The Pension Benefit Guaranty Corporation (PBGC) and Lockheed Martin Corporation have agreed on protection for the pensions of nearly 3,000 workers and retirees when they become part of the newly created L-3 Communications Corporation.
"Pension security must be considered when corporations change structure. We are pleased that Lockheed Martin and L-3 Communications worked with PBGC to strengthen their pension commitments for workers and retirees," said PBGC Acting Executive Director John Seal.
Lockheed Martin is spinning off some of its aerospace and defense communications business to create L-3, which will be jointly owned by Lockheed Martin, the Wall Street investment group, Lehman Brothers Capital Partners, and the management team that will oversee the new company. As part of this transaction, the pension plans covering the employees of the divested businesses will be transferred to L-3.
Under the agreement, Lockheed Martin will reassume sponsorship of three underfunded pension plans that will become part of L-3 in the event L-3 is unable to support the plans. The agreement will remain in effect until L-3 achieves an investment grade financial rating.
The three pension plans will cover L-3 workers at Wideband Systems in Salt Lake City, UT, Advanced Recorders in Sarasota, FL, and at Hycor in Woburn, MA. These plans, which on a PBGC termination basis are underfunded by an estimated $40 million, became an obligation of Lockheed Martin when it acquired most of the Loral Corporation last year.
Four other plans also being transferred to L-3 are well funded and not covered by this agreement. All seven L-3 pension plans are covered by PBGC's insurance guarantee.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by more than 42 million American workers and retirees participating in about 50,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.