New York City-based L3 Technologies, which modifies aircraft and employs nearly 1,300 people at its Waco facility, has announced it will freeze the pension plans of all salaried employees as it tweaks its bottom line.
Effective Jan. 1, 2019, L3’s plans will no longer accrue annual service credit, according to Pensions & Investments magazine, citing information included in L3’s fourth-quarter earnings statement for last year.
L3 Technologies employs an estimated 31,000 people worldwide.
“We expect this action to reduce our pension expense by at least $25 million in 2019,” said Ralph G. D’Ambrosio, senior vice president and chief financial officer, during a conference call on fourth-quarter performance.
L3 Technologies had $2.72 billion in pension assets as of Dec. 31, 2016, and $3.76 billion in liabilities, according to its earning statement. Pensions & Investments magazine added the company expected to contribute about $100 million to its global pension plan in 2017.
Todd Stoner, a local investment adviser, said during an interview that at least one employee of the local L3 plant had contacted him about this turn of events and sought advice on reworking his retirement plan.
“This announcement, as I understand it, means current employees will not accrue additional pension benefits; their funds will not keep growing,” said Stoner, adding employees may have to consider opening or making larger contributions to IRAs or 401(k) retirement accounts.
“This definitely could impact retirement income,” said Stoner, adding his client “did not view this news as a big, happy surprise.”
Stoner said L3 is simply joining a trend among companies to move away from so-called defined benefit plans.
L3 enjoyed sales of $9.5 billion during fiscal 2017, a 4 percent increase from the previous year, and saw earnings for the fourth quarter hit $3.34 per share, up from $2.32 during the fourth quarter the previous year.
But new CEO Christopher Kubasik said he is not pleased with the performance of L3’s Aerospace Systems unit, which includes the Waco plant, calling 2018 a “key year” for its operations. He said the company needs to secure more contracts for the unit, which locally specializes in modifying and maintaining military aircraft and installing customized interiors in planes for dignitaries and foreign heads of state.
The Waco facility has suffered four rounds of layoffs the past four years, with the most recent reduction of 124 jobs coming in September. It has seen employment dip from 1,800 to about 1,300, but remains the largest industrial employer in Greater Waco.
On the positive side, a ceremony last week at L3 in Waco celebrated completion of upgrades to an HC-130J aircraft the U.S. Coast Guard will fly on surveillance missions. The contract includes the option to upgrade five more aircraft, according to an L3 news release.