Retirement Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Retirement Plans

RETIREMENT PLANS

We provide retirement benefits to eligible employees through a variety of plans:

•Defined contribution

•Defined benefit

◦Pension (qualified and non-qualified)

◦Other post-retirement benefit

Substantially all of our plans use a December 31 measurement date consistent with our fiscal year.

Defined Contribution Plans

We provide eligible employees the opportunity to participate in defined contribution plans (commonly known as 401(k) plans), which permit contributions on a before-tax and after-tax basis. Employees may contribute to various investment alternatives. In most of these plans, we match a portion of the employees’ contributions. Our contributions to these plans totaled $398 in 2021, $379 in 2020 and $333 in 2019. The defined-contribution plans held approximately 17 million and 19 million shares of our common stock, representing approximately 6% and 7% of our outstanding shares on December 31, 2021 and 2020, respectively.

Defined Benefit Plans

Plan Descriptions. We have trusteed, qualified pension plans covering eligible employees aligned with the markets in our business: U.S. government, non-U.S. government and commercial. Some of these plans require employees to make contributions to the plan. We also sponsor several non-qualified pension plans, which provide eligible executives with additional benefits, including excess benefits over

limits imposed on qualified plans by federal tax law. The principal factors affecting the benefits earned by participants in our pension plans are employees’ years of service and compensation levels. Our primary U.S. pension plans, which comprise the majority of our unfunded obligation, were closed to new salaried participants on January 1, 2007, and were closed to new hourly participants in subsequent collective bargaining agreements over the next several years. Additionally, we have made several changes to these plans for certain participants that limit or cease the benefits that accrue for future service.

In addition to pension benefits, we maintain plans that provide post-retirement healthcare and life insurance coverage for certain employees and retirees. These benefits vary by employment status, age, service and salary level at retirement. The coverage provided and the extent to which the retirees share in the cost of the program vary throughout the company. The plans provide health and life insurance benefits only to those employees who retire directly from our service and not to those who terminate service prior to eligibility for retirement.

Contributions. It is our policy to fund our qualified pension plans in a manner that optimizes the tax deductibility and contract recovery of contributions considered within our capital deployment framework. Therefore, we may make discretionary contributions in addition to the required contributions determined in accordance with IRS regulations. We contributed $135 to our qualified pension plans in 2021. In 2022, our required contributions are approximately $40.

We maintain several tax-advantaged accounts, primarily Voluntary Employees’ Beneficiary Association (VEBA) trusts, to fund the obligations for some of our other post-retirement benefit plans. For non-funded plans, claims are paid as received. Contributions to our other post-retirement benefit plans were not material in 2021 and are not expected to be material in 2022.

Benefit Payments. We expect the following benefits to be paid from our defined benefit plans over the next 10 years:

	Pension Benefits		Other  Post-retirement Benefits
2022	$	885	$	57
2023	899		56
2024	926		54
2025	944		52
2026	967		50
2027-2031	4,921		228

Benefit Cost. Our annual benefit cost consists of five primary elements:

•the cost of benefits earned by employees for services rendered during the year.

•an interest charge on our plan liabilities.

•an expected return on our plan assets for the year.

•actuarial gains and losses, which result from changes in assumptions and differences between actual and expected return on assets and participant experience.

•the cost or credit attributed to prior service resulting from changes we make to plan benefit terms.

For qualified pension plans and other post-retirement benefit plans, actuarial gains and losses and prior service costs or credits are initially deferred in AOCL and then amortized on a straight-line basis over future years. For our qualified U.S. government pension plans, we amortize actuarial gains and

losses over a custom amortization period based on the amount of pension costs allocable to our U.S. government contracts. For the remaining qualified pension plans and other post-retirement benefit plans, we amortize only the amount of actuarial gains and losses that exceeds 10% of the greater of plan assets or benefit obligations. This amount is amortized over the average remaining service period of plan participants who are active employees unless all or almost all of a plan’s participants are inactive or are not accruing additional benefits, then the amortization period is based on the average remaining life expectancy of the plan participants. To further reduce the volatility of our annual benefit cost, gains and losses resulting from the return on plan assets are included over five years in the determination of the amortizable amount of actuarial gains and losses. For non-qualified pension plans, we recognize actuarial gains and losses immediately.

