Although Lockheed Martin Corp.'s defined contribution plans are blessed with a strong participation rate and healthy participant investing, executives wanted improvements in the investment lineup and plan design to create simplicity, encourage retirees to keep their retirement assets in the company plans and make the company more attractive to prospective employees.
"We are in a war for talent," said Paul M. Colonna, president and CIO of the Lockheed Martin Investment Management Co., Bethesda, Md., which handles investments for the company's seven DC plans with $50.2 billion in assets. "We must do our part for retention and recruitment."
Last month, Lockheed Martin put its strategy into action, which included removing eight stand-alone investment options that accounted for less than 10% of total DC assets. Having studied participants' investing activity, Mr. Colonna advocated a "less is more approach."
He started his DC review soon after joining Lockheed Martin in January 2019, replacing Christopher Li, who had retired. Before Lockheed Martin, Mr. Colonna was executive vice president and CIO of fundamental equities for State Street Global Advisors. Before that, he was president and CIO for public investments at General Electric Asset Management.
His review involved discussions with participants, Lockheed Martin benefits officials and asset managers. In ex- amining the DC lineup, Mr. Colonna asked, "Is it doing everything we wanted it to do?" The investment-plan design restructuring is identical for seven Lockheed Martin DC plans, most notably the Lockheed Martin Corporation Salaried Savings Plan, which accounts for more than 90% of DC assets and covers more than 90% of approximately 200,000 DC participants.
The review began just as the company was changing record keepers to Empower Retirement from Voya Financial Inc., a process that started before Mr. Colonna joined Lockheed Martin.
Historically, Mr. Colonna explained, the company had focused on getting employees to participate in the plans. "Participation rates were not the issue" for the DC restructuring. The average aggregate participation rate for the Lockheed Martin Corporation Salaried Savings Plan and three other DC plans for which employees make contributions is about 93%. (Three other DC plans are funded through employer contributions).
"Our cost profile was strong compared to our peers and our contribution rates are good," he said. The average deferral rate — excluding a company match — for the Lockheed Martin Corporation Salaried Savings Plan is 11%. The company match for the largest plan is 50 cents on the dollar up to 8% of annual pay. There is no vesting period for the match. The three other employee-contribution DC plans have varying match formulas.
Mr. Colonna's review also led to some additions. Lockheed Martin added an actively managed bond fund, and it added three asset categories — global equity, defensive equity and private real estate — to the underlying investments in its custom target-date series. The target-date enhancements were aimed at providing a more growth-oriented structure to appeal to younger participants and to offer greater diversification, such as the adding of the real estate component, said Mr. Colonna, whose unit manages the underlying investments in the target-date series.