Lockheed Martin Corp. will not offer its defined benefit-pension plan or retiree health-care benefits to employees hired after January 1, 2006, the company announced.
The Bethesda, Maryland-based defense contractor becomes the latest in a long line of companies — including International Business Machines, Hewlett-Packard, Motorola, and others — that have amended their defined-benefits plan to exclude new employees.
Lockheed, which currently has about 130,000 employees, will offer new workers a 401(k) savings plan to which the company will make a defined contribution, as well as another, similar savings program. In addition, new employees will receive three weeks of vacation instead of two. In an internal memo, Lockheed wrote that based on its survey of employees, younger workers value paid time off more than retirement plans.
According to the company, the change should save Lockheed $125 million to $150 million each year in 10 years, reported The Washington Post.
This year, meeting its defined-benefit obligations cost the company approximately $500 million, according to the report. Although Lockheed, like most contractors, recovers some of that expense from the Pentagon, managing the company’s payments is still difficult, chief financial officer Christopher Kubasik told the Post. Unlike defined-contribution expenses, which can be projected each year, defined-benefit expenses depend upon the gyrations of investment returns. Like many pension-plan providers, Lockheed did not contribute to its defined-benefit plan during the ’90s boom years; in 2001, the company resumed contributions with an $8 million payment.