PENSION AND OTHER POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 30, 2022

Retirement Benefits [Abstract]

PENSION AND OTHER POSTRETIREMENT BENEFITS

NOTE 14: PENSION AND OTHER POSTRETIREMENT BENEFITS

Defined Contribution Plans

As of December 30, 2022, we sponsor numerous defined contribution savings plans, which allow our eligible employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. The plans include several match contribution formulas which require us to match a percentage of the employee contributions up to certain limits, generally totaling 6.0% of employee eligible pay. Matching contributions, net of forfeitures, charged to expense were $226 million, $230 million and $225 million in fiscal 2022, 2021 and 2020, respectively.

Deferred Compensation Plans

We also sponsor certain non-qualified deferred compensation plans. The following table provides the fair value of our deferred compensation plan investments and liabilities by category and by fair value hierarchy level:

	December 30, 2022				December 31, 2021
(In millions)	Total		Level 1		Total		Level 1
Assets
Deferred compensation plan assets:(1)
Equity and fixed income securities	$	64	$	64	$	77	$	77
Investments measured at NAV:
Corporate-owned life insurance	33				35
Total fair value of deferred compensation plan assets	$	97			$	112
Liabilities
Deferred compensation plan liabilities:(2)
Equity securities and mutual funds	$	8	$	8	$	6	$	6
Investments measured at NAV:
Common/collective trusts and guaranteed investment contracts	192				177
Total fair value of deferred compensation plan liabilities	$	200			$	183

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(1)Represents diversified assets held in a “rabbi trust” associated with our non-qualified deferred compensation plans, which we include in the “Other current assets” and “Other non-current assets” line items in our Consolidated Balance Sheet, and which are measured at fair value.

(2)Primarily represents obligations to pay benefits under certain non-qualified deferred compensation plans, which we include in the “Compensation and benefits” and “Other long-term liabilities” line items in our Consolidated Balance Sheet. Under these plans, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts.

Defined Benefit Plans

We sponsor numerous defined benefit pension plans for eligible employees. Benefits for most participants under the terms of these plans are based on the employee’s years of service and compensation. We fund these plans as required by statutory regulations and through voluntary contributions. Some of our employees also participate in other postretirement defined benefit plans such as health care and life insurance plans.

Effective January 1, 2020, for certain acquired L3 U.S. defined benefit pension plans, benefit accruals were frozen and replaced with a 1% cash balance benefit formula for certain employees who were not considered highly compensated on December 31, 2018.

At December 31, 2022, the Salaried Pension Plan was merged into the Aviation Products Pension Plan. The merger will result in lower Pension Benefit Guaranty Corporation (“PBGC”) premiums in 2023 and thereafter. Our Aviation Products Pension Plan is our largest defined benefit pension plan, with assets valued at $6.4 billion and a PBO of $6.5 billion as of December 30, 2022.

During fiscal 2022, we reduced our pension benefit obligations by approximately $64 million by purchasing group annuity policies and transferring approximately $64 million of pension plan assets to an insurance company. There was no gain or loss as a result of this transaction.

During fiscal 2021, we reduced our pension benefit obligations by approximately $250 million by purchasing group annuity policies and transferring approximately $250 million of pension plan assets to an insurance company. As a result of the annuity purchases, we recognized a pre-tax loss of $4 million in fiscal 2021, which is included as a component of the “Non-operating income, net” line item in our Consolidated Statement of Operations. We also recognized a pre-tax curtailment gain of $3 million in fiscal 2021 as a result of employee terminations, which is included as a component of the “Non-operating income, net” line item in our Consolidated Statement of Operations.

Balance Sheet Information

Amounts recognized in our Consolidated Balance Sheet for defined benefit plans reflect the funded status of our plans. The following table provides a summary of the funded status of our defined benefit plans and the presentation of such balances within our Consolidated Balance Sheet:

	December 30, 2022						December 31, 2021
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Fair value of plan assets	$	7,411	$	242	$	7,653	$	9,604	$	320	$	9,924
PBO	(7,494)		(228)		(7,722)		(10,007)		(348)		(10,355)
Funded status	$	(83)	$	14	$	(69)	$	(403)	$	(28)	$	(431)
Consolidated Balance Sheet line item amounts:
Other non-current assets	$	144	$	66	$	210	$	150	$	51	$	201
Compensation and benefits	(11)		(6)		(17)		(11)		(7)		(18)
Defined benefit plans	(216)		(46)		(262)		(542)		(72)		(614)

