Last updated: July 2026. Reviewed by Brennan Decima, CFP®, founder of Decima Wealth Consulting, an independent fiduciary working with L3Harris employees and executives on ERSP, equity compensation, and retirement income coordination.
Key Takeaways: The ERSP is L3Harris’s nonqualified deferred compensation plan for highly compensated employees whose 401(k) contributions and match get capped by IRS limits. It lets you keep deferring pay and receiving a match above and beyond the IRS 401(k) annual limits
This guide is written specifically for employees who have been offered ERSP participation.
Who is actually eligible for the ERSP?
Eligibility isn’t automatic just because you participate in the L3Harris 401(k). You need to meet all of the following:
- You’re already a participant in the qualified L3Harris Retirement Savings Plan (401(k)).
- Your annual benefits base rate meets the Threshold Compensation Rate set each year by the Employee Benefits Committee.
- You met that threshold by the prior November 15 (or November 30 if you were newly hired or promoted into eligibility).
The Committee can also designate specific employees as eligible at its discretion, independent of the threshold test. And importantly: participation isn’t mandatory. You need to elect that you want to participate in the ERSP.
401(k) contribution limits for 2026
The 401(k) contribution limit for 2026 is $24,500 for employee salary deferrals, and $72,000 for the combined employee and employer contributions. If you’re age 50 or older, you’re eligible for a catch-up contribution and can contribute up to an additional $8,000 in 2026. However, if you’re between ages 60 and 63 and your plan allows, you can contribute up to $11,250 as a super catch-up contribution in lieu of the standard $8,000. This means if you’re age 50 or older you’ll be able to contribute up to $32,500 in 2026, and if you’re between 60 and 63 and your plan allows, you’ll be able to contribute up to $35,750 in 2026.
Mega-Backdoor Roth Reminder: L3Harris allows employees to make post-tax contributions beyond the pretax and Roth contribution limit but less than the combined employee and employer contribution limit to invest even more for retirement. These after tax contributions are eligible to be convert to a Roth.
Roth 401(k) contribution limits
The Roth 401(k) contribution limits for 2026 are the same as those for traditional 401(k) plans. L3Harris allows employees to contribute up to the annual maximum across both. In other words, if you’re under 50, you can’t put more than $24,500 total as employee contributions in your 401(k) accounts in 2026, no matter how many accounts you have.
401(k) contribution limits
| Pretax and Roth employee contributions | Employee + employer contributions | Catch-up contributions (in addition to the employee and employer limit) | |
|---|---|---|---|
| 401(k) contribution limit for 2026 | $24,500 | $72,000 | $8,000 (50-59 or 64+), $11,250 (60-63, if your plan allows) |
Source: IRS
Why does the ERSP exist at all?
Most retirement experts suggest saving 15% of your pre-tax income for retirement. For a higher earning individual, this is not possible due to 401(k) limits. The ERSP was created to address that shortfall and allow higher earners to save more on a pre-tax basis for retirement. Let’s look at example.
Bob has $500,000 in eligible compensation. He want’s to save 15% of his income and put away $75,000. However, due to 401(k) limits, he is only eligible to put aside $24,500 in 2026. Due to these limitations, Bob would only be eligible to defer taxes on 4.9% of his compensation if he solely used the 401(k).
If Bob decides to opt into the ERSP, he can continue to defer the full 15%. This allows him to defer an additional $34,300 and recieve an additional $20,200 in company match. For someone in the 37% tax bracket, this additional deferral could reduce their taxes by over $12,000.
The primary advantage of deferring income in the ESRP is tax deferral. From a tax perspective it’s similar to contributing pre-tax to the L3Harris 401(k), but on a much larger scale.
There’s no limit specified by the IRS on how much compensation a participant can defer into a corporate NQDC plan each year. L3Harris employees can defer up to 70% of their eligible compensation.
For L3Harris executives who expect to be in a lower tax bracket in the future when they stop working, this is a powerful opportunity to reduce taxes and allow more of their money to compound for retirement. The greater the tax rate you pay, the greater the potential advantage of tax deferral.
What can I contribute to the ERSP?
There are three distinct contribution types, and it’s worth knowing which one applies to you:
- Compensation Deferrals — the amount you elected to defer that couldn’t go into the 401(k) because of the IRS limits above.
- Equity Award and Special Award Deferrals — deferral of equity incentive payouts or one-time special awards.
