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POSTRETIREMENT BENEFIT PLANS | 9 Months Ended
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Sep. 25, 2022
Retirement Benefits [Abstract] |
POSTRETIREMENT BENEFIT PLANS | POSTRETIREMENT BENEFIT PLANS FAS income (expense) The pretax FAS income (expense) related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):
|  | Quarters Ended | Nine Months Ended
|  | September 25, 2022 |  | September 26, 2021 | September 25, 2022 |  | September 26, 2021
Qualified defined benefit pension plans |  |  |  |  |  |  |  |  |  |  |
Operating: |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | (20) |  |  |  | $ | (26) |  |  | $ | (68) |  |  |  | $ | (80) |  |
Non-operating: |  |  |  |  |  |  |  |  |  |  |
Interest cost |  | (342) |  |  |  | (302) |  |  | (947) |  |  |  | (923) |  |
Expected return on plan assets |  | 425 |  |  |  | 517 |  |  | 1,430 |  |  |  | 1,655 |  |
Recognized net actuarial losses |  | (62) |  |  |  | (210) |  |  | (363) |  |  |  | (714) |  |
Amortization of prior service credits |  | 90 |  |  |  | 88 |  |  | 270 |  |  |  | 262 |  |
Pension settlement charge |  | — |  |  |  | (1,665) |  |  | (1,470) |  |  |  | (1,665) |  |
Non-service FAS pension income (expense) |  | 111 |  |  |  | (1,572) |  |  | (1,080) |  |  |  | (1,385) |  |
Total FAS pension income (expense) |  | $ | 91 |  |  |  | $ | (1,598) |  |  | $ | (1,148) |  |  |  | $ | (1,465) |  |
Retiree medical and life insurance plans |  |  |  |  |  |  |  |  |  |  |
Operating: |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | (3) |  |  |  | $ | (3) |  |  | $ | (7) |  |  |  | $ | (10) |  |
Non-operating: |  |  |  |  |  |  |  |  |  |  |
Interest cost |  | (12) |  |  |  | (13) |  |  | (36) |  |  |  | (39) |  |
Expected return on plan assets |  | 34 |  |  |  | 35 |  |  | 102 |  |  |  | 105 |  |
Recognized net actuarial gains |  | 12 |  |  |  | — |  |  | 35 |  |  |  | — |  |
Amortization of prior service costs |  | (7) |  |  |  | (9) |  |  | (21) |  |  |  | (27) |  |
Non-service FAS retiree medical and life income |  | 27 |  |  |  | 13 |  |  | 80 |  |  |  | 39 |  |
Total FAS retiree medical and life income |  | $ | 24 |  |  |  | $ | 10 |  |  | $ | 73 |  |  |  | $ | 29 |  |
We record the service cost component of FAS income (expense) for our qualified defined benefit plans and retiree medical and life insurance plans in the cost of sales accounts; the non-service components of our FAS income (expense) for our qualified defined benefit pension plans in the non-service FAS pension income (expense) account; and the non-service components of our FAS income (expense) for our retiree medical and life insurance plans as part of the other non-operating income (expense), net account on our consolidated statements of earnings. The recognized net actuarial losses or gains and amortization of prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ($30 million and $41 million for the quarter and nine months ended September 25, 2022 and $6 million and $13 million for the quarter and nine months ended September 26, 2021) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of FAS income (expense) for the periods presented. These costs totaled $(3) million ($(2) million, net of tax) and $120 million ($93 million, net of tax) during the quarter and nine months ended September 25, 2022, and $137 million ($107 million, net of tax) and $492 million ($387 million, net of tax) during the quarter and nine months ended September 26, 2021 and were recorded on our consolidated statements of comprehensive income as an increase to other comprehensive income. Purchase of Group Annuity Contracts and Pension Remeasurement As previously announced, on June 24, 2022, we purchased group annuity contracts to transfer $4.3 billion of gross defined benefit pension obligations and related plan assets to an insurance company for approximately 13,600 U.S. retirees and beneficiaries. The group annuity contracts were purchased using assets from Lockheed Martin’s master retirement trust and no additional funding contribution was required. This transaction had no impact on the amount, timing, or form of the monthly retirement benefit payments to the affected retirees and beneficiaries. In connection with this transaction, during the second quarter we recognized a noncash, non-operating pension settlement charge of $1.5 billion. As a result of this transaction, we were required to remeasure the related plan benefit obligations and assets as of the June 24, 2022 close date reflecting the use of an updated discount rate and actual return on plan assets. The plan remeasurement resulted in a decrease of $2.2 billion to our net unfunded pension obligations, which includes a decrease in benefit obligation of $7.9 billion (primarily due to an increase in the discount rate from 2.875% at December 31, 2021 to 4.75%) and an incremental loss on plan assets of $5.7 billion. The corresponding increase of $1.7 billion after taxes was recognized in stockholders’ equity. We now expect FAS pension expense of approximately $1.1 billion in 2022, inclusive of the noncash, non-operating pension settlement charge of $1.5 billion (pretax) described above. The nine months ended September 26, 2021 reflect a noncash, non-operating pension settlement charge of $1.7 billion recognized in connection with the transfer of $4.9 billion of our gross defined benefit pension obligations and related plan assets to an insurance company on August 3, 2021. Funding requirements The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, along with consideration of CAS and Internal Revenue Code rules. We made no contributions to our qualified defined benefit pension plans during the quarters and nine months ended September 25, 2022 and September 26, 2021.

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