General Dynamics 2013 Annual Report Download - page 58

P. RETIREMENT PLANS
We provide defined-contribution benefits, as well as defined-benefit
pension and other post-retirement benefits, to eligible employees.
Retirement Plan Summary Information
Defined-contribution Benefits. We provide eligible employees the
opportunity to participate in defined-contribution savings plans
(commonly known as 401(k) plans), which permit contributions on a
before-tax and after-tax basis. Generally, salaried employees and
certain hourly employees are eligible to participate in the plans. Under
most plans, the employee may contribute to various investment
alternatives, including investment in our common stock. In some of
these plans, we match a portion of the employees’ contributions. Our
contributions to these plans totaled $203 in 2011, $201 in 2012 and
$204 in 2013. The defined-contribution plans held approximately
31 million and 27 million shares of our common stock, representing
approximately 9 percent and 8 percent of our outstanding shares, on
December 31, 2012 and 2013, respectively.
Pension Benefits. We have six noncontributory and six contributory
trusteed, qualified defined-benefit pension plans covering eligible
government business employees, and two noncontributory and four
contributory plans covering eligible commercial business employees,
including some employees of our international operations. The primary
factors affecting the benefits earned by participants in our pension plans
are employees’ years of service and compensation levels. Our primary
government pension plan, which comprises the majority of our unfunded
obligation, was closed to new salaried participants on January 1, 2007.
Additionally, we made changes to this plan for certain participants
effective in 2014 that limit or cease the benefits that accrue for future
service. As a result of these modifications, the plan’s projected benefit
obligation (PBO) was reduced by approximately $205.
We also sponsor one funded and several unfunded non-qualified
supplemental executive plans, which provide participants with
additional benefits, including excess benefits over limits imposed on
qualified plans by federal tax law.
Other Post-retirement Benefits. We maintain plans that provide
post-retirement healthcare and life insurance coverage for certain of
our employees and retirees. These benefits vary by employment status,
age, service and salary level at retirement. The coverage provided and
the extent to which the retirees share in the cost of the program vary
throughout the company. The plans provide health and life insurance
benefits only to those employees who retire directly from our service
and not to those who terminate service prior to eligibility for retirement.
Contributions and Benefit Payments
It is our policy to fund our defined-benefit retirement plans in a manner
that optimizes the tax deductibility and contract recovery of contributions,
considered within our capital deployment framework. We make
discretionary and required contributions to our pension plans to provide
for benefits attributed to service to date and to be earned in the future.
Our required contributions are determined in accordance with IRS
regulations. The contributions to our pension plans depend on a variety
of factors, including discount rates and annual returns on our plan
assets. We contributed $601 to our pension plans in 2013, including
approximately $250 of voluntary contributions. We expect to contribute
approximately $550 to our pension plans in 2014.
We maintain several tax-advantaged accounts, primarily Voluntary
Employees’ Beneficiary Association (VEBA) trusts, to fund the obligations
for some of our post-retirement benefit plans. For non-funded plans,
claims are paid as received. We contributed $25 to our other post-
retirement plans in 2013 and expect to contribute a similar amount in
2014.
We expect the following benefits to be paid from our retirement plans
over the next 10 years:
Pension
Benefits
Other Post-retirement
Benefits
2014 $ 496 $ 82
2015 520 83
2016 543 83
2017 569 82
2018 596 82
2019-2023 3,427 397
Government Contract Considerations
Our contractual arrangements with the U.S. government provide for the
recovery of contributions to our pension and other post-retirement
benefit plans covering employees working in our defense business
groups. For non-funded plans, our government contracts allow us to
recover claims paid. Following payment, these recoverable amounts are
allocated to contracts and billed to the customer in accordance with the
Cost Accounting Standards (CAS) and specific contractual terms. For
some of these plans, the cumulative pension and post-retirement benefit
cost exceeds the amount currently allocable to contracts. To the extent
recovery of the cost is considered probable based on our backlog and
probable follow-on contracts, we defer the excess in contracts in process
on the Consolidated Balance Sheets until the cost is allocable to
contracts. See Note G for discussion of our deferred contract costs. For
other plans, the amount allocated to contracts and included in revenues
has exceeded the plans’ cumulative benefit cost. We have deferred
recognition of these excess earnings to provide a better matching of
revenues and expenses. These deferrals have been classified against the
plan assets on the Consolidated Balance Sheets.
54 General Dynamics Annual Report 2013