(Adds details, spokesperson comments, background)
By Rohit T. K.
July 1 Lockheed Martin Corp, Pentagon's
biggest defense supplier, said it will move existing employees
to a defined-contribution retirement plan by Jan.1, 2020,
becoming the latest company to freeze its expensive
defined-benefit pension plan.
The new pension plan will come into effect from Jan. 1,
2016, the maker of the F-35 fighter jet, satellites and coastal
warships said on Tuesday.
"This action also allows us to better manage the rising
costs of our retirement programs at a more predictable rate and
to limit our long-term liabilities," a Lockheed Martin
spokesperson told Reuters.
Lockheed is following the lead of Boeing Co, which in
May announced a move to a defined-contribution plan from a
defined-benefit plan for 68,000 non-union employees, including
its Chief Executive, to reduce costs.
Lockheed said current U.S regulations require the company to
freeze the current plan by 2020 or face a significant tax
Under a defined-benefit pension plan, an employer commits to
pay out employees' pensions at a contracted rate after
In a defined-contribution plan, an employer contributes at a
contracted rate to a pension plan and the investment risk, and
thus how big a pension fund grows, rests with the employee.
The company has 113,000 employees with about 48,000
participating in the current defined-benefit plan.
Lockheed employees belonging to the International
Association of Machinists and Aerospace Workers (IAM) went on
strike at a Mississippi space center in May over pension
Lockheed shares were trading down 1 percent at $158.90 in
morning trading on the New York Stock Exchange on Tuesday.
(Editing by Saumyadeb Chakrabarty)