The L3Harris 401k, formally the L3Harris Retirement Savings Plan, is a defined contribution plan with a 401(k) feature. Its rules raise planning questions that general 401(k) guides often miss: company matching contributions generally come in L3Harris stock, vesting depends on service and plan provisions, and the plan accepts pre-tax, Roth, and regular after-tax contributions. Some employees also have equity awards or pension benefits to coordinate with their retirement savings. Here’s how these features can affect your retirement and tax planning.
If you’d like help sorting through your L3Harris benefits, you can schedule a conversation with Inclinevest Wealth Management. You can also see how we work with employees on our services and fees page.
How the L3Harris 401k Match Works
After one year of service, L3Harris generally matches 100% of your contributions up to 6% of eligible compensation, or up to 5% if you’re accruing a cash balance benefit under the company’s defined benefit pension plans. Pre-tax, Roth, and after-tax contributions all count toward the match, according to the plan’s most recent Form 11-K filed with the SEC. Employees who don’t choose a contribution rate are generally enrolled at 6% pre-tax, so the default captures the full L3Harris 401k match for most people.
Eligible compensation is capped at $360,000 for 2026, so the largest possible match at 6% is $21,600 for that year. On a $200,000 salary, a full match is $12,000 per year. Special matching rules apply to some employees covered by collective bargaining agreements, so your Summary Plan Description controls for your group.
The match generally goes into the plan as L3Harris stock rather than cash, with exceptions for certain bargaining unit employees. Each year of full participation therefore adds to your L3Harris position without any decision on your part. The company can also make discretionary profit-sharing contributions, though it made none for 2025.
When Do L3Harris 401k Match Contributions Vest?
Your own contributions and rollovers are always 100% vested. Company match contributions generally become fully vested after three years of service. You also become 100% vested in the match upon reaching age 55 while employed, upon death or disability, and in some cases when the company sells a business that affects your role. Certain bargaining unit groups and legacy plans follow different schedules, including immediate vesting or a five-year schedule.
If you leave before you’re fully vested, you forfeit the unvested match unless you return to L3Harris within five years. When you’re weighing an outside offer in your second or third year, add the unvested L3Harris 401k match to the unvested equity you’d leave behind.
How Much Company Stock Can an L3Harris 401k Account Hold?
The portion of the plan invested in the L3Harris Stock Fund is designated as an employee stock ownership plan, and the plan limits how much of your own money goes into it. A transfer can’t push the fund above 20% of your account, and no more than 20% of your newly made contributions can go into it. Participants can generally direct up to 100% of newly made match contributions into the fund, and the match generally arrives as stock. Over a long career, an L3Harris 401k balance can therefore end up with well over 20% in a single stock.
Dividends on shares in the Stock Fund can generally be reinvested in the plan or paid to the participant in cash. Reinvestment adds to the position. A cash payment may be taxable as ordinary income and may carry withholding, so check the tax treatment before electing cash.
How Much L3Harris Stock Is Too Much for Your Retirement Plan?
Your paycheck, bonus, equity awards, and match already depend on how L3Harris performs. A large stock position in the 401(k) adds your retirement savings to the same exposure. Defense companies have their own drivers, including federal budget timing, program awards, and the integration of acquisitions such as Aerojet Rocketdyne, and those drivers can move the stock independently of the broader market.
Start with one number. Add the shares in the plan, shares held outside the plan, vested and unvested RSUs and PSUs, and in-the-money options, then divide by your total net worth. The right range depends on whether you hold a pension, how much of your retirement income will come from investments, and how a sizable decline in the position would change your retirement timeline. The investment philosophy at Inclinevest Wealth Management centers on global, evidence-based diversification, and that’s the lens we apply to a concentrated position like this.
Selling inside the plan has no tax cost, because moving money between funds in a 401(k) isn’t a taxable event. That makes the plan the easiest place to diversify. Before you sell down plan shares, ask whether the net unrealized appreciation strategy described below could apply to you, because shares sold inside the plan can’t be used for it. Employees with access to material nonpublic information may also face trading restrictions, so timing matters.