Net annual benefit (credit) cost consisted of the following:

	Pension Benefits
Year Ended December 31	2021		2020		2019
Service cost	$	119	$	115	$	111
Interest cost	360		491		600
Expected return on plan assets	(963)		(926)		(911)
Net actuarial loss	352		387		355
Prior service credit	(20)		(18)		(19)
Settlement/curtailment/other	70		—		—
Net annual benefit (credit) cost	$	(82)	$	49	$	136

	Other Post-retirement Benefits
Year Ended December 31	2021		2020		2019
Service cost	$	10	$	10	$	8
Interest cost	19		27		35
Expected return on plan assets	(36)		(36)		(36)
Net actuarial gain	—		(3)		(8)
Prior service credit	—		(1)		(3)
Net annual benefit credit	$	(7)	$	(3)	$	(4)

In October 2021, we purchased an irrevocable group annuity contract (referred to as a buy-out contract) for approximately $550 using retirement plan assets held in trust to transfer the related outstanding qualified pension obligations to an insurance company. As a result of the transaction, the insurance company is now required to pay and administer the retirement benefits owed to approximately 21,000 U.S. retirees and beneficiaries, with no change to the amount, timing or form of the monthly retirement benefit payments. In connection with this transaction, we recognized a non-cash settlement charge of approximately $75 in our qualified U.S. government pension plans related to the GAAP acceleration of deferred actuarial losses included in AOCL for the plans.

Our contractual arrangements with the U.S. government provide for the recovery of pension and other post-retirement benefit costs related to employees working on government contracts, including settlement costs. See Note A for a discussion of our other contract costs. To the extent there is a non-service component of net annual benefit (credit) cost for our defined benefit plans, it is reported in other income (expense) in the Consolidated Statement of Earnings.

Funded Status. We recognize an asset or liability on the Consolidated Balance Sheet equal to the funded status of each of our defined benefit plans. The funded status is the difference between the fair

value of the plan’s assets and its benefit obligation. The following is a reconciliation of the benefit obligations and plan/trust assets, and the resulting funded status, of our defined benefit plans:

	Pension Benefits				Other Post-retirement Benefits
Year Ended December 31	2021		2020		2021		2020
Change in Benefit Obligation
Benefit obligation at beginning of year	$	(19,692)	$	(18,107)	$	(1,062)	$	(1,027)
Service cost	(119)		(115)		(10)		(10)
Interest cost	(360)		(491)		(19)		(27)
Amendments	3		37		4		2
Actuarial gain (loss)	955		(1,780)		187		(60)
Settlement/curtailment/other	553		(65)		—		(4)
Benefits paid	881		829		60		64
Benefit obligation at end of year	$	(17,779)	$	(19,692)	$	(840)	$	(1,062)
Change in Plan/Trust Assets
Fair value of assets at beginning of year	$	14,751	$	13,177	$	705	$	644
Actual return on plan assets	1,692		1,843		114		102
Employer contributions	135		480		—		—
Settlement/curtailment/other	(551)		58		—		—
Benefits paid	(860)		(807)		(42)		(41)
Fair value of assets at end of year	$	15,167	$	14,751	$	777	$	705
Funded status at end of year	$	(2,612)	$	(4,941)	$	(63)	$	(357)

The overall decrease in our pension benefit obligation for the year ended December 31, 2021, was due primarily to the settlement resulting from the buy-out contract and actuarial gains created by the change in the weighted-average discount rate, which increased from 2.54% at December 31, 2020, to 2.84% at December 31, 2021.

The overall increase in our pension benefit obligation for the year ended December 31, 2020, was due primarily to actuarial losses created by the change in the weighted-average discount rate, which decreased from 3.19% at December 31, 2019, to 2.54% at December 31, 2020.

