Lockheed Martin's pension situation is more layered than most. The salaried plan freeze in 2020, multiple transfers to Athene since 2018, and the interest rate spike since 2022 have all changed the picture for LM retirees and deferred vested participants. Here's what you actually need to know to calculate your benefit and make a decision.
The plan structure: salaried vs. hourly
Lockheed Martin operates separate pension plans for salaried and hourly employees, and the hourly side splits further by union contract. The salaried plans cover white-collar, management, and professional employees. Hourly plans cover production workers and technical staff represented by unions including the IAM (International Association of Machinists) and other bargaining units.
For salaried employees, there are two formula structures depending on hire date. Employees hired before 2006 typically accrued benefits under a traditional final average pay formula: a percentage (approximately 1.5% to 1.9% per year, depending on plan tier) multiplied by years of service multiplied by final average compensation. Employees hired between 2006 and 2016 were generally moved into a cash balance structure where the account grows through pay credits and interest credits each year.
Both structures were frozen effective January 1, 2020. No new credits have accrued since. The benefit you'd earned through December 31, 2019 is what's sitting in the plan (or what transferred to Athene).
The Athene transfers
Lockheed Martin began transferring pension obligations to Athene Annuity and Life Insurance Company in 2018. The transfers have been substantial:
- 2018: approximately $800 million in obligations transferred
- 2021: an additional tranche as part of ongoing de-risking
- 2022: approximately $4.9 billion, the largest single transfer, covering a significant portion of LM's remaining salaried retiree obligations
If you're already collecting a monthly pension and your payments started coming from Athene rather than Lockheed Martin directly, your obligation has been transferred. The monthly amount doesn't change. The payer changes. So does your PBGC coverage: once an obligation transfers to an insurance company, it exits the PBGC system.
Athene is a subsidiary of Apollo Global Management. AM Best rates Athene at A (Excellent) as of 2026. That's a solid rating, though Athene's business model (acquiring annuity obligations and investing in higher-yield assets) is meaningfully different from traditional insurers like Prudential or MetLife. Worth understanding rather than ignoring.
What the PBGC covers (and doesn't)
For benefits still inside the LM pension plan, the PBGC provides a federal backstop. If LM's plan were ever terminated in an underfunded state, the PBGC would cover benefits up to approximately $7,107 per month for a 65-year-old retiree in 2026. The LM plans have historically been among the better-funded large corporate pensions, so PBGC as a safety net rather than an active concern is probably the right mental model.
For the substantial portion of LM retirees whose obligations transferred to Athene, PBGC coverage ended at the moment of transfer. Their protection is state insurance guaranty associations, which in most states cover annuity contracts up to $250,000 in present value. For longer-service LM retirees with larger monthly benefits, the present value of their annuity may exceed that state guarantee limit, leaving a gap. This isn't a reason to panic: insurance company failures are rare and Athene is well-capitalized. It's a reason to understand the situation clearly rather than assume the old PBGC coverage still applies.
The $7,000 mandatory cash-out rule
If your vested benefit is small enough, the plan may pay you automatically rather than administering a small monthly obligation indefinitely. Under IRS rules, if the present value of your benefit is $7,000 or less, the plan can distribute it to you as a lump sum without your election. If your monthly benefit is approximately $583 or less (which is $7,000 annuitized at current rates), expect a mandatory cash-out rather than a monthly annuity.
This applies most often to former LM employees who worked briefly, vested with a few years of service, and moved on. If you're in this situation, the lump sum comes automatically at the plan's normal retirement age or when the plan identifies you. Make sure LM has your current address. Unclaimed pension benefits are a real problem for people who changed addresses without updating plan records.
How to calculate your lump sum under 2026 segment rates
For eligible LM participants, lump sum offers must use the IRS 417(e) segment rate formula. The same formula governs every private sector defined benefit plan in the U.S. Verizon uses it. AT&T uses it. GM uses it. The inputs differ; the formula doesn't.
The 2026 segment rates from the November 2025 IRS publication:
- Segment 1 (payments in years 1-5): 5.03%
- Segment 2 (payments in years 6-20): 5.35%
- Segment 3 (payments in years 21 and beyond): 5.57%
LM's plan documents specify which lookback month applies. It may not be November. Check your Summary Plan Description or the election notice itself. A one-month difference in lookback can shift a $400,000 lump sum by $8,000 to $15,000.
The LMPeople portal (Lockheed's HR system) has a Retirement Income Modeler, but it requires active login credentials. Former employees who no longer have LM system access can't use it. The pension lump sum calculator on this site runs the same IRS formula without requiring any login. Enter your monthly benefit, your current age, and the segment rates. It gives you a formula-based present value estimate in about 10 seconds.
Why rates matter more now than in 2019
LM froze its salaried pension in January 2020. At the time, the 10-year Treasury yield was around 1.8%, and segment rates were correspondingly low (approximately 2.0%, 3.0%, 3.5%). A $4,000/month frozen benefit for a 60-year-old would have calculated to roughly $800,000 as a lump sum under those rates.
Under 2026 rates, the same $4,000/month benefit for the same 60-year-old calculates to approximately $585,000. Nothing about the pension changed. The discount rate moved, and $215,000 of lump sum value disappeared. If you were hoping to take a lump sum at 2019 values, that option is gone and it's unlikely rates return to those levels in the near term.
This is a good reason to look seriously at the annuity option rather than assuming the lump sum is automatically better. At 2026 rates, your annuity buys more relative income per dollar of lump sum forgone than it did in 2020. The monthly guarantee is worth more when the discount rate is high.
Lump sum vs. monthly benefit: the decision
Four factors determine whether the lump sum or the annuity is right for your situation. Health and longevity. Other income sources. Surviving spouse needs. Investment discipline.
The break-even age at 2026 rates for a 65-year-old LM retiree falls between 81 and 84, depending on the specific benefit amount and form of payment. Live past 84 and the annuity generates more cumulative income. Die before 81 and the lump sum wins.
If you have a surviving spouse who relies on the pension income, a joint-and-survivor annuity extends protection to them. A lump sum in an IRA passes whatever remains, which is potentially more or less than the annuity value depending on how it's invested and how withdrawals are managed. There's no right answer: only the right answer for your specific numbers and circumstances.
The lump sum vs. annuity calculator runs the break-even analysis with your actual numbers. For LM-specific plan context, including how the Athene transfers affect deferred vested participants in different plan tiers, see the Lockheed Martin pension guide. A fee-only fiduciary who charges by the hour and earns no commissions is worth $300 to $500 for a one-time analysis before you sign an irreversible election form.