Equity Compensation · 24 min read
Lockheed Martin RSUs and PSUs: The 3-Year Cliff and 55-With-10 Rule
Lockheed Martin RSUs cliff-vest three years after grant, and PSUs and the cash LTIP pay on a three-year performance period. Unvested awards are forfeited if you leave, unless your departure is retirement under the filed agreements: an effective date more than six months after grant and either age 55 with ten years of service or age 65. Retirement keeps RSUs vesting on schedule and prorates PSUs and LTIP; layoff after six months prorates all three. Withholding at vest defaults to the highest individual rate, 37% in 2026, and your basis is the delivery-date value, which the 1099-B often omits.
Lockheed Martin pays long-term incentives in three instruments, and the rules that decide whether you keep them are written into the award agreements the company files with the SEC. Restricted stock units cliff-vest three years after grant. Performance stock units and the cash Long-Term Incentive Performance award are measured over a three-year performance period. All three are forfeited if you leave early, unless you leave in one of the ways the agreements carve out, and the one that matters most for a long-tenured employee is retirement: a termination after six months from grant at age 55 with ten years of service, or at 65. Below: each award and its vesting, the retirement test exactly as filed, a hypothetical employee who crosses that line mid-cycle, what layoff, divestiture, death, disability and a change in control do to unvested awards, how tax is withheld at vest, the DMICP deferral election, the basis error that shows up on the 1099-B, and the hedging and pledging rules. Tax figures are 2026 federal amounts; confirm your own numbers with a CPA or tax counsel.
What equity awards does Lockheed Martin grant, and when do they vest?
Three, plus a variant. The 2026 proxy describes the long-term incentive for named executive officers as 50% PSUs, 30% RSUs and 20% cash LTIP for the 2025 grant, with RSUs cliff-vesting after three years and the PSU and LTIP payouts set by results at the end of a three-year performance period (Lockheed Martin 2026 proxy statement, 2025 Long-Term Incentive Compensation). The form agreements filed for the February 25, 2026 grants set the terms for employees who receive them; grants to other employees follow the same forms, and the annual report notes that RSU vesting occurs at least one year from grant and most often three years from grant (Lockheed Martin 2025 Form 10-K, Note 13, Stock-Based Compensation). Your award agreement and the Stock Plan System record govern.
| Award | What you receive | Vesting | Payout range | Dividends |
|---|---|---|---|---|
| RSU (annual) | One share per unit, plus cash equal to the dividends paid during the restricted period | Cliff: the restricted period runs from the award date to the third anniversary (February 25, 2026 to February 25, 2029 for the 2026 grant) | Fixed number of units | Deferred dividend equivalents accrue and are paid in cash at vesting |
| RSU (installment) | One share per unit, plus dividend equivalents | Graded: the filed form provides for a three-year or two-year schedule with equal annual tranches | Fixed number of units | Paid in cash at each vesting date |
| PSU | Shares equal to the target award multiplied by the performance factor | Three-year performance period (January 1, 2026 to December 31, 2028), then vesting on the third anniversary of grant (February 25, 2029) | 0% to 200% of target; for 2026, TSR (30%), Sales (30%) and Cash from Operations (40%), adjusted up or down by up to 25% by a strategic and operational modifier; value capped at 400% of the grant-date price times shares earned | Accrue during the period; paid in cash on earned shares |
| LTIP (cash) | Cash equal to the target award multiplied by the performance factor | Three-year performance period (2025–2027 for the 2025 grant), paid after the Committee certifies results, no later than March 15, 2028 | 0% to 200% of target; for 2025, relative TSR (50%), ROIC (25%) and Free Cash Flow (25%); individual payout capped at $10,000,000 | None |
Two details from the filings shape the rest of this article. First, the 2026 design change: for named executive officers, the cash LTIP was replaced with PSUs, so the 2026 mix is 70% PSUs and 30% RSUs, the PSU measures moved to relative TSR, Sales and Cash from Operations, and a plus-or-minus 25% modifier was added (2026 proxy statement, 2026 Compensation Design Changes). The 2024–2026 and 2025–2027 LTIP cycles remain outstanding, and their agreements still govern those awards. Second, the performance factors are formulaic. Relative TSR is ranked against the S&P 500 and an aerospace and defense peer group, each weighted 50%, with 25% of target at the 25th percentile, 100% at the 50th and 200% at the 75th, interpolated between points, and the TSR factor is capped at 100% if Lockheed Martin’s own three-year TSR is negative (2026 PSU Award Agreement, sections 2.1 and 3.2). Nothing here predicts where those factors will land; the agreements say plainly that the payout can be zero.