RSUs and PSUs are generally taxed as ordinary income when they vest, though award terms and settlement details can matter. Federal withholding on supplemental wages is commonly 22%, which can fall short of the actual rate for higher earners and leave a balance due at filing. The same planning applies to the equity compensation side of your L3Harris 401k and pay package.
Can You Use the L3Harris 401k for Roth and Mega Backdoor Roth Contributions?
The plan accepts three types of employee contributions: pre-tax, designated Roth, and regular after-tax. For 2026, the deferral limit for pre-tax and Roth contributions is $24,500, with an additional $8,000 catch-up at age 50 and older. The total limit on employee and employer contributions combined is $72,000, with catch-up contributions on top.
Regular after-tax contributions may be able to fill the space between your deferrals plus match and that $72,000 total. For an employee earning $200,000 who defers $24,500 and receives a $12,000 match, the theoretical remaining room is $35,500, before any other employer contributions or plan-specific restrictions. The plan sets its own cap on after-tax contributions, so the amount you can actually contribute may be lower.
That room creates a potential opportunity often called the mega backdoor Roth: contribute after-tax dollars, then convert them to Roth quickly so earnings stay minimal. The 11-K says participants can withdraw their regular after-tax balance while still employed, and the plan document includes in-plan Roth conversion provisions. Whether the strategy works for you depends on how the plan operates today, so confirm the details in your current Summary Plan Description or the participant portal before contributing. Earnings on after-tax contributions are taxable when converted or withdrawn, which is why speed matters.
A 2026 rule change affects higher earners. If your prior-year FICA wages from the employer exceeded $150,000, any catch-up contributions must be made as Roth contributions, which removes the pre-tax deduction on those dollars. This applies where the plan offers the Roth feature. A higher $11,250 catch-up limit applies at ages 60 to 63 if the plan offers it.
Whether to favor pre-tax or Roth dollars depends on your current bracket, your expected bracket in retirement, and how much pre-tax money you’ll hold when required minimum distributions begin. That choice benefits from a projection more than a rule of thumb.
How Do L3Harris Pension Benefits Fit With the L3Harris 401k?
Some L3Harris employees also have benefits under legacy defined benefit pension plans, including cash balance or pension equity arrangements. Eligibility and benefit formulas depend on your hire date and the plan or legacy business involved. These benefits can affect both your match rate, 5% instead of 6% for participants accruing a cash balance benefit, and the retirement income available to you. Review your pension statement and the governing plan documents.
At retirement, pension benefits often come with a choice between a lump sum and a monthly payment, with survivor options for a spouse, if your plan offers both. A lump sum can be rolled to an IRA and invested. A monthly payment provides income for life that doesn’t depend on markets. The better choice depends on your health, your spouse’s needs, your other guaranteed income, and how much risk the rest of your portfolio carries. Pension elections are usually irrevocable, so model the choice alongside Social Security and your L3Harris 401k withdrawals before you decide.
What Can You Do With L3Harris 401k Stock When You Retire?
According to the plan description, you can leave the vested balance in the plan, take a lump sum or installments, or roll it to an IRA. If your account holds L3Harris stock with a low cost basis, another option may apply: net unrealized appreciation, or NUA. This is a specialized tax strategy, so review it with a tax professional before choosing it.
The first question is practical. The L3Harris Stock Fund is unitized, meaning it holds primarily L3Harris shares plus some short-term liquid investments, and its value is tracked in units. Ask the recordkeeper whether the plan can distribute actual shares in kind and how it determines cost basis. If it can’t distribute shares, NUA isn’t available to you.
If it can, NUA generally requires a lump-sum distribution, meaning the entire balance from all of the employer’s qualified plans of the same kind within a single tax year, after a qualifying event such as separation from service or reaching age 59½. You can move some or all of the L3Harris shares in kind to a taxable brokerage account and roll the rest to an IRA. You pay ordinary income tax on the shares’ cost basis in the year of distribution. The appreciation is generally taxed at long-term capital gains rates when you sell. The IRS describes the treatment in Topic 412.
Suppose you hold shares with a $100,000 cost basis and a $400,000 value. Distributing them in kind creates ordinary income on $100,000 and defers tax on the $300,000 of NUA until you sell, at capital gains rates rather than ordinary rates.