A portion of our PBO includes amounts that have not yet been recognized as expense (or reductions of expense) in our results of operations. Such amounts are recorded in the “Accumulated other comprehensive loss” line item in our Consolidated Balance Sheet until they are amortized as a component of net periodic benefit income. The following table provides a summary of pre-tax amounts recorded within Accumulated other comprehensive loss:

	December 30, 2022						December 31, 2021
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Net actuarial loss (gain)	$	243	$	(100)	$	143	$	209	$	(73)	$	136
Net prior service (credit) cost	(183)		5		(178)		(218)		6		(212)
	$	60	$	(95)	$	(35)	$	(9)	$	(67)	$	(76)

The following table provides a roll-forward of the PBO for our defined benefit plans:

	December 30, 2022						December 31, 2021
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Change in benefit obligation
Benefit obligation at beginning of fiscal year	$	10,007	$	348	$	10,355	$	11,045	$	387	$	11,432
Service cost	44		2		46		66		2		68
Interest cost	220		7		227		188		5		193
Actuarial gain	(2,097)		(107)		(2,204)		(381)		(22)		(403)
Benefits paid(1)	(626)		(22)		(648)		(555)		(24)		(579)
Settlements(2)	—		—		—		(268)		—		(268)
Expenses paid	(26)		—		(26)		(31)		—		(31)
Foreign currency exchange rate changes	(28)		—		(28)		2		—		2
Divestiture	(8)		—		(8)		(65)		—		(65)
Other	8		—		8		6		—		6
Benefit obligation at end of fiscal year	$	7,494	$	228	$	7,722	$	10,007	$	348	$	10,355

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(1)Fiscal 2022 includes approximately $64 million associated with the purchase of group annuity policies. The transaction is reflected in Benefits paid as settlement accounting had not been met.

(2)Fiscal 2021 includes approximately $250 million associated with the purchase of group annuity policies.

Actuarial gains in the PBO as of December 30, 2022 were primarily the result of an increase in discount rates related to increased interest rates. Additionally, the legacy Harris Salaried medical plan replaced the self-insured arrangement with a fully-insured group Humana MAPD plan for the majority of Medicare-eligible participants, which resulted in a $23 million gain. Other sources of gains and losses such as plan experience, updated census data, mortality updates and minor adjustments to actuarial assumptions generated combined gains and losses of less than 1% of expected year end obligations.

The following table provides a roll-forward of the assets and the ending funded status of our defined benefit plans:

	December 30, 2022						December 31, 2021
(In millions)	Pension		Other Benefits		Total		Pension		Other Benefits		Total
Change in plan assets
Plan assets at beginning of fiscal year	$	9,604	$	320	$	9,924	$	9,301	$	299	$	9,600
Actual return on plan assets	(1,516)		(51)		(1,567)		1,215		43		1,258
Employer contributions	16		(5)		11		17		2		19
Benefits paid(1)	(626)		(22)		(648)		(555)		(24)		(579)
Settlements(2)	—		—		—		(268)		—		(268)
Expenses paid	(26)		—		(26)		(31)		—		(31)
Foreign currency exchange rate changes	(32)		—		(32)		1		—		1
Divestiture	(10)		—		(10)		(78)		—		(78)
Other	1		—		1		2		—		2
Plan assets at end of fiscal year	$	7,411	$	242	$	7,653	$	9,604	$	320	$	9,924
Funded status at end of fiscal year	$	(83)	$	14	$	(69)	$	(403)	$	(28)	$	(431)

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(1)Fiscal 2022 includes approximately $64 million associated with the transfer of plan assets to an insurance company. The transaction is reflected in Benefits paid as settlement accounting had not been met.

(2)Fiscal 2021 includes approximately $250 million associated with the transfer of plan assets to an insurance company.

