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Lockheed Martin reduces gross pension obligation by $4.3B

Bethesda-based global security and aerospace company Lockheed Martin Corporation Monday announced it has purchased group annuity contracts from retirement services company Athene Holding Ltd.

Under the contracts, Lockheed Martin will transfer approximately $4.3 billion of its gross pension obligations and related plan assets for approximately 13,600 U.S. retirees and beneficiaries to Athene. The contracts were purchased using assets from Lockheed Martin’s master retirement trust and no additional funding contribution was required as part of this transaction.

On Jan. 1, 2023, Athene will begin paying and administering the retirement benefits of the affected retirees and beneficiaries in the Lockheed Martin Corporation Salaried Employee Retirement Program and the Lockheed Martin Aerospace Hourly Pension Plan. The transaction will result in no changes to the benefits received by retirees and beneficiaries. Transferred pension benefits are subject to the protections offered by the State Guaranty Association in the states where the retirees and beneficiaries live. Affected retirees and beneficiaries will receive a letter with additional details about the transfer.

In connection with this transaction, the company expects to recognize a non-cash, non-operating settlement charge of approximately $1.5 billion ($1.2 billion, or $4.50 per share, after tax) in the second quarter of 2022, related to the accelerated recognition of actuarial losses for the affected plans that were included in stockholders’ equity.

The actual settlement charge will depend on finalization of the actuarial assumptions, including discount rate and investment rate of return, as of the measurement date. The charge was not included in the company’s prior 2022 financial outlook released on April 19 and the company will provide an update to its 2022 financial outlook with its second quarter earnings release.