Amounts recognized on the Consolidated Balance Sheet consisted of the following:

	Pension Benefits				Other Post-retirement Benefits
December 31	2021		2020		2021		2020
Noncurrent assets	$	134	$	69	$	292	$	121
Current liabilities	(176)		(181)		(112)		(125)
Noncurrent liabilities	(2,570)		(4,829)		(243)		(353)
Net liability recognized	$	(2,612)	$	(4,941)	$	(63)	$	(357)

Amounts deferred in AOCL for our defined benefit plans consisted of the following:

	Pension Benefits				Other Post-retirement Benefits
December 31	2021		2020		2021		2020
Net actuarial loss (gain)	$	3,639	$	5,752	$	(277)	$	(12)
Prior service (credit) cost	(76)		(93)		8		12
Total amount recognized in AOCL, pretax	$	3,563	$	5,659	$	(269)	$	—

The following is a reconciliation of the change in AOCL for our defined benefit plans:

	Pension Benefits				Other Post-retirement Benefits
Year Ended December 31	2021		2020		2021		2020
Net actuarial (gain) loss	$	(1,684)	$	863	$	(265)	$	(6)
Prior service credit	(3)		(38)		(4)		(1)
Amortization of:
Net actuarial (loss) gain from prior years	(352)		(387)		—		3
Prior service credit	20		18		—		1
Settlement/curtailment/other	(77)		—		—		—
Change in AOCL, pretax	$	(2,096)	$	456	$	(269)	$	(3)

A pension plan’s funded status is the difference between the plan’s assets and its projected benefit obligation (PBO). The PBO is the present value of future benefits attributed to employee services rendered to date, including assumptions about future compensation levels. On December 31, 2021 and 2020, most of our pension plans had a PBO that exceeded the plans’ assets. Summary information for those plans follows:

December 31	2021		2020
PBO	$	(16,958)	$	(19,189)
Fair value of plan assets	14,213		14,191

A pension plan’s accumulated benefit obligation (ABO) is the present value of future benefits attributed to employee services rendered to date, excluding assumptions about future compensation levels. The ABO for all pension plans was $17.5 billion and $19.4 billion on December 31, 2021 and 2020, respectively. The ABO for all other post-retirement plans was $840 and $1.1 billion on December 31, 2021 and 2020, respectively. On December 31, 2021 and 2020, most of our defined benefit plans had an ABO that exceeded the plans’ assets. Summary information for those plans follows:

	Pension Benefits				Other Post-retirement Benefits
December 31	2021		2020		2021		2020
ABO	$	(16,775)	$	(18,596)	$	(384)	$	(784)
Fair value of plan assets	14,213		13,829		36		300

Assumptions. We calculate the plan assets and liabilities for a given year and the net annual benefit cost for the subsequent year using assumptions determined as of December 31 of the year in question.

The following table summarizes the weighted average assumptions used to determine our benefit obligations:

Assumptions on December 31	2021		2020
Pension Benefits
Benefit obligation discount rate	2.84	%	2.54	%
Rate of increase in compensation levels	2.77	%	2.66	%
Other Post-retirement Benefits
Benefit obligation discount rate	2.89	%	2.52	%
Healthcare cost trend rate:
Trend rate for next year	5.50	%	6.00	%
Ultimate trend rate	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2024		2024

The following table summarizes the weighted average assumptions used to determine our net annual benefit cost:

Assumptions for Year Ended December 31	2021		2020		2019
Pension Benefits
Discount rates:
Benefit obligation	2.54	%	3.19	%	4.28	%
Service cost	2.25	%	2.74	%	3.81	%
Interest cost	1.87	%	2.78	%	3.92	%
Expected long-term rate of return on assets	7.14	%	7.41	%	7.46	%
Rate of increase in compensation levels	2.63	%	2.73	%	2.77	%
Other Post-retirement Benefits
Discount rates:
Benefit obligation	2.52	%	3.18	%	4.24	%
Service cost	2.97	%	3.35	%	4.23	%
Interest cost	1.83	%	2.78	%	3.88	%
Expected long-term rate of return on assets	6.33	%	6.86	%	6.84	%

We base the discount rates on a current yield curve developed from a portfolio of high-quality, fixed-income investments with maturities consistent with the projected benefit payout period.

We determine the long-term rates of return on assets based on consideration of historical and forward-looking returns and the current and expected asset allocation. Beginning in 2021, we decreased the expected long-term rates of return on assets in our primary U.S. pension plans by 25 basis points and in our primary U.S. other post-retirement benefit plans by 25 basis points or 125 basis points depending on the investment mix of each plan’s assets. These changes to our expected long-term rates of return resulted from an assessment of the historical and forward-looking long-term returns of our various asset classes.