What is the retirement-eligibility test, exactly as filed?
Retirement keeps an RSU vesting and prorates a PSU or LTIP award, but only if two conditions are met on the effective date of your departure. The 2026 RSU agreement puts it this way: if you retire and the effective date of your retirement is after August 25, 2026 (the “Minimum Service Date,” six months after the award date) but before the vesting date, you continue to vest in your RSUs and dividend equivalents as if you had remained employed until the vesting date. For this purpose, retirement means retirement from service following attainment of (i) age 55 and ten years of service at the time of termination, or (ii) age 65 (2026 RSU Award Agreement, section 4(b)). The effective date of retirement is the first day following the date you terminate service. The PSU agreement uses the same test, but the treatment differs: on retirement you receive a fraction of the award, with the numerator equal to the days from the award date to your termination and the denominator equal to the days from the award date to the end of the vesting period, applied to whatever the performance factors produce at the end of the period (2026 PSU Award Agreement, section 5.1(b) and (c)(iii)). The 2025 LTIP agreement prorates the same way over the performance period (2025 LTIP Award Agreement, section 5.1(b)).
Three consequences follow from the wording:
- The test is grant by grant. Each award has its own Minimum Service Date. A departure that is retirement for a 2024 grant can be a plain resignation for a grant made in February of the year you leave.
- The ten years are measured at termination. The agreement says “at the time of termination,” so a service anniversary a month after your last day does not count.
- Misconduct removes it. A termination for misconduct after the Minimum Service Date forfeits the award even if you have reached 55 with ten years, or 65 (2026 RSU Award Agreement, section 5).
The proxy summarizes the same rule for executives: termination on or after the six-month anniversary of the grant date and either age 55 with ten years of service or age 65 is treated as retirement-eligible, with continued vesting of RSUs and prorated payment of PSUs and LTIP based on performance at the end of the period (2026 proxy statement, Potential Payments Upon Termination or Change in Control).
Hypothetical illustration: three overlapping grants and a 55th birthday mid-cycle
The employee below is invented. She joined Lockheed Martin in March 2012, so she has more than ten years of service, and she turns 55 on June 15, 2026. She holds three annual RSU grants on the dates the proxy reports for executive grants, plus a 2026 PSU: 300 RSUs granted February 22, 2024 (vesting February 22, 2027), 300 RSUs granted February 26, 2025 (vesting February 26, 2028), and 300 RSUs and 200 target PSUs granted February 25, 2026 (vesting February 25, 2029). The Minimum Service Dates are August 22, 2024, August 26, 2025 and August 25, 2026. She is weighing three departure dates.
| Effective date of departure | Status on that date | 2024 RSUs (300) | 2025 RSUs (300) | 2026 RSUs (300) and PSUs (200 target) |
|---|---|---|---|---|
| May 1, 2026, voluntary | Age 54: not retirement-eligible for any grant | Forfeited | Forfeited | Forfeited |
| May 1, 2026, layoff | Age 54, but layoff has its own rule: pro rata after the Minimum Service Date, with a release of claims | Pro rata: 799 of 1,096 days, 219 units, paid after February 22, 2027 | Pro rata: 429 of 1,095 days, 118 units, paid after February 26, 2028 | Forfeited: the layoff is before August 25, 2026, unless she was identified as subject to a divestiture |
| July 1, 2026, retirement | Age 55 with 14 years of service: retirement-eligible, but before the 2026 grant’s Minimum Service Date | Continues to vest: all 300 units, paid at February 22, 2027 | Continues to vest: all 300 units, paid at February 26, 2028 | Forfeited: July 1 is not after August 25, 2026 |
| September 1, 2026, retirement | Age 55 with 14 years, and after every Minimum Service Date | All 300 units at February 22, 2027 | All 300 units at February 26, 2028 | RSUs: all 300 units at February 25, 2029. PSUs: 188 of 1,096 days, so 17.2% of whatever the performance factors produce, from 0 to 400 shares at the extremes, paid after February 25, 2029 |
The arithmetic between the third and fourth rows is the point: two months separate a July departure from a September one, and for this employee that interval decides whether the 2026 grant exists. In every retirement row the shares still arrive on the original vesting dates, not on her last day, so a retiree who leaves in 2026 receives stock in 2027, 2028 and 2029, each delivery taxed in the year it lands. Layoff, by contrast, is prorated but is also paid after the third anniversary of grant, not at separation (2026 RSU Award Agreement, section 4(c)). The table uses dates from the filings and round unit counts; your Stock Plan System record carries the real ones.
