Details on new Lockheed Martin retirement benefit plan
According to the statement released by Lockheed earlier today, pay-based benefits will be frozen as of January 1, 2016. Service-based benefits will also be frozen as of January 1, 2020.
Lockheed Martin Corporation (NYSE:LMT) new retirement plan will offer employees up to 10% of their salary in company contributions to a 401(k) every year.
It should be noted that retirees already collecting benefits under the old program, as well as former employees with a vested benefit, will not be impacted by the change in plans. Moreover, current and former employees will also be keeping the pension benefits they’ve already earned.
Pensions continue to disappear
Today’s announcement makes Lockheed Martin Corporation (NYSE:LMT) just the latest large enterprise to move away from the traditional pension model. Defense contractor and jetliner giant Boeing also revamped its pension plan and replaced it with a 401(k) plan back in March.
Companies have been retreating from defined benefit (pension) plans for decades because of the growing costs of funding the plans. The biggest problem is that workers are living longer. In the U.S., men now aged 65 live an average of five years longer than they did 50 years ago. The skyrocketing costs of defined benefit plans was obscured by rising stock markets for a number of years. But since 2000, the returns from stock markets have been relatively low and the yields on bonds have also declined.
Over the last few years, there’s been a major shift towards defined-contribution plans (such as 401(k) plans), where both employers and employees contribute to a plan which the worker can access in retirement, in order to keep costs down
Lockheed Martin Corporation (NYSE:LMT) shares are up 17 cents at $160.90 as of 12:27 PM ET today.