The accumulated benefit obligation for all defined benefit pension plans was $7.5 billion at December 30, 2022. The following tables provide information for benefit plans with accumulated benefit obligations in excess of plan assets and benefit plans with PBO in excess of plan assets:

	December 30, 2022			December 31, 2021
(In millions)	Pension		Other Benefits	Pension		Other Benefits
Accumulated benefit obligation	$	6,698	N/A	$	9,216	N/A
Fair value of plan assets	6,472		N/A	8,672		N/A

	December 30, 2022				December 31, 2021
(In millions)	Pension		Other Benefits		Pension		Other Benefits
PBO	$	6,699	$	52	$	9,340	$	109
Fair value of plan assets	6,472		—		8,786		30

Statement of Operations Information

The following table provides the components of net periodic benefit (income) loss and other amounts recognized in other comprehensive income in fiscal 2022, 2021 and 2020 as they pertain to our defined benefit plans:

	Pension
	Fiscal Year Ended
(In millions)	December 30, 2022		December 31, 2021		January 1, 2021
Net periodic benefit income
Service cost	$	44	$	66	$	65
Interest cost	220		188		273
Expected return on plan assets	(624)		(621)		(630)
Amortization of net actuarial loss	9		30		10
Amortization of prior service credit	(27)		(28)		(28)
Cost for special termination benefits	—		—		1
Effect of curtailments or settlements	—		1		—
Net periodic benefit income	$	(378)	$	(364)	$	(309)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial loss (gain)	$	42	$	(972)	$	403
Prior service cost	8		2		1
Amortization of net actuarial loss	(9)		(30)		(10)
Amortization of prior service credit	27		28		28
Currency translation adjustment	1		1		2
Recognized prior service credit	—		4		—
Recognized net actuarial loss	—		(4)		—
Total change recognized in other comprehensive income	69		(971)		424
Total impact from net periodic benefit (income) loss and changes in other comprehensive income	$	(309)	$	(1,335)	$	115

	Other Benefits
	Fiscal Year Ended
(In millions)	December 30, 2022		December 31, 2021		January 1, 2021
Net periodic benefit income
Service cost	$	2	$	2	$	2
Interest cost	7		5		10
Expected return on plan assets	(20)		(20)		(21)
Amortization of net actuarial gain	(7)		—		(3)
Amortization of prior service cost	1		1		—
Net periodic benefit income	$	(17)	$	(12)	$	(12)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial (gain) loss	$	(34)	$	(46)	$	4
Prior service cost	—		—		8
Amortization of net actuarial gain	7		—		3
Amortization of prior service cost	(1)		(1)		—
Total change recognized in other comprehensive income	(28)		(47)		15
Total impact from net periodic benefit (income) loss and changes in other comprehensive income	$	(45)	$	(59)	$	3

Defined Benefit Plan Assumptions

The determination of the assumptions related to defined benefit plans are based on the provisions of the applicable accounting pronouncements, review of various market data and discussions with our actuaries. We develop each assumption using relevant Company experience in conjunction with market-related data. Assumptions are reviewed annually and adjusted as appropriate.

The following tables provide the weighted-average assumptions used to determine PBO and net periodic benefit income, as they pertain to our defined benefit pension plans:

Obligation assumptions as of:	December 30, 2022		December 31, 2021
Discount rate	5.18	%	2.75	%
Rate of future compensation increase	3.01	%	3.01	%
Cash balance interest crediting rate	4.00	%	3.50	%
Cost assumptions for fiscal periods ended:	December 30, 2022		December 31, 2021		January 1, 2021
Discount rate to determine service cost	2.69	%	2.26	%	2.87	%
Discount rate to determine interest cost	2.27	%	1.80	%	2.74	%
Expected return on plan assets	7.44	%	7.43	%	7.68	%
Rate of future compensation increase	3.01	%	3.01	%	2.80	%
Cash balance interest crediting rate	3.50	%	3.50	%	3.50	%

Key assumptions for our Aviation Products Pension Plan (our largest defined benefit pension plan with 87% of the total PBO included a discount rate for obligation assumptions of 5.19%, a cash balance interest crediting rate of 4.00% and expected return on plan assets of 7.50% for fiscal 2022, which is being maintained at 7.50% for fiscal 2023. There is also a frozen pension equity benefit that assumes a 3.75% interest crediting rate.