Beginning in 2022, we are decreasing the expected long-term rates of return on assets by between 0 and 86 basis points in our primary U.S. pension plans and by between 0 and 300 basis points in our primary U.S. other post-retirement benefit plans. These changes to our expected long-term rates of return resulted from changes in our expected asset allocation.

In 2021, we revised the mortality assumption based on a recent experience study. Additionally, we updated several other assumptions to align them with historical experience and future expectations, including rates of retirement and cost of living increases. The impact of these changes was a net decrease of $332 and $85 in the benefit obligations of our pension and other post-retirement benefit plans, respectively, on December 31, 2021.

Retirement plan assumptions are based on our best judgment, including consideration of current and future market conditions. Given the long-term nature of the assumptions being made, actual outcomes can and often do differ from these estimates. Changes in these estimates impact future pension and other post-retirement benefit costs. As previously discussed, our contractual arrangements with the U.S. government provide for the recovery of pension and other post-retirement benefit costs. Therefore, the impact of annual changes in financial reporting assumptions on the cost for these plans does not immediately affect our operating results.

Assets. A committee of our board of directors is responsible for the strategic oversight of our defined benefit plan assets held in trust. Management develops investment policies and provides oversight of a third-party investment manager who reports to the committee on a regular basis. The outsourced third-party investment manager develops investment strategies and makes all day-to-day investment decisions related to defined benefit plan assets in accordance with our investment policy and target allocation percentages with the objective of generating future returns at or above our assumed long-term rates of return used to determine net annual benefit cost.

Our investment policy endeavors to strike the appropriate balance between asset growth and funded status protection. The objective of the policy is to generate asset returns that will increase the funded status of our plans while systematically reducing cost and deficit risk as funded status of the plans improve. Several of our U.S. pension plans are now utilizing a target asset allocation strategy that will automatically increase investments in liability-hedging assets (primarily fixed-income securities) and decrease investments in return-seeking assets (primarily U.S. equity investments) as the plans reach specific funded status targets.

At the end of 2021, our target asset allocation ranges for plans that are less than fully funded were:

Equities	39-68%
Fixed income	20-50%
Cash	0-5%
Other asset classes	0-16%

More than 90% of our pension plan assets are held in a single trust for our primary qualified U.S. government and commercial pension plans. On December 31, 2021, the trust was invested largely in publicly traded equities, fixed-income securities, and commingled funds comprised primarily of equity securities. The trust also invests in other asset classes consistent with our investment policy. Our investment policy allows the use of derivative instruments when appropriate to reduce anticipated asset volatility, to gain exposure to an asset class or to adjust the duration of fixed-income assets.

We hold assets in VEBA trusts for some of our other post-retirement benefit plans. These assets are managed by a third-party investment manager with oversight by management and are generally invested in publicly traded equities, fixed-income securities and commingled funds comprised primarily of equity and fixed-income securities. Our asset allocation strategy for the VEBA trusts considers funded status, potential fluctuations in our other post-retirement benefit obligation, the taxable nature of certain VEBA trusts, tax deduction limits on contributions and the regulatory environment.

Our defined benefit plan assets are reported at fair value. See Note P for a discussion of the hierarchy for determining fair value. Our Level 1 assets include investments in publicly traded equity securities. These securities are actively traded and valued using quoted prices for identical securities from the market exchanges. Our Level 2 assets include fixed-income securities and commingled funds whose underlying investments are valued using observable marketplace inputs. The fair value of plan assets invested in fixed-income securities is generally determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets. Our plan assets that are invested in commingled funds are valued using a unit price or net asset value (NAV) that is based on the underlying investments of the fund. Our Level 3 assets consist of insurance deposit contracts, retirement annuity contracts and real estate funds.

Certain investments valued using NAV as a practical expedient are excluded from the fair value hierarchy. These investments are redeemable at NAV generally on a monthly or quarterly basis, and most have redemption notice periods of up to 90 days. The unfunded commitments related to these investments were not material on December 31, 2021 or 2020.

