PensionsJanuary 29, 2020

MetLife Secures $1.9 Billion Pension Deal with Lockheed Martin

The aerospace giant will transfer liabilities to the insurer, roughly 20,000 retirees and current workers.

Reported by Sarah Min

Lockheed Martin will shed roughly $1.9 billion in liabilities after MetLife takes on pension benefit payments for roughly 20,000 retirees and current employees under the defense contractor.

The aerospace company in December purchased a group annuity contract from Metropolitan Tower Life Insurance, a subsidiary of the insurance giant. The transaction, announced Tuesday, will not cut the amount of pension benefits for the Lockheed Martin’s affected retirees.

The transfer constitutes 14% of Lockheed’s $13.2 billion in pension liabilities as of year-end 2019, according to the company’s filings.

The agreement will allow the company to “focus on its core mission and mitigate financial risk associated with market volatility,” while ensuring a “seamless transition” for retirees, said Ken Possenriede, executive vice president and chief financial officer at Lockheed Martin, in a statement.

This is not the first pension transfer for Lockheed, which last January moved $2.6 billion in pension liabilities that covered a total of 41,000 workers to Prudential Insurance and Athene.

It’s also part of a broader movement of US employers paying insurers to take on pension liabilities, as plan expenses grow, and more companies move towards 401(k) plans. Roughly one-third of defined benefit sponsors plan to offload their liabilities sometime in the next five years, MetLife said in a study.

Last year, MetLife secured a $6 billion pension deal with FedEx, which was the largest U.S. pension transfer in years. In 2012, telecommunications giant Verizon transferred $7.5 billion in liabilities to Prudential.

Earlier this month, MetLife agreed to pay a $10 million fine to the Securities and Exchange Commission for pension accounting violations. Lockheed, thanks to the military buildup under the Trump Administration, had an earnings surge of 23% last year, to $6.2 billion.