Lockheed Martin said Tuesday that it is incrementally freezing pension benefits to some 48,000 salaried workers over four years.
The giant defense contractor, based in Bethesda, Md., will replace its defined-benefit plan with an enhanced 401(k) that offers an annual match of up to 10 percent of an employee’s salary, the company said in a statement. Lockheed closed its salaried pension plan to new hires in 2006.
Retirees already collecting benefits and former employees who are vested will not be affected by the change, it said. Current and former employees will also keep benefits already earned in their pension plan.
The changeover has a two-step approach, starting Jan. 1, 2016, with the freeze of pay-based benefits and concluding Jan. 1, 2020, with the freeze of length-of-service-based benefits.
In its statement, Lockheed said the changes will not affect its 2014 second- quarter earnings. The pension expense for the entire fiscal year will be released with second-quarter results July 22, it said.
“We do not expect to see any significant cost savings for the company until after 2020,” said Gordon Johndroe, Lockheed’s vice president of media relations, adding that managing costs is key to remaining competitive in the long run. “Beginning in 2020, we will be able to pass some of the expected savings on to our customers.”
Lockheed’s move is part of a growing trend among major employers. In November, the consulting firm Towers Watson found that only 30 companies on the 2013 Fortune 100 list still offered a defined-benefit pension plan to newly hired salaried employees, down from 90 in 1985.
In North Texas, Lockheed employs about 13,300 workers at its aeronautics complex in west Fort Worth and about 2,700 at its Missiles and Fire Control facility in Grand Prairie. The company said it could not provide numbers on how many salaried employees are at each site.
In May, 115 union machinists at Mississippi’s Stennis Space Center walked out over plans to replace traditional pension benefits with a nonguaranteed 401(k) retirement plan but gave in after a five-day strike. A 10-week strike by hourly workers at the Lockheed plant in Fort Worth could not buck the trend in 2012.