Defense contractor Lockheed Martin Corp. said Thursday it will no longer provide traditional pension plans to new salaried employees in part to cut costs, offering them instead defined contribution retirement plans.
In a letter to the company’s 85,000 salaried employees, Lockheed said it will contribute money to accounts for the new workers that give them the option to invest the money as they choose. However, as of Jan. 1, new hires won’t be offered a pension where they receive regular payments after retirement based on years of service and salary.
Lockheed expects to save between $125 million and $150 million on the change after it is phased in over the next several years, according to company spokesman Tom Greer. Currently, the company’s pension plan has $23 billion of assets and $27 billion in liability, he said.
Those costs have dragged down the company’s financial results. Lockheed reported $600 million in pension related expenses last year, and predicted pensions expenses for 2005 would be roughly the same.
The change will not affect Lockheed’s workers covered by union contracts or current employees, Greer said. Newly hired workers will also be offered 401K employee contribution plans along with the defined contribution program.
Greer said the change was partly in response to surveys of employees, who indicated they wanted more control over how their retirement funds were invested.
“We think we are giving them a little bit more freedom,” he said.