What happens on layoff, divestiture, death, disability or a change in control?
Each event has its own clause, and the clauses differ between RSUs and performance awards. The table sets them out as filed. The grant notice or the 2020 Incentive Performance Award Plan can add terms the form does not, so read yours.
| Event | RSUs | PSUs and LTIP |
|---|---|---|
| Resignation, or termination for any other reason not listed below | Forfeited on the termination date, with no credit for partial service | Forfeited on the termination date |
| Termination for misconduct | Forfeited, even if retirement-eligible | Forfeited, even if retirement-eligible |
| Death while employed | Vest immediately in full; shares and dividend equivalents delivered within 60 days to the beneficiary, and in no event later than the following March 15 | Prorated on days worked, paid at the end of the vesting period on actual performance, to the beneficiary |
| Total disability (the date long-term disability benefits begin) | Vest immediately in full, delivered within 60 days | Prorated, paid at the end of the vesting period |
| Layoff after the Minimum Service Date, including a voluntary separation window program | Pro rata by days, rounded up to a whole share, conditioned on signing and not revoking a general release; paid after the vesting date | Pro rata by days, conditioned on a release; paid at the end of the vesting period on actual performance |
| Divestiture of your business, with your employment transferring to the buyer | The Committee may have the buyer assume or substitute the award. If not, pro rata by days, paid within 60 days; if you are retirement-eligible at that time, you are treated as retired and keep vesting in full, regardless of the Minimum Service Date | Treated as a qualifying termination: pro rata, paid at the end of the vesting period; the Minimum Service Date does not apply to employees identified as subject to divestiture |
| Change in control | Double trigger. If the RSUs are not assumed or substituted, they vest on the closing date. If assumed, they vest on an involuntary termination without cause or a resignation for good reason within 24 months after closing. Delivery within 14 days of vesting | Same double trigger, at the target award; after the performance period but before the vesting date, the target award vests on the earlier of the vesting date or a qualifying termination |
Good reason has a defined meaning in the agreements: a material reduction in authority, base salary, incentive or equity participation, or a relocation of more than 50 miles, with written notice within 90 days and a 30-day cure period (2026 RSU Award Agreement, section 7(b)). Two further mechanics are easy to miss. No stock is issued under an award within six months of the award date, whatever the trigger (2026 RSU Award Agreement, section 17). And a leave of absence does not end employment for these purposes unless an agreement with the company says otherwise, so vesting continues through an approved leave.
How is tax withheld when Lockheed Martin RSUs vest?
By holding back shares, and at a higher rate than most articles about RSUs assume. The value of the shares delivered at vest, plus the cash dividend equivalents, is wages in the year of delivery, included at fair market value once the property is no longer subject to a substantial risk of forfeiture (IRS Publication 525 (2025), Restricted Property). Withholding is satisfied by reducing the number of shares delivered. The agreement then sets the rate: if you are an Insider, the company bases withholding on the highest individual tax rate; if you are not, it bases withholding on the highest individual tax rate unless you elect otherwise during an election window the company may offer, and if you elect a lower rate you may owe additional tax when the award is paid (2026 RSU Award Agreement, section 2). The PSU agreement carries the same language (2026 PSU Award Agreement, page 2).
That is the reverse of the usual RSU problem. Federal law lets an employer withhold on supplemental wages such as an RSU vest at a flat 22%, and requires 37% only on supplemental wages above $1,000,000 in the calendar year (IRS Publication 15 (2026), section 7, supplemental wages). Lockheed Martin’s default is the top rate, 37% for 2026, which over-withholds for anyone whose marginal rate is lower and matches only the highest bracket. The 2026 brackets are the reference: 24% begins at $211,400 of taxable income for a joint return and $105,700 for a single filer, 32% at $403,550 and $201,775, 35% at $512,450 and $256,225, and 37% at $768,700 and $640,600 (IRS, tax inflation adjustments for tax year 2026 (Rev. Proc. 2025-32)). Texas levies no personal income tax, so the state layer is zero for a Fort Worth or Grand Prairie household (Texas Constitution, Article 8, Section 24-a). Medicare tax of 1.45% applies to the full value, plus 0.9% Additional Medicare Tax on wages above $200,000, and Social Security tax applies up to the 2026 wage base of $184,500 (IRS Publication 15 (2026), section 9).
