Lockheed Reports Reduced DB Obligations from Lump Sums

While lump-sum payments to certain defined benefit plan participants reduced the company’s pension obligations, new mortality assumptions increased them.

Lump-sum payments from Lockheed Martin’s defined benefit (DB) pension plan to certain former employees who had not commenced receiving their vested benefit payments reduced its pension benefit obligation by a significant amount, the company reported in a filing with the Securities and Exchange Commission (SEC).

The company made lump-sum payments of $427 million in 2014, and the corresponding reduction in benefit obligation was $529 million.

Lockheed Martin announced last July that it will freeze its salaried DB plan and transition employees to an enhanced defined contribution (DC) retirement plan.

In the SEC filing, the company notes that the measurement of benefit obligations is affected by key assumptions such as discount rates, employee turnover and participant longevity, among other factors. Its benefit obligations at December 31, 2014, reflect new longevity assumptions, which had the effect of increasing the DB pension benefit obligations by $3.4 billion.

Lockheed Martin utilized a discount rate of 4.00% when calculating its benefit obligations. It noted that an increase of 25 basis points in the discount rate assumption, with all other assumptions held constant, would have decreased its DB benefit obligation by approximately $1.5 billion, while a decrease of 25 basis points would have increased the obligation by the same amount.

The 10-K filing is here.