By RTT News,
July 01, 2014, 01:29:00 PM EDT
(RTTNews.com) - Lockheed Martin Corp ( LMT ) said Tuesday it will freeze defined-benefit pension plan for U.S.-based salaried employees and transition them to an enhanced defined contribution retirement plan, in yet another instance of a company making efforts to cut down pension costs.
The Bethesda, Maryland-based defense contractor said the change will take effect in a two-step approach, beginning on January 1, 2016 with the freeze of pay-based benefits and concluding with the freeze of service-based benefits on January 1, 2020. The company expects the plan will be fully frozen effective January 1, 2020.
When the freeze is complete, the majority of Lockheed Martin salaried employees, including about 25,000 not in the pension plan, will have transitioned to a retirement plan that offers up to 10 percent of employees' salary annually in company contributions.
While the salaried pension plan was closed to new participants in 2006, about 48,000 employees of Lockheed Martin's 113,000 employees are participating. An additional 250,000 retirees and former employees are in the plan.
Retirees already collecting benefits and former employees with a vested benefit will not be affected by the change. Current and former employees will also keep all benefits already earned in their pension plan to date.
The company expects that these changes will have no impact on second quarter 2014 earnings results. Full year 2014 estimates for pension expense will be updated and communicated when the company reports second quarter results on July 22.
Defense contractors are facing challenges of high pension costs amid curbs in government spending. As a result, companies have swapped traditional pensions for 401(k) plans, thereby transferring the risk of market volatility to their workers and reducing costs in the long term.
Lockheed employees belonging to the International Association of Machinists and Aerospace Workers went on strike at a Mississippi space center in May over pension changes.
In May, Boeing Co announced a move to a defined-contribution plan from a defined-benefit plan for 68,000 non-union employees to reduce costs.
Lockheed Martin stock is trading at $161.01, up $0.28 or 0.17%, on a volume of 754k shares on the NYSE.
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