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Lockheed Martin Corp. has moved another 20,000 retirees and beneficiaries and about $1.9 billion in pension obligations to MetLife, the latest in a succession of risk transfer deals and discretionary plan contributions the defense contractor has used to shift most salaried employees to a 401(k) plan.
Under terms of the deal, the monthly benefits to the retirees will not change, but MetLife will be responsible for administering the checks, not Lockheed, according to a statement from the insurance company.
In 2006, Lockheed's plan for salaried employees was frozen to new hires. In 2014, the company amended several of its non-union pension plans, comprising a majority of its pension obligations, to implement a two-stage freeze of retirement benefits.
In 2016, the company froze the pay-based component of its benefits formula, meaning pay increases after the end of 2015 could not be used to calculate benefits.
In January of this year, the service-based component of the formula was frozen so that pension credits could not be earned from time worked after the end of 2019, according to regulatory filings with the Securities and Exchange Commission.
To implement the freeze, the company made a $5 billion contribution to its pensions in 2018 after enactment of the Tax Cuts and Jobs Act in 2017, which allowed Lockheed to write down the investment at the previous corporate tax rate of 35 percent.
In 2019, Lockheed transferred $1.8 billion in pension obligations for about 32,000 retirees to Prudential in a buy-out deal. It also executed a buy-in deal with Athene, comprising $800 million in obligations to 9,000 retirees.
The Lockheed Martin Salaried Employee Retirement Program had 184,235 participants, according to its 2018 Form 5500 filing.
Of that group, 76,685 were retirees or beneficiaries receiving pension checks.
So far, Lockheed has transferred the pension obligations of 61,000 retirees and beneficiaries from its books. There are currently about 40,000 active employees participating in company-sponsored pension plans. Future risk transfer deals are likely, but none are yet planned, a company spokesperson said.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