The fair value of our pension plan assets by investment category and the corresponding level within the fair value hierarchy were as follows:

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category	December 31, 2021
Cash and equivalents	$	130	$	9	$	121	$	—
Equity securities (a):
U.S. companies	1,143		1,143		—		—
Non-U.S. companies	151		151		—		—
Fixed-income securities:
Corporate bonds (b)	4,090		—		4,090		—
Treasury securities	1,495		—		1,495		—
Commingled funds:
Equity funds	6,592		—		6,592		—
Fixed-income funds	430		—		430		—
Real estate funds	8		—		—		8
Other investments:
Insurance deposit contracts	163		—		—		163
Retirement annuity contracts	35		—		—		35
Total plan assets in fair value hierarchy	$	14,237	$	1,303	$	12,728	$	206
Plan assets measured using NAV as a practical expedient (c):
Real estate funds	632
Hedge funds	260
Equity funds	38
Total pension plan assets	$	15,167

(a)No single equity holding amounted to more than 1% of the total fair value.

(b)Our corporate bond investments had an average rating of A.

(c)Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table for these investments are included to permit reconciliation of the fair value hierarchy to the total plan assets.

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category	December 31, 2020
Cash and equivalents	$	112	$	—	$	112	$	—
Equity securities (a):
U.S. companies	1,137		1,137		—		—
Non-U.S. companies	90		90		—		—
Private equity investments	33		—		—		33
Fixed-income securities:
Corporate bonds (b)	3,532		—		3,532		—
Treasury securities	1,129		—		1,129		—
Commingled funds:
Equity funds	7,306		—		7,306		—
Fixed-income funds	416		—		416		—
Real estate funds	90		—		—		90
Other investments:
Insurance deposit contracts	157		—		—		157
Retirement annuity contracts	38		—		—		38
Total plan assets in fair value hierarchy	$	14,040	$	1,227	$	12,495	$	318
Plan assets measured using NAV as a practical expedient (c):
Real estate funds	446
Hedge funds	254
Equity funds	11
Total pension plan assets	$	14,751

(a)No single equity holding amounted to more than 1% of the total fair value.

(b)Our corporate bond investments had an average rating of A-.

(c)Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table for these investments are included to permit reconciliation of the fair value hierarchy to the total plan assets.

The fair value of our other post-retirement benefit plan assets by category and the corresponding level within the fair value hierarchy were as follows:

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Asset Category (a)	December 31, 2021
Cash and equivalents	$	12	$	—	$	12
Equity securities	105		105		—
Fixed-income securities	154		—		154
Commingled funds:
Equity funds	354		—		354
Fixed-income funds	140		—		140
Real estate funds	2		2		—
Total plan assets in fair value hierarchy	$	767	$	107	$	660
Plan assets measured using NAV as a practical expedient (b):
Real estate funds	7
Hedge funds	3
Total other post-retirement benefit plan assets	$	777

(a)We had no Level 3 investments on December 31, 2021.

(b)Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table for these investments are included to permit reconciliation of the fair value hierarchy to the total plan assets.

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Asset Category (a)	December 31, 2020
Cash and equivalents	$	16	$	—	$	16
Equity securities	97		97		—
Fixed-income securities	134		—		134
Commingled funds:
Equity funds	320		—		320
Fixed-income funds	128		—		128
Real estate funds	2		2		—
Total plan assets in fair value hierarchy	$	697	$	99	$	598
Plan assets measured using NAV as a practical expedient (b):
Real estate funds	5
Hedge funds	3
Total other post-retirement benefit plan assets	$	705

(a)We had no Level 3 investments on December 31, 2020.

(b)Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table for these investments are included to permit reconciliation of the fair value hierarchy to the total plan assets.

Changes in our Level 3 defined benefit plan assets during 2021 and 2020 were as follows:

	Insurance Deposits Contracts		Retirement Annuity Contracts		Private Equity Investments		Real Estate Funds		Total Level 3 Assets
December 31, 2019	$	137	$	35	$	26	$	84	$	282
Actual return on plan assets:
Unrealized gains, net	18		3		5		7		33
Realized losses, net	—		—		—		(1)		(1)
Purchases, sales and settlements, net	2		—		2		—		4
December 31, 2020	157		38		33		90		318
Transfers out of Level 3	—		—		(33)		(82)		(115)
Actual return on plan assets:
Unrealized gains (losses), net	9		(3)		—		—		6
Purchases, sales and settlements, net	(3)		—		—		—		(3)
December 31, 2021	$	163	$	35	$	—	$	8	$	206