Lockheed Martin Announces Pension Risk Transfer

In its fourth quarter and full-year 2018 results, federal contractor Lockheed Martin announced that in December 2018, certain of the corporation’s pension plans used pension trust assets to purchase group annuity contracts from insurance companies for $2.6 billion.

One such contract transferred $1.8 billion of its outstanding defined benefit (DB) plan obligations related to approximately 32,000 U.S. retirees and beneficiaries to Prudential. As a result of this transaction, the insurance company is now required to pay and administer the retirement benefits owed to these retirees and beneficiaries.

The second transaction requires Athene Holding to reimburse Lockheed’s pension trust fund for all future benefit payments made to approximately 9,000 U.S. retirees and beneficiaries under a group annuity contract purchased for $0.8 billion. Under the terms of this transaction, the plan will continue to pay and administer the retirement benefits to these retirees and beneficiaries but will be reimbursed for all future benefit payments covered by the contract with no net ongoing cash funding obligation to the plan for the covered participants, as the cost of providing benefits is funded by the contract.

The firm said these transactions have no impact on the amount, timing, or form of the monthly retirement benefit payments to the covered retirees and beneficiaries, and they did not impact the corporation’s earnings or cash flows in 2018.