Lockheed Martin 2004 Annual Report Download - page 62

Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
60
Defined Retiree Medical
Benefit and Life
Pension Plans Insurance Plans
(In millions) 2004 2003 2004 2003
AMOUNTS RECOGNIZED
IN THE CONSOLIDATED
BALANCE SHEET:
Prepaid assets $ 1,030 $ 1,213 $—$—
Accrued liabilities (1,660) (1,100) (1,236) (1,440)
Intangible asset 444 517 ——
Accumulated other
comprehensive loss
related to minimum
pension liability 2,374 1,938 ——
Net amount recognized $ 2,188 $ 2,568 $(1,236) $(1,440)
The projected benefit obligations (PBO) for the
Corporation’s more significant defined benefit pension plans
exceeded the fair value of the plans’ assets at December 31,
2004 and 2003, as reflected in the table above.
At December 31, 2004 and 2003, the Corporation’s con-
solidated balance sheet included pretax additional minimum
pension liabilities of $2.4 billion and $1.9 billion, respectively,
related to certain of its defined benefit pension plans. This lia-
bility is calculated on a plan-by-plan basis, and is required if the
accumulated benefit obligation (ABO) of the plan exceeds the
fair value of the plan assets and the plan’s accrued pension lia-
bilities. The ABO for all defined benefit pension plans was
approximately $23 billion and $21 billion at December 31,
2004 and 2003, respectively.
For defined benefit pension plans in which the ABO was in
excess of the fair value of the plans’ assets, the PBO, ABO and
fair value of the plans’ assets were as follows:
(In millions) 2004 2003
Projected benefit obligation $17,051 $15,228
Accumulated benefit obligation 14,792 13,312
Fair value of plan assets 13,132 12,211
The net pension cost as determined by FAS 87, Employers’
Accounting for Pensions, and the net post-retirement benefit
cost as determined by FAS 106, Employers’ Accounting for
Post-retirement Benefits Other Than Pensions, related to the
Corporation’s plans include the following components:
(In millions) 2004 2003 2002
DEFINED BENEFIT PENSION PLANS
Service cost $ 743 $ 640 $ 565
Interest cost 1,497 1,453 1,401
Expected return on plan assets (1,698) (1,748) (2,162)
Amortization of prior service cost 79 79 72
Recognized net actuarial losses (gains) 264 62 (33)
Amortization of transition asset (1) (2) (3)
Total net pension expense (income) $ 884 $ 484 $ (160)
RETIREE MEDICAL AND
LIFE INSURANCE PLANS
Service cost $49$40$ 37
Interest cost 225 211 213
Expected return on plan assets (88) (69) (89)
Amortization of prior service cost 81 (4)
Recognized net actuarial losses 60 49 20
Total net post-retirement expense $ 254 $ 232 $ 177
The actuarial assumptions used to determine the benefit
obligations at December 31, 2004 and 2003 related to the
Corporation’s defined benefit pension and post-retirement ben-
efit plans, as appropriate, are as follows:
Benefit Obligation
Assumptions
2004 2003
Discount rates 5.75% 6.25%
Rates of increase in future compensation levels 5.50 5.50
The actuarial assumptions used to determine the net expense
(income) related to the Corporation’s defined benefit pension and
post-retirement benefit plans for the years ended December 31,
2004, 2003 and 2002, as appropriate, are as follows:
Pension Cost Assumptions
2004 2003 2002
Discount rates 6.25% 6.75% 7.25%
Expected long-term rates of
return on assets 8.50 8.50 9.50
Rates of increase in future
compensation levels 5.50 5.50 5.50