Lockheed Martin Corp., Bethesda, Md., completed pension buyout and pension buy-in transactions totaling $2.2 billion in December through the purchase of two group annuity contracts from insurance companies.
The defense and aerospace company disclosed the transactions Tuesday in an 8-K filing with the SEC.
The first purchase transferred $1.4 billion in U.S. pension plan liabilities related to about 13,500 U.S. retirees and beneficiaries to an undisclosed insurer. The traditional buyout transaction transfers the benefit-paying responsibility to the insurer.
According to a news release Tuesday from MetLife, Lockheed Martin purchased the contract from its subsidiary Metropolitan Tower Life Insurance Co.
The second purchase for $793 million from another undisclosed insurer covers the U.S. pension plan liabilities of about 2,500 retirees and beneficiaries. Lockheed Martin will retain the benefit-paying responsibilities for this population, but will be reimbursed for all future benefit payments covered by the contract. Pension buy-in transactions are very common in the U.K. but a rarity in the U.S.
It is the second time Lockheed Martin has completed pension buyout and buy-in transactions in tandem.
In December 2018, the company completed a traditional buyout transaction, transferring the responsibility to pay benefits for about $1.6 billion in U.S. pension plan liabilities to Prudential Insurance Co. of America, and also a buy-in transaction through the purchase of an $810 million group annuity contract from Athene Annuity & Life Co., which reimburses Lockheed Martin for benefit payments the plan will make to its retirees and beneficiaries.
John Mollard, vice president and treasurer at Lockheed Martin, said in a February 2019 telephone interview that the process began with the company's $5 billion in contributions to its pension plans in 2018.
Motivated by the passage of the Tax Reform and Jobs Act, which dropped the corporate tax rate to 21% from 35%, Mr. Mollard said the company decided to accelerate its contributions to take advantage of the higher tax deduction that was set to expire Sept. 15, 2018.