REMINDER: Once you make a decision to enroll in the ERSP for the following year, your contribution election is irrevocable. It is critical to make sure you have thought about potential changes in expenses or major purchases that might come up during the year. Unlike the 401(k) where you can modify your decisions throughout the year, someone who enrolls in the ERSP has locked in their contributions for the entire year.
Does L3Harris match ERSP contributions?
Yes. L3Harris matches up to 6% of your ERSP contributions.
How does the ERSP coordinate with my 401(k)?
This is the part most participants underestimate. The ERSP isn’t a separate savings decision — it’s a continuation of the same one:
- Your Compensation Deferrals into the ERSP only begin once the 401(k) can’t accept any more pretax contributons due to IRS limits. The two plans function as one contiguous deferral, with the 401(k) filling first.
- Vesting mirrors the 401(k). Amounts tied to Compensation Deferrals and Matching Deferrals vest on the same schedule as the corresponding 401(k) contributions. Additional Participant Deferrals, by contrast, are 100% vested immediately.
- Your ERSP balance is tracked against the same investment fund menu used in the 401(k) for measuring gains and losses.
What’s the biggest risk of participating in the ERSP?
The ERSP is unfunded and unsecured. There is no trust holding your ERSP balance the way there is for your 401(k). Your ERSP account is a bookkeeping entry — a promise from the company to pay you later. Until it’s distributed, you are a general unsecured creditor of L3Harris, on the same footing as any other company obligation. If L3Harris were ever to become insolvent, ERSP participants could lose some or all of their unpaid balance.
This is the single most important thing to understand before deferring meaningful income: the ERSP should never be treated as equivalent in safety to your 401(k), no matter how similar the fund menu looks.
When and how do I get my ERSP money back?
- Distributions generally begin in January following the later of age 55 or your separation from service.
- You can generally choose a lump sum or installments over 3 to 15 years. Your distribution election is made in advance and is irrevocable once locked in.
- If you’re classified as a Specified Employee under IRS Section 409A, a mandatory 6-month delay applies to your distribution after separation.
Reminder: Each year’s ERSP contribution will have a separate distribution election. These distribution decisions are irrevocable. It is important to think about the role you want that money to play when you leave the company before deciding on the best option for payout.
What should ERSP-eligible employees think about before enrolling or increasing a deferral?
A few questions worth working through with an advisor before open enrollment.
- Do I annually maximize my contributions to traditional retirement plans and other savings options? You should be making the maximum contribution to your 401(k) plan and HSA each year before you consider enrolling in the ERSP.
- Do I want to save more than the IRS limits on a pre-tax basis? The ERSP is a pre-tax account. Even if you are maxing out the Roth in the 401(k), deferrals to the ERSP will be pre-tax. Consider whether or not you want to utilize the after-tax and Mega Backdoor Roth feature in the 401(k) as an alternative savings vehicle.
- Will my tax rate be lower in the future? You don’t pay income taxes on deferred compensation until you receive those funds. Participation is more beneficial if you expect your tax bracket to be lower at the time of distributions. Look closely at your cash flow needs and upcoming expenses to estimate whether you can afford to forgo income you expect in the coming years. After you’ve selected a deferral amount, the decision is irrevocable.
- Is L3Harris financially secure? Since this is an unfunded plan, you need to feel confident that your L3Harris will be able to payout these funds in the future.
- How does this money fit into my future income needs? Distribution decisions are irrevocable. It is critical to map out your cash flow needs in the future to make sure the payouts align with your taxes, income, and spending needs. Will you be retired or taking on another role when you leave the company?
- Am I comfortable with not having access to this money for a number of years? ERSP money is generally not accessible until the distribution date. Unlike a 401(k) plan, the ERSP generally does not allow early distributions and/or loans.
- What investments make the most sense for my timeframe and risk tolerance? The ERSP offers the same fund lineup as the L3Harris Retirement Savings Plan. It does not allow brokeragelink options. The investment choices should align with your comfort level of fluctuation and the timing of when these funds will be paid out.
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About the author
Brennan Decima, CFP®, is the founder of Decima Wealth Consulting, an independent, fiduciary retirement planning firm. He works specifically with highly compensated L3Harris employees and executives navigating ERSP deferral and distribution elections, equity compensation, and coordinated retirement income planning.
This article is educational and general in nature, based on publicly available plan documents. It is not personalized financial, tax, or legal advice, and ERSP provisions can change. Confirm your specific eligibility, Threshold Compensation Rate, and election deadlines directly with the L3Harris Benefits Service Center before making any deferral decision.
