Retirement Plans

Lockheed Sells Pension Risk

The company said it reached deals with Prudential and Athene to reduce its obligations for tens of thousands of employees.
Lauren MuskettJanuary 30, 2019
Lockheed Sells Pension Risk

Lockheed Martin announced it offloaded $2.6 billion in pension obligations to insurance companies in December. The defense contractor said it transferred $1.8 billion of defined-benefit pension obligations to Prudential Insurance Company of America. It also reached an $800 million pension risk-transfer deal with Athene Holding under which the insurer will reimburse Lockheed’s pension trust fund for future benefit payments to about 9,000 beneficiaries.

CFO Bruce Tanner told investors and analysts on the company’s earnings call that the transactions would insulate the company from volatility associated with $2.5 billion in current pension obligations. “We think this creates a win-win situation, providing the same benefits to retirees going forward, while reducing future volatility for the business and our customers,” Tanner said.

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Lockheed will also save $25 million per year in pension insurance fees to the Pension Benefit Guaranty Corp, Tanner said.

International Paper Co., FedEx, Accenture, General Motors, Verizon, Bristol-Myers Squibb, and Kimberly-Clark are among the companies transferring their pension obligations to insurance companies to reduce costs and mitigate risk.

Data from Pensions & Investments’ Research Center showed $31.7 billion in pension-risk transfers through mid-November of 2018, up from $20.2 billion in 2017. The data showed $60.1 billion in transfers in 2014.

“There has been a recognition of the challenges and risks that companies face associated with maintaining a pension plan,” Scott Kaplan, head of pension risk transfer at Prudential, told Dow Jones.

One of those is the volatility of pension plan funded status, which fluctuates in a highly volatile equities market. At mid-year 2018, Lockheed had a $17.7 billion gap in its pension funding.