NASA Settles Space Shuttle Contractor Pension Liability

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Note to readers: NASA’s public affairs office said Aug. 2 the value of the pension shortfall was $511 million. The agency had said earlier the amount was $505 million.

WASHINGTON — NASA has paid off the $511 million that was needed to cover a pension shortfall at United Space Alliance (USA), which maintained and operated the space shuttle fleet until its retirement last year, the agency confirmed July 31.

“NASA received the final voucher for payment on Wednesday, July 18, and paid it on Monday July 23,” agency spokesman Josh Buck wrote in a July 31 email to Space News.

The payment closes the books on NASA’s biggest unsettled expense from the shuttle era. The agency had to cover the pension shortfall because its contract with Houston-based USA, a joint venture of Boeing Co. and Lockheed Martin Corp., allows the company to charge NASA for all personnel expenses.

NASA has known since 2010 that covering the USA pension shortfall — created by stock market declines prior to that time, and by provisions in contract law that affected when USA could bill the government for retirement expenses — likely would cost $500 million or more. The agency asked Congress for $548 million to be paid out in 2012 so that it could write USA the check, but lawmakers appropriated only $470 million, instructing NASA to make up the difference by diverting money budgeted for USA-led shuttle retirement activity.

Buck said NASA followed that directive.

USA was established 17 years ago to operate the space shuttle fleet on NASA’s behalf. The shuttle program ended last July.

In November, NASA awarded USA $233 million to close out the shuttle program and prepare the orbiters for museum display. USA’s shuttle transition and retirement work is set to wrap up in April.

The U.S. Internal Revenue Service gave USA the all-clear to terminate its pension plan June 19, USA spokeswoman Kari Fluegel said. USA employees who are eligible for a pension could choose to be paid a lump sum or sign up for an annuity. Lump sums were paid out July 23, Fluegel said.

Around the time its pension termination plan was cleared, USA sent layoff notices to about 200 workers, Fluegel said. Of these, 130 are in Florida and 50 are in Houston, with the remainder in Alabama, she said.

As recently as 2005, USA’s work force numbered almost 11,000. As of July 31, about 2,500 people were still working for the company, Fluegel said.

Meanwhile, Lockheed Martin publicly acknowledged July 24 USA’s impending dissolution for the first time. The Bethesda, Md.-based contractor made the disclosure in its latest quarterly earnings call. In December, Lockheed and Boeing barred USA from seeking new contracts, according to government and industry sources.

 

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