The strategy accelerates tax on the basis, leaves you with a concentrated position in a taxable account, and has special rules for how the appreciation is treated if you pass the shares to heirs. Because the lump-sum requirement means the decision comes before any rollover, a 401(k) rollover review should happen first.
If you separate from service in or after the year you turn 55, you can generally take distributions from that employer’s 401(k) without the 10% early withdrawal penalty, which can help bridge the years before age 59½. This exception applies to the employer plan and doesn’t carry over to money you’ve rolled to an IRA.
How Should You Coordinate Taxes and Withdrawals Around Your L3Harris 401k?
The years between your last paycheck and your first required minimum distribution often offer the lowest tax brackets you’ll see in retirement. Your final year of work typically includes full salary, a bonus, and vesting equity, so the year after it can be a candidate for Roth conversions, particularly if you delay Social Security. Required minimum distributions start at age 73 for people born from 1951 through 1959 and at age 75 for those born in 1960 or later.
Withdrawal order across taxable, pre-tax, and Roth accounts, Social Security claiming age, and the handling of company stock each change your lifetime tax bill, and they interact. A fixed withdrawal rate rarely fits a household with a pension, equity awards, and a large single-stock position, which is why rethinking the 4% rule matters here. Good retirement income planning sequences these decisions together.
Putting Your L3Harris 401k Into a Complete Retirement Plan
The match, vesting schedule, stock fund, Roth features, and distribution rules interact with your pension, equity awards, Social Security, and taxes. Reviewing them together tends to surface decisions a single-topic review misses, such as how much plan stock to hold before an NUA decision, or how much to convert to Roth in your first year of retirement.
Inclinevest Wealth Management is a fee-only fiduciary firm that works with aerospace and defense professionals in Colorado and across the country. To see how this looks for your situation, visit our L3Harris employee financial planning page or schedule a conversation to review your plan.
Key Takeaways
- The L3Harris 401k generally matches 100% of contributions up to 6% of eligible pay after one year of service (5% if you accrue a cash balance pension benefit), and the match generally arrives as L3Harris stock.
- Match contributions generally become fully vested after three years of service, and you vest fully at age 55 while employed.
- The 20% limit applies to transfers and your own new contributions, so match dollars can push your L3Harris stock well above 20% over time.
- Add up all L3Harris exposure, including RSUs, PSUs, options, and shares outside the plan, before deciding how much to hold.
- The plan accepts Roth and after-tax contributions, which may support a mega backdoor Roth strategy if the plan permits the needed conversion or withdrawal. Confirm the current rules before relying on it.
- NUA can reduce taxes on low-basis L3Harris shares, but it depends on whether the plan can distribute shares in kind, requires a lump-sum distribution, and has to be decided before any rollover.
- Pension elections, Roth conversions, Social Security timing, and withdrawals work best when they’re modeled together.
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest Wealth Management, a fee-only fiduciary retirement financial advisor and financial planner. He works with high-net-worth pre-retirees and retirees nationwide, with particular experience serving aerospace and defense professionals. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more about Gabriel and Inclinevest Wealth Management or schedule a conversation.
Sources
- L3Harris Retirement Savings Plan, Form 11-K, Description of Plan (plan year 2025), U.S. Securities and Exchange Commission: https://www.sec.gov/Archives/edgar/data/202058/000020205826000043/R4.htm
- L3Harris Retirement Savings Plan (amended and restated effective January 1, 2025), exhibit to Form 10-K, U.S. Securities and Exchange Commission: https://www.sec.gov/Archives/edgar/data/202058/000020205825000023/exhibit10hil3harrisrsp1125.htm
- L3Harris Technologies, Form 10-K for the fiscal year ended January 3, 2025 (equity awards), U.S. Securities and Exchange Commission: https://www.sec.gov/Archives/edgar/data/202058/000020205825000023/hrs-20250103.htm
- IRS Announces 2026 Dollar Limitations for Retirement Plans, Parker Poe: https://www.parkerpoe.com/news/2025/11/irs-announces-2026-dollar-limitations-for-retirement-plans
- Topic No. 412, Lump-Sum Distributions, Internal Revenue Service: https://www.irs.gov/taxtopics/tc412
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
