Lockheed Martin 1996 Annual Report Download - page 81

Lockheed Martin Corporation
The following table sets forth the defined benefit plans'
funded status and amounts recognized in the Corporation's consol-
idated balance sheet:
The net periodic post-retirement benefit cost included the fol-
lowing components:
(In millions)
Plan assets at fair value
Actuarial present value of
benefit obligations:
Vested
Non-vested
Accumulated benefit obligation
Effect of projected future
salary increases
Projected benefit obligation (PBO)
Plan assets greater than PBO
1996
$18,402
$13,486
236
13,722
1,694
15,416
2,986
1995
$13,813
$10,684
115
10,799
1,589
12,388
1,425
Reconciling items:
Unrecognized net asset existing at the date
of initial application of SFAS No. 87
Unrecognized prior-service cost
Unrecognized gain
Prepaid pension asset
(196)
461
(2,484)
$ 767
(287)
499
(1,381)
$ 256
The increases in the fair value of plan assets, the PBO and
the prepaid pension asset are primarily related to the inclusion of
the defined benefit plans of Tactical Systems in 1996. The fair value
of plan assets also increased due to favorable investment returns
in 1996.
At December 31, 1996, approximately 56 percent of the plan
assets were equity securities with the remainder primarily being
fixed income securities and cash equivalents. Actuarial determina-
tions were based on various assumptions displayed in the following
table. Net pension costs in 1996, 1995 and 1994 were based on
assumptions in effect at the end of the respective preceding year.
Benefit obligations as of each year-end were based on assumptions
in effect as of those dates.
The Corporation has made contributions to trusts (including
Voluntary Employees' Beneficiary Association (VEBA) trusts and
401(h) accounts) established to pay future medical benefits to eligi-
ble retirees and dependents.
The following table sets forth the post-retirement benefit
plans' obligations and funded status as of December 31:
(In millions)
Plan assets at fair value
Actuarial present value of benefit obligations:
Active employees, eligible to retire
Active employees, not eligible to retire
Former employees
Accumulated post-retirement
benefit obligation (APBO)
Assets less than APBO
Unrecognized prior service cost
Unrecognized gain
Post-retirement benefit unfunded liability
1996
$ 736
$ 334
454
1,819
2,607
1,871
206
$2,077
1995
$ 590
$ 344
428
1,504
2,276
1,686
16
93
$1,795
Actuarial determinations were based on various assumptions
displayed in the following table. Net retiree medical costs for 1996,
1995 and 1994 were based on assumptions in effect at the end of the
respective preceding years. Benefit obligations as of the end of each
year reflect assumptions in effect as of those dates.
Retiree Medical And Life Insurance Plans
Certain health care and life insurance benefits are provided to eligi-
ble retirees by the Corporation. These benefits are paid by the
Corporation or funded through several trusts.
The medical trend rates used in measuring the APBO were
7.5% in 1996 and 8% in 1995, and were assumed to gradually
decrease to 4.5% by the year 2004. An increase of one percentage
point in the assumed medical trend rates would result in an
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Assumptions:
Discount rates
Rates of increase in future
compensation levels
Expected long-term
rate of return on assets
1996
7.8%
6.0
9.0
1995
7.5%
6.0
8.8
1994
8.2-8.5%
5.5-6.0
8.0-8.8
(In millions)
Service cost—benefits
earned during the year
Interest cost
Net amortization and
other components
Actual return on assets
Curtailment gain
Net post-retirement cost
1996
$ 40
181
13
(73)
(15)
$146
1995
$ 34
177
44
(82)
—
$173
1994
$ 54
164
(29)
(3)
(21)
$165
Assumptions:
Discount rates
Expected long-term
rate of return on assets
1996
7.8%
9.0
1995
7.5%
8.8
1994
8.2-8.5%
8.0-8.8