Lockheed pares pension
Defense contractor won't offer defined benefits to new hires as of Jan. 1
By Kelly Yamanouchi, Staff Writer
Friday, October 7, 2005
Lockheed Martin Corp., which has more than 10,000 employees in Colorado, will stop offering a defined-benefit pension to new salaried employees as of Jan. 1.
New hires will get a defined-contribution retirement plan instead, to which Lockheed will contribute a percentage of each employee's salary. The amount of money accrued will depend on how investments perform. That's different from a defined-benefit pension, funded by the company, in which employees typically are due a set monthly payout in retirement.
Current and future employees will continue to get matches on their 401(k) contributions, separate from the pension plan.
Current employees will see little change in their pension benefits except that the company will phase out, over five years, a pension supplement for employees who retire early at age 60.
"We wanted to ensure that there was at least enough time there, so we didn't at least in essence pull it out from under them," said Lockheed spokesman Tom Greer.
To cut costs, Lockheed also will stop offering post-retirement health-care contributions to new salaried employees.
Lockheed, based in Bethesda, Md., told its 85,000 salaried workers about the changes in a note Thursday. The change in pensions for new hires will save the company at least $125 million in future years, said chief financial officer Christopher Kubasik.
Lockheed's Colorado employees include 4,853 in its space-systems unit based at Waterton Canyon in Jefferson County. That unit is competing to build a crew exploration vehicle for NASA. If it is selected as the contractor next year, more employees may be hired.
United Launch Alliance, Lockheed's new joint venture with Boeing for rocket launches, will be based in Colorado and likely will offer benefits that are a combination of Boeing's and Lockheed's and also could contain other elements, Greer said. He said he could not say whether that program, which is awaiting regulatory approval, will offer traditional pensions.
Boeing has asked its nearly 1,000 employees who work in program management, engineering and administration for the development of Boeing's Delta rockets in California to consider moving to Denver.
Lockheed's contributions to retiree health plans and pensions have almost doubled in the past two years as investment returns haven't kept pace with rising benefit payouts. Fewer than 20 percent of U.S. companies offer defined-benefit pensions, meaning Lockheed, which has the nation's 10th-largest plan, is following a broader trend, Kubasik said.
Other companies, such as United Airlines, have ended pension plans.
Defined-benefit plans generally cost about 4 to 5 percent of base pay, he said. Under the new plan, Lockheed will make a contribution of between 3 percent and 6 percent of base salary depending on years of service, Kubasik said. Workers with less than nine years at the company will get 3 percent, while veterans of 30 years or more will receive 6 percent.
"This is not a cutback; it's a replacement," Kubasik said.
Bloomberg News contributed to this report.