred to Prudential (2025 or 2018)? If yes, PBGC no longer covers it. Assess your comfort with Prudential's claims-paying ability and your state guaranty association's coverage limit relative to the present value of your lifetime benefit stream. For participants with large monthly benefits where the lifetime present value exceeds state guaranty limits, eliminating insurer-solvency risk via an IRA rollover becomes more compelling.
2. Does your benefit exceed the PBGC cap ($7,789.77/month at 65)? If your benefit remains in the RTX plan and exceeds the cap, the lump sum captures the full actuarial value — including the portion above the cap — without depending on RTX's plan funding or corporate solvency for that excess.
3. What does the break-even analysis show? Run your numbers at our pension break-even calculator. At a 5% assumed investment return, the break-even age for taking the lump sum vs. annuity is typically around age 80–85 — roughly the median life expectancy for a healthy 65-year-old today. If your health history suggests below-median longevity, the lump sum is likely the better expected-value choice. If you expect to reach 85+, the annuity's longevity insurance becomes more valuable.
4. Do you have other guaranteed income sources? A retiree with Social Security and a spouse's pension covering baseline living expenses has flexibility to take the lump sum and invest in growth assets. A retiree with no other guaranteed income may value the annuity's income-floor function more highly.
5. What does the post-rollover tax picture look like? Model the RMD trajectory using our IRA RMD calculator. If growing RMDs push you into higher tax brackets and IRMAA tiers in your 70s and 80s, factor those costs into the annuity comparison — the annuity's monthly payments are bounded and known, while IRA RMDs compound and grow.

There is no universal right answer. The optimal choice depends on your age, health, marital status, Prudential-transfer status, benefit size relative to the PBGC cap, other income sources, and the post-rollover tax picture. A fee-only advisor with experience in RTX and Raytheon benefits can model the NPV for your specific numbers — without the conflict-of-interest that commission-based advisors face when a lump-sum rollover generates AUM fees on a large IRA.

1. Stordahl Capital Management, "How the Raytheon Pension Freeze Affects Your Benefits Today"; The Retirement Group, "Lump-Sum Payouts and Annuity Purchase for Raytheon Employees". Raytheon Company froze its defined-benefit pension plan for most non-union salaried employees in 2007. Employees hired before the freeze date who have met vesting requirements retain fully vested accrued benefits payable as a lump sum or lifetime annuity at retirement (earliest eligibility typically age 55 with 5 years of service). Values verified July 2026.
2. RTX Corporation, Form 8-K filed November 13, 2025; PLANSPONSOR, "Prudential, RTX Announce $2.5B PRT Deal"; Pensions & Investments, "RTX Shifts $2.5 Billion in Liabilities to Prudential in Biggest U.S. Risk Transfer of the Year". 2025 transfer: $2.5B, ~60,000 retirees and beneficiaries, announced November 13, 2025, closed December 30, 2025; one-time non-cash pretax charge ~$300M in Q4 2025. 2018 transfer: ~$1B, ~13,000 retirees and beneficiaries. Both transfers end PBGC coverage for affected participants; state insurance guaranty associations provide the backstop. Values verified July 2026.
3. IRS, Minimum Present Value Segment Rates. Under IRC §417(e)(3), pension plans must use IRS-prescribed segment rates to calculate the present value of accrued benefits when paying a lump sum. November 2025 stabilized rates: Segment 1: 4.07%; Segment 2: 5.15%; Segment 3: 6.01% (IRS Notice 2025-81). Confirm the specific look-back month and stability period for your RTX plan with the RTX Benefits Center, as each plan document specifies its own look-back rules. Values verified July 2026.
4. PBGC, Maximum Monthly Guarantee Tables. 2026 maximum monthly guarantee for a 65-year-old straight-life annuitant: $7,789.77/month ($93,477/year). Applies only to active PBGC-covered single-employer defined-benefit plans; does not apply to benefits transferred to an insurance company via group annuity purchase. State insurance guaranty association limits vary by state; see NOLHGA (nolhga.com) for state-by-state information. Values verified July 2026.
5. IRS, IRC §72(t) Exceptions to Early Distribution Penalty. Under IRC §72(t)(2)(A)(v), distributions from a qualified plan after separation from service in or after the year the participant turns 55 are not subject to the 10% early distribution penalty. This exception applies to the plan from which you separated and does not carry over to funds rolled to an IRA. The Retirement Group, "Navigating Early Retirement: The Rule of 55 Explained for Raytheon Employees". Values verified July 2026.
6. IRS, IRA Required Minimum Distributions. SECURE 2.0: RMD start age 73 (born 1951–1959), 75 (born 1960+). CMS, Medicare Costs at a Glance. 2026 IRMAA Tier 1: $109,000 single / $218,000 MFJ, adding $74.90/month to Part B premium per person. IRS Notice 2025-67: 2026 QLAC limit $210,000. Values verified July 2026.
7. DOL/ERISA §205, Spousal Benefit Rights Under ERISA. ERISA §205 requires the qualified joint-and-survivor annuity as the default benefit form for married participants in defined-benefit pension plans. The surviving spouse must receive at least 50% of the annuity payable to the participant. Waiver of the QJSA requires notarized spousal consent. The election is irrevocable once benefits commence. Values verified July 2026.

Content verified July 2026. RTX and Raytheon pension plan rules are complex and depend on whether your benefit accrued under the Raytheon Company plan or a UTC predecessor plan, your hire and separation dates, your service history, and whether your benefit was included in the 2025 or 2018 Prudential group annuity transfer. Confirm your specific benefit, election options, and the current segment-rate look-back month directly with the RTX Benefits Center. This page is informational and does not constitute financial, tax, or investment advice.