Lockheed Martin [LMT] on Tuesday said it will freeze the defined benefit pension plans of its United States-based salaried employees and transition them to a defined contribution retirement plan, a trend among more employers seeking more control over their long-term expense obligations.
The company said the change to its retirement plans won’t impact financial results for its second quarter, which closed on June 30.
The change will begin in two phases, with the freeze of pay-based benefits on Jan. 1, 2016 followed by the freeze of service-based benefits on Jan. 1, 2020.
Under a defined benefit plan, companies pay specific amounts to their retirees on a regular basis over their lifetimes in what is essentially called a pension. Under the defined contribution plan, companies specify how much they are paying now into their employees’ retirement plans.
Lockheed Martin said that when the freeze on its pension plan is complete, which is expected on Jan. 1, 2020, it will offer up to 10 percent of employees’ salary annually in company contributions.
Once the pension freeze is complete, most of the company’s salaried employees, including 25,000 not in the pension plan, will be in the retirement plan. Lockheed Martin’s salaried pension plan was closed to new participants in 2006 and has 48,000 employees in it. Another 250,000 retirees and former employees are also in the pension plan.
Lockheed Martin has 113,000 employees.