By Nick Thornton
Lockheed Martin will freeze its defined benefit pension plan and transition its employees to a defined contribution plan
, the Maryland-based aerospace giant said today.
The first step in the phase-out of the pension plan will begin on Jan. 1, 2016, with the freeze of pay-based benefits. Service-based benefits, which are calculated based on an employee’s years with the company, will be frozen on Jan. 1, 2020, by which time Lockheed expects the plan to be fully frozen.
The company’s salaried pension was closed to new participants in 2006. About 48,000 of the company’s 113,000 employees are enrolled in the defined benefit plan. When the freeze is finally completed, nearly all of Lockheed’s salaried employees will have transitioned into a defined contribution plan, which offers up to 10 percent of salary in annual matches.
Employees now in the defined benefit plan will keep the benefits they’ve already earned. Retirees
already collecting benefits will not be affected by the change.
Boeing, Lockheed’s primary competitor in the aerospace and defense sectors, announced it was freezing its pension last March, moving 68,000 non-union employees into a defined contribution plan.
As the world’s largest manufacturer of planes, Boeing’s pension expenses, which tallied $3.45 billion last year, are the third-highest of all U.S. corporations, according to research by Bloomberg. General Electric’s $5 billion expense was the highest, followed by Exxon’s costs, which are $3.75 billion.
According to the Pension Rights Center, more than 170 major companies have frozen or dramatically changed their defined benefit plans
Originally published on BenefitsPro.com