Hypothetical illustration: one vest, three withholding outcomes
A married couple filing jointly has $350,000 of taxable income before an RSU vest that delivers shares worth $90,000, a round figure with no per-share price implied. The vest lifts taxable income to $440,000, so $53,550 of it is taxed at 24% and $36,450 at 32%.
| Line | Amount |
|---|---|
| Value of shares delivered at vest (wages) | $90,000 |
| Federal income tax the vest creates: $53,550 × 24% + $36,450 × 32% | $24,516 |
| Withheld at the agreement’s default, the highest rate (37%) | $33,300, or $8,784 more than the tax |
| Withheld if the employee elected the flat supplemental rate (22%) | $19,800, or $4,716 less than the tax |
| Withheld at 32%, if an election at that rate were offered | $28,800, or $4,284 more than the tax |
Neither direction is free. Over-withholding is an interest-free loan to the Treasury until the refund; under-withholding has to be closed with estimated payments or a higher W-4 to stay inside the safe harbor, which we cover in our guide to RSU withholding and why 22% falls short. The election window, if the company offers one, is the place to match withholding to the bracket the vest will actually land in. Because Lockheed Martin RSUs cliff-vest, one delivery can be three years of grants’ worth of value arriving in a single tax year, which is why the bracket math is worth doing in advance.
The retirement-eligible withholding event
There is a second withholding moment that surprises people. The agreement provides that if any tax withholding is required during the restricted period, the company reduces the award by shares and dividend equivalents equal to the withholding obligation (2026 RSU Award Agreement, section 2). The proxy shows it happening: on December 5, 2025, a portion of the 2023, 2024 and 2025 RSU grants of three executives vested early “equal to the value of the tax withholding obligation due because the NEO is retirement-eligible” (2026 proxy statement, Option Exercises and Stock Vested, footnote 1). The reason is the employment-tax timing rule: an amount deferred under a nonqualified deferred compensation plan is taken into account as FICA wages on the later of the date the services are performed or the date the right is no longer subject to a substantial risk of forfeiture (26 CFR 31.3121(v)(2)-1(a)(2)). Once you are retirement-eligible for a grant, the service condition can no longer cause forfeiture, so Medicare tax (and Social Security tax, if you are under the wage base) comes due on the unvested units, and the company sells a slice of the award to pay it. Income tax still waits for delivery. The practical effect is that the year you cross 55 with ten years, a few shares from each outstanding grant disappear, and the number of units that will vest is smaller than the grant notice said. Ask the stock plan administrator for the post-withholding unit count before planning a vest.
Should I defer an LTIP payout into the DMICP?
The Deferred Management Incentive Compensation Plan lets an eligible employee defer all or part of an annual incentive payout or an LTIP payment until after termination of employment or later, on terms fixed when the deferral is elected. The filed plan document sets the mechanics (Lockheed Martin Deferred Management Incentive Compensation Plan, as amended and restated effective January 1, 2020, Articles II, III and V):
- Who. An employee on or before May 1 of the award year who participates in the Management Incentive Compensation Plan or receives a Long Term Incentive Award, limited to a select group of management or highly compensated employees.
- When to elect. An LTIP deferral agreement must be delivered by a date set by Human Resources that is no later than six months before the end of the performance period; an annual incentive deferral by June 30 of the award year. Elections are irrevocable after the deadline, and a separate agreement is needed for each award year.
- How much. A dollar amount of at least $5,000 in $1,000 multiples, a percentage (subject to the $5,000 floor), the excess over a stated amount, or the whole payment.
- When it starts. At election you choose one of three commencement options: the Payment Date next following termination for any reason; the first Payment Date of the year after the year of termination; or the first Payment Date of the year after you have both terminated and reached an age you designate. Payment Dates are January 15 and July 15.
- What form. A lump sum, or annual installments over a period you designate up to 25 years, each installment equal to the balance divided by the installments remaining. Balances of $10,000 or less are paid as a lump sum.
- Changing your mind. A new election must be delivered at least 12 months before the first payment would have been due, must delay the first payment by at least 60 months, and takes effect 12 months after delivery. No election may be made or changed after termination.
- Leaving before 55. If you terminate before age 55 for a reason other than death or disability, the balance is paid as a lump sum on the next Payment Date, whatever you elected.