The following table provides the weighted-average assumptions used to determine projected benefit obligations and net periodic benefit income, as they pertain to our other postretirement defined benefit plans:

Obligation assumptions as of:	December 30, 2022		December 31, 2021
Discount rate	5.16	%	2.60	%
Rate of future compensation increase	N/A		N/A
Cost assumptions for fiscal periods ended:	December 30, 2022		December 31, 2021		January 1, 2021
Discount rate to determine service cost	2.91	%	2.49	%	3.25	%
Discount rate to determine interest cost	2.06	%	1.42	%	2.55	%
Rate of future compensation increase	N/A		N/A		N/A

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plans invest, the weight of each asset class in the strategic allocation, the correlations among asset classes and their expected volatilities. Our expected rate of return on plan assets is estimated by evaluating both historical returns and estimates of future returns. Specifically, the determination of the expected long-term rate of return takes into consideration: (1) the plan’s actual historical annual return on assets over the past 15-, 20- and 25-year time periods, (2) historical broad market returns over long-term timeframes weighted by the plan’s strategic allocation and (3) independent estimates of future long-term asset class returns, weighted by the plan’s strategic allocation. Based on this approach, the long-term expected annual rate of return on assets is estimated at 7.50% for fiscal 2023 for the U.S. defined benefit pension plans. The weighted average long-term expected annual rate of return on assets for all defined benefit pension plans is estimated to be 7.44% for fiscal 2023.

In fiscal 2021, we adopted updated mortality tables, which resulted in an increase in the defined benefit plans’ PBO as of December 31, 2021 and estimated net periodic benefit income beginning with fiscal 2022.

The assumed composite rate of future increases in the per capita healthcare costs (the healthcare trend rate) is 6.90% for fiscal 2023, decreasing ratably to 4.60% by fiscal 2033. To the extent that actual experience differs from these assumptions, the effect will be accumulated and generally amortized for each plan to the extent required over the estimated future life expectancy or, if applicable, the future working lifetime of the plan’s active participants.

Investment Policy

The investment strategy for managing defined benefit plan assets is to seek an optimal rate of return relative to an appropriate level of risk. We manage substantially all defined benefit plan assets on a commingled basis in a master investment trust. In making these asset allocation decisions, we take into account recent and expected returns and volatility of returns for each asset class, the expected correlation of returns among the different investments, as well as anticipated funding and cash flows. To enhance returns and mitigate risk, we diversify our investments by strategy, asset class, geography and sector and engage a large number of managers to gain broad exposure to the markets.

The following table provides the current strategic target asset allocation ranges by asset category:

	Target Asset Allocation
Equity investments	35	%	—	55%
Fixed income investments	25	%	—	35%
Alternative investments	12	%	—	30%
Cash and cash equivalents	0	%	—	10%

Fair Value of Plan Assets

The following is a description of the valuation techniques and inputs used to measure fair value for major categories of investments as reflected in the table that follows such description:

•Domestic and international equities, which include common and preferred shares, domestic listed and foreign listed equity securities, open-ended and closed-ended mutual funds, real estate investment trusts and exchange traded funds, are generally valued at the closing price reported on the major market exchanges on which the individual securities are traded at the measurement date. Because these assets are traded predominantly on liquid, widely traded public exchanges, equity securities are categorized as Level 1 assets.

•Private equity funds, which include buy-out, mezzanine, venture capital, distressed asset and secondary funds, are typically limited partnership investment structures. Private equity funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Private equity funds generally have liquidity restrictions that extend for ten or more years. At December 30, 2022 and December 31, 2021, our defined benefit plans had future unfunded commitments totaling $568 million and $504 million, respectively, related to private equity fund investments.

•Real estate funds, which include core, core plus, value-add and opportunistic funds, are typically limited partnership investment structures. Real estate funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Real estate funds generally permit redemption on a quarterly basis with 90 or fewer days-notice. At December 30, 2022, our defined benefit plans had future unfunded commitments totaling $33 million related to real estate fund investments. At December 31, 2021, our defined benefit plans had future unfunded commitments totaling $100 million related to real estate fund investments.

•Hedge funds, which include equity long/short, event-driven, fixed-income arbitrage and global macro strategies, are typically limited partnership investment structures. Limited partnership interests in hedge funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Hedge funds generally permit redemption on a quarterly or more frequent basis with 90 or fewer days notice. At each of December 30, 2022 and December 31, 2021, our defined benefit plans had no future unfunded commitments related to hedge fund investments.

