Lockheed Martin Makes Two Big Pension Risk Transfers in Q4

Latest 8-K reveals $2.6 billion in LDI transactions.

Lockheed Martin purchased two separate group annuity contracts in the final quarter of 2018, shifting $2.6 billion in pension liabilities to different insurers, according to an 8-K filing published Tuesday.

The first is a $1.8 billion transaction with Prudential, which will now cover 32,000 members of the aerospace and missile defense corporation’s defined benefit plan. The other deal is an $800 million buy-in, where Lockheed will continue to make benefit payments that will be reimbursed byAthene, confirmed a Lockheed spokesperson. That agreement covers another 9,000 people.

The moves do not cur any recipient’s benefits, according to the 8-K, which also states that they did not impact the corporation’s earnings or cash flows in 2018.

Lockheed Martin’s pension plan was 68% funded as of December 31, 2017, according to the company’s most recent 10-K filing, which showed $48.billion in liabilities.

“[Pension risk transfers are] becoming more commonplace,” Peggy McDonald, a Prudential vice president who helped broker the Lockheed deal, told CIO. “As more and more companies [enter these agreements], you start seeing more companies start looking at it more seriously and funded status has generally improved for plan sponsors.”  

She expects more of these deals to happen throughout the year as the “underlying reasons why a plan sponsor would transfer risk haven’t changed.” However, recent premium increases by the Pension Benefit Guaranty Corp. (PBGC) could push more plan sponsors in that direction.

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