Two further points from the filings. Amounts credited to the Company Stock Investment Option are paid in shares and may not be reallocated to other options (2026 proxy statement, Nonqualified Deferred Compensation), and on a change in control all DMICP balances are paid in a lump sum within 15 days. The plan is a contractual promise: your rights are those of a general, unsecured creditor of the company (DMICP, Article VI, section 1). The 2025 LTIP agreement confirms the payable portion may be paid in cash by March 15, 2028 or deferred under the DMICP by an irrevocable election (2025 LTIP Award Agreement, section 5.2). The planning question is a tax-bracket question: installments beginning the year after retirement can spread income across lower brackets, before Social Security and required distributions begin, while a lump sum ends the unsecured-creditor exposure sooner. The election and the pension start date, the NQSSP and NCAP payout schedules, and the final RSU deliveries belong in one tax picture, which is the work behind our tax planning process.
What basis goes on the 1099-B when I sell?
The value on the delivery date, which is also the wage figure on your W-2, and the broker’s form often does not show it. The instructions for Form 1099-B tell brokers that for equity compensation granted or acquired after 2013 they cannot increase the reported basis for income recognized on vesting or exercise (IRS Instructions for Form 1099-B, Box 1e). A 1099-B for Lockheed Martin shares from an RSU can therefore report a basis of zero or a discounted figure, and a return prepared straight from it taxes the same $90,000 twice. The fix is on Form 8949: enter the basis as reported, then correct it in column (g) with code B in column (f), increasing basis by the amount included in wages (IRS Instructions for Form 8949, columns (f) and (g)). Keep the vest confirmation from the Stock Plan System for every lot: the delivery date, the number of shares after withholding, and the value used for wages. For a cliff-vested grant that is one lot per year, which makes the record short but the stakes per lot large.
The holding period for capital gain purposes starts at delivery, not at grant, so shares from a February vest sold the following January are short-term. Dividend equivalents are paid in cash and taxed as wages, not as qualified dividends, and they do not add to basis.
Can I hedge, pledge or sell Lockheed Martin stock whenever I want?
Not while employed. The insider trading policy, filed with the SEC, prohibits hedging and pledging by all directors, officers and employees. Employees may not purchase or sell derivative securities based on Lockheed Martin stock, and the policy bars hedging or monetization transactions “such as forward-sale contracts, equity swaps, collars, and exchange funds” that offset a decline, lock in gains without a sale, or divest the risks and rewards of ownership. Employees may not hold Lockheed Martin securities in a margin account or pledge them as collateral for a loan (Lockheed Martin Policy on Compliance with United States Securities Laws, Exhibit 19 to the 2024 Form 10-K, sections 8.7 and 8.8). The proxy restates the ban and applies it to shares received as compensation and shares otherwise held (2026 proxy statement, Anti-Hedging and Anti-Pledging Policy). The award agreements themselves incorporate the policy, CPS 722 (2026 RSU Award Agreement, section 17).
Timing is also constrained for some employees. The policy imposes a quarterly trading blackout on anyone who certifies in the quarterly or annual reporting process or who has, or is expected to acquire, knowledge of results before release. Blackouts begin 14 days before each quarter’s accounting closing date, which is the last Sunday of the quarter’s last month (December 31 for the fourth quarter, so the blackout starts December 18), and end when the NYSE opens the day after earnings are released (Exhibit 19, sections 5.10 and 5.11). Ad hoc blackouts can be added. Trades under a Rule 10b5-1 plan approved by the General Counsel are exempt from the policy, and standing or limit orders outside such a plan are to be used judiciously, kept short and monitored. After termination, the additional prohibitions in section 8 generally expire, except for Section 16 officers and directors, for whom they may extend up to six months; the law against trading on material nonpublic information always applies (Exhibit 19, section 7).
That ordering matters for a concentrated position. For a current employee, the tools that advisors often list for large single-stock holdings are off the table under the policy, so diversification means selling, in an open window, with the tax planned. After separation, and only if the household is eligible, the wider set opens up. Each carries its own terms:
- Exchange fund. How it works: you contribute shares to a partnership holding many stocks and receive a diversified interest without a current sale. Costs: management fees, a multi-year holding requirement, and some non-stock assets in the fund. Risks: illiquidity, fund performance, and rule changes. Who: accredited investors or qualified purchasers, and never while the employer’s policy bans it.
