Lockheed Martin 2005 Annual Report Download - page 66
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LockheedMartinCorporation
NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
December31,2005
the remaining service lives of the employees eligible for the
benefit.TheimpactofadoptionoftheFSPwasareductionof
the FAS 106 postretirement expense for the year ended
December31,2005ofapproximately$35million.Thepostre-
tirement expense computed under FAS 106 does not include
theeffectsofU.S.GovernmentCostAccountingStandardsor
incometaxbenefits.
The actuarial assumptions used to determine the benefit
obligations at December 31, 2005 and 2004 related to the
Corporation’sdefinedbenefitpensionandpostretirementben-
efitplans,asappropriate,areasfollows:
BenefitObligation
Assumptions
2004
Discountrates 5.75%
Ratesofincreaseinfuture
compensationlevels 5.50
ThedecreaseinthediscountratefromDecember31,2004
toDecember31,2005resultedinanincreaseintheprojected
benefit obligations of the Corporation’s defined benefit pen-
sion plans at December 31, 2005 of approximately $465
million.Thedecreaseintherateofincreaseinfuturecompen-
sationlevelsfromDecember31, 2004toDecember31,2005
resulted in a decrease in the projected benefit obligations of
theCorporation’sdefinedbenefitpensionplansatDecember31,
2005ofapproximately$483million.
The actuarial assumptions used to determine the net
expenserelatedtotheCorporation’sdefinedbenefitpensionand
postretirementbenefitplansfor theyearsendedDecember31,
2005,2004and2003,asappropriate,areasfollows:
PensionCostAssumptions
2004 2003
Discountrates 6.25% 6.75%
Expectedlong-termratesof
returnonassets 8.50 8.50
Ratesofincreaseinfuture
compensationlevels 5.50 5.50
The long-term rate of return assumption represents the
expectedaveragerateofearningsonthefundsinvestedorto
beinvestedtoprovideforthebenefitsincludedinthebenefit
obligations.Thatassumptionisdeterminedbasedonanumber
offactors,includinghistoricalmarketindexreturns,theantici-
pated long-term asset allocation of the plans, historical plan
return data, plan expenses and the potential to outperform
marketindexreturns.
Themedicaltrendratesusedinmeasuringthepostretire-
ment benefit obligation were 10.2% in 2005 and 11.0% in
2004,andwereassumedtoultimatelydecreaseto5.0%bythe
year 2012. An increase or decrease of one percentage point
intheassumedmedicaltrendrateswouldresultinachangein
thepostretirementbenefitobligationofapproximately5%and
(4)%,respectively,atDecember31,2005,andachangeinthe
2005postretirementservicecostplusinterestcostofapproxi-
mately4%and(4)%,respectively.Themedicaltrendratefor
2006is10.0%.
The asset allocations of the Corporation’s plans at
December 31, 2005 and 2004, by asset category, were as
follows:
Defined
Benefit
PensionPlans
RetireeMedical
andLife
InsurancePlans
2004 2004
Assetcategory:
Equitysecurities 64% 58%
Debtsecurities 32 41
Other 41
100% 100%