•Fixed income investments, which include U.S. Government securities, investment and non-investment-grade corporate bonds and securitized bonds, are generally valued using pricing models that use verifiable, observable market data such as interest rates, benchmark yield curves and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Fixed income investments are generally categorized as Level 2 assets. Fixed income funds valued at the closing price reported on the major market exchanges on which the individual fund is traded are categorized as Level 1 assets.

•Other is comprised of guaranteed insurance contracts valued at book value, which approximates fair value, calculated using the prior-year balance adjusted for investment returns and changes in cash flows and corporate owned life insurance policies valued at the accumulated benefit.

•Cash and cash equivalents are primarily comprised of short-term money market funds valued at cost, which approximates fair value, or valued at quoted market prices of identical instruments. Cash and currency are

categorized as Level 1 assets; cash equivalents, such as money market funds or short-term commingled funds, are categorized as Level 2 assets.

•Certain investments that are valued using the NAV per share (or its equivalent) as a practical expedient are not categorized in the fair value hierarchy and are included in the table to permit reconciliation of the fair value hierarchy to the aggregate defined benefit plan assets.

The following tables provide the fair value of plan assets held by our defined benefit plans by asset category and by fair value hierarchy level:

	December 30, 2022
(In millions)	Total		Level 1		Level 2		Level 3
Asset Category
Equities:
Domestic equities	$	1,275	$	1,275	$	—	$	—
International equities	1,044		1,002		42		—
Real Estate Investment Trusts	192		192		—		—
Fixed income:
Corporate bonds	1,118		—		995		123
Government securities	320		—		320		—
Securitized assets	166		—		166		—
Fixed income funds	92		4		88		—
Cash and cash equivalents	148		22		126		—
Total	4,355		$	2,495	$	1,737	$	123
Investments Measured at NAV:
Equity funds	1,661
Fixed income funds	299
Hedge funds	294
Private equity funds	696
Real estate funds	372
Other	2
Total Investments Measured at NAV	3,324
Payables, net	(26)
Total fair value of plan assets	$	7,653

	December 31, 2021
(In millions)	Total		Level 1		Level 2		Level 3
Asset Category
Equities:
Domestic equities	$	1,684	$	1,684	$	—	$	—
International equities	1,367		1,278		89		—
Real Estate Investment Trusts	259		259		—		—
Fixed income:
Corporate bonds	1,411		—		1,335		76
Government securities	448		—		448		—
Securitized assets	99		—		99		—
Fixed income funds	102		5		97		—
Cash and cash equivalents	337		9		328		—
Total	5,707		$	3,235	$	2,396	$	76
Investments Measured at NAV:
Equity funds	2,667
Fixed income funds	444
Hedge funds	386
Private equity funds	559
Real estate funds	180
Other	3
Total Investments Measured at NAV	4,239
Payables, net	(22)
Total fair value of plan assets	$	9,924

Contributions

Funding requirements under IRS rules are a major consideration in making contributions to our postretirement benefit plans. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the required minimum funding thresholds.

The Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the Worker, Retiree, and Employer Recovery Act of 2008, MAP-21 and applicable Internal Revenue Code regulations mandate minimum funding thresholds. The Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act further extended the interest rate stabilization provision of MAP-21. As a result of prior voluntary contributions, we made no material contributions to our U.S. qualified defined benefit pension plans in fiscal 2022, 2021 or 2020 and are not required to make any contributions to these plans during fiscal 2023 or for several years thereafter.

Estimated Future Benefit Payments

The following table provides the projected timing of payments for benefits earned to date and benefits expected to be earned for future service by current active employees under our defined benefit plans:

(In millions)	Pension		Other     Benefits(1)		Total
Fiscal Years:
2023	$	564	$	21	$	585
2024	568		21		589
2025	569		20		589
2026	569		19		588
2027	565		19		584
2028 — 2032	2,730		82		2,812

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(1)Projected payments for Other Benefits reflect net payments from the Company, which include subsidies that reduce the gross payments by less than 1%.

Multi-employer Benefit Plans

Certain of our businesses participate in multi-employer defined benefit pension plans. We make cash contributions to these plans under the terms of collective-bargaining agreements that cover union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if we choose to stop participating in some of our multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Cash contributed and expenses recorded for our multi-employer plans were not material in fiscal 2022, 2021 or 2020.