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POSTRETIREMENT BENEFIT PLANS
 6 Months Ended
Jun. 26, 2022
Retirement Benefits [Abstract]  
POSTRETIREMENT BENEFIT PLANS POSTRETIREMENT BENEFIT PLANS
FAS (expense) income
The pretax FAS (expense) income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):
 Quarters EndedSix Months Ended
 June 26,
2022		June 27,
2021		June 26,
2022		June 27,
2021
Qualified defined benefit pension plans
Operating:
Service cost$(24)$(27)$(48)$(54)
Non-operating:
Interest cost (303)(310)(605)(621)
Expected return on plan assets 503 569 1,005 1,138 
Recognized net actuarial losses (151)(252)(301)(504)
Amortization of prior service credits 90 87 180 174 
Pension settlement charge(1,470)— (1,470)— 
Non-service FAS pension (expense) income(1,331)94 (1,191)187 
Total FAS pension (expense) income$(1,355)$67 $(1,239)$133 
Retiree medical and life insurance plans
Operating:
Service cost$(2)$(4)$(4)$(7)
Non-operating:
Interest cost (12)(13)(24)(26)
Expected return on plan assets 34 35 68 70 
Recognized net actuarial gains12 — 23 — 
Amortization of prior service costs (7)(9)(14)(18)
Non-service FAS retiree medical and life income27 13 53 26 
Total FAS retiree medical and life income$25 $9 $49 $19 
We record the service cost component of FAS (expense) income 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 (expense) income for our qualified defined benefit pension plans in the non-service FAS pension (expense) income account; and the non-service components of our FAS (expense) income for our retiree medical and life insurance plans as part of the other non-operating (expense) income, 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 ($6 million and $11 million for the quarter and six months ended June 26, 2022 and $3 million and $7 million for the quarter and six months ended June 27, 2021) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of FAS (expense) income for the periods presented. These costs totaled $62 million ($47 million, net of tax) and $123 million ($95 million, net of tax) during the quarter and six months ended June 26, 2022, and $177 million ($140 million, net of tax) and $355 million ($280 million, net of tax) during the quarter and six months ended June 27, 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
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, we recognized a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax) for the affected plans in the quarter ended June 26, 2022, which represents the accelerated recognition of actuarial losses that were included in the AOCL account within stockholders’ equity.
As a result of this transaction, we were required to remeasure the benefit obligations and plan assets for the affected defined benefit pension plans as of the June 24, 2022 close date. The remeasurement reflects the use of an updated discount rate and actual return on plan assets.
The following table provides a reconciliation of the benefit obligations, plan assets and net unfunded status related to all of our qualified defined benefit pension plans, inclusive of the plans affected by the interim remeasurement and plans that were not affected, for the six months ended June 26, 2022 (in millions):
Change in benefit obligation
Beginning balance at December 31, 2021
$43,447 
Service cost48 
Interest cost605 
Benefits paid(776)
Settlements(a)
(4,309)
Plan amendments30 
Actuarial (gains) losses(b)
(7,928)
Ending balance at June 26, 2022
$31,117 
Change in plan assets
Beginning balance at December 31, 2021
$35,192 
Actual return on plan assets(c)
(4,734)
Benefits paid(776)
Settlements(a)
(4,309)
Ending balance at June 26, 2022
$25,373 
Net unfunded status of the plans(d)
$(5,744)
(a)Represents the transfer of gross defined benefit pension obligations and related plan assets to an insurance company pursuant to the group annuity contracts purchased on June 24, 2022, as described above.
(b)Primarily reflects an increase in the discount rate from 2.875% at December 31, 2021 to 4.75% at the remeasurement date.
(c)The actual return on plan assets for the period January 1, 2022 through the June 24, 2022 remeasurement date for the affected plans was approximately (16%), or $(4.7) billion which was approximately $5.7 billion lower (the incremental loss) than our expected return on plan assets of 3.25% for the period, or $1.0 billion (the proportional effect, or approximately half of our expected 6.50% annual long-term rate of return on plan assets assumption), for the period.
(d)For plans where the benefit obligation is in excess of plan assets, we report the net obligation (which was $5,808 million as of June 26, 2022) as part of accrued pension liabilities on our consolidated balance sheet. Conversely, for plans where the assets exceed the benefit obligation, we include the net asset (which was $64 million as of June 26, 2022) as part of other noncurrent assets on our consolidated balance sheet. The net unfunded status of the plans of $5,744 million in the table above represents the net total of these two amounts.
The plan remeasurement resulted in a decrease of $2.2 billion to our net unfunded pension obligations (which includes the change in benefit obligation due to remeasurement of $7.9 billion and the incremental loss on plan assets recognized in remeasurement of $5.7 billion) with a corresponding increase of $1.7 billion after taxes in stockholders’ equity. The change in stockholders’ equity reflects the decrease in deferred actuarial losses, which will be recognized as an increase in net FAS pension income (or a decrease in net FAS pension expense) over the estimated remaining life expectancy of the covered employees beginning in the third quarter of 2022.
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. Excluding the noncash, non-operating pension settlement charge, our expected FAS pension income will be approximately $410 million in 2022, which is $50 million lower than our prior 2022 FAS pension income estimate of $460 million.
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 six months ended June 26, 2022 and June 27, 2021.