- Collar or prepaid variable forward. How it works: options or a forward contract limit downside and cap upside, with cash advanced in the forward version. Costs: spreads, lost upside, and dealer fees. Risks: constructive-sale treatment if the band is too tight, counterparty exposure, and complexity at unwind. Who: larger positions through a broker-dealer, subject to suitability, and barred by the policy while employed.
- Charitable remainder trust or donor-advised fund. How it works: appreciated shares are given, sold inside the vehicle without immediate gain, and either pay an income stream (CRT) or fund grants (DAF). Costs: the gift is irrevocable, and a CRT has setup and administration costs. Risks: deduction limits as a share of adjusted gross income, and no access to the principal. Who: households with a charitable intent; the policy does not prohibit an outright gift.
Our guide to diversifying concentrated stock sets out the cost and eligibility of each in more detail.
How we approach Lockheed Martin equity in a plan
We start with a grant ledger: every outstanding RSU, PSU and LTIP award with its award date, Minimum Service Date, vesting date, and the post-withholding unit count once you are retirement-eligible. From that ledger the departure question becomes a set of dates rather than a feeling, and for a household near 55 with ten years the ledger usually shows one or two dates that matter far more than the others. That is the core of our work with executives and equity compensation, and much of it happens with households in Fort Worth and Grand Prairie, where we plan alongside the frozen salaried pension and the savings plan; see our Fort Worth planning page.
The second layer is the tax calendar. Cliff vesting delivers a year’s worth of value in one day, retirement can put three such days in three consecutive years, a DMICP election can move an LTIP payout into a chosen year, and the withholding election decides whether April brings a refund or a bill. We model those years side by side with the pension start date and Social Security, then set a written sell rule for the shares that do arrive. The rule is about the household’s balance sheet, how much of it one employer should carry, and not a view on the stock.
Questions worth answering before you set a departure date
- For each outstanding grant, what is the Minimum Service Date, and is my planned effective date after it?
- Will I have ten years of service on the effective date itself, measured the way the agreement measures it?
- If a layoff or voluntary separation window is possible, which grants would be prorated and which would be forfeited?
- How many units remain in each grant after the retirement-eligible tax withholding, and what did that withholding cover?
- What rate will the company withhold at my next vest, and is an election window open to change it?
- Which LTIP cycles are outstanding, when is the DMICP deferral deadline for each, and what commencement and form would I choose?
- Do my 1099-B records for prior vests show the basis the W-2 reported, or do they need a Form 8949 adjustment?
- Am I subject to the quarterly blackout, and which windows fall between my vest dates and my planned sales?
What this does not mean
Nothing here is a recommendation to buy, sell or hold Lockheed Martin stock, or to retire, resign or stay on any date. The retirement provisions protect awards already granted; they do not make one departure date better than another for a given household, and the agreements can be amended for future grants. The performance measures and payout ranges are quoted as filed; we do not estimate where any performance factor will land. Tax figures are 2026 federal amounts and Texas law as of September 2026, and the plan documents, the Stock Plan System record, and your own return govern. Confirm the facts of your situation with a CPA or tax counsel before acting.
Frequently asked questions
What is the Lockheed Martin RSU vesting schedule?
The annual RSU form cliff-vests 100% on the third anniversary of the award date; the 2026 grant vests February 25, 2029. A separate installment form provides for equal annual tranches over three or two years, and the annual report notes vesting can occur as early as one year from grant. Your award agreement in the Stock Plan System states which form applies to each grant.
What is the retirement-eligibility rule for Lockheed Martin equity awards?
Under the filed 2026 agreements, a termination is retirement if its effective date is after the grant’s Minimum Service Date, six months after the award date, and you have reached either age 55 with ten years of service at the time of termination or age 65. RSUs then keep vesting on the original schedule; PSUs and LTIP awards are prorated by days and paid at the end of the period on actual performance. The test is applied grant by grant.
What happens to my unvested Lockheed Martin RSUs if I am laid off?
If the layoff is after the grant’s Minimum Service Date and you sign and do not revoke a general release, you receive a pro rata share of the RSUs based on days in the restricted period, rounded up to a whole share, paid after the third anniversary of grant. A layoff before the Minimum Service Date forfeits the grant unless you were identified as subject to a divestiture. PSUs and LTIP are prorated the same way and paid at the end of the period.
Do Lockheed Martin RSUs vest on death or disability?
RSUs vest immediately and in full on death while employed or on total disability, which the agreement defines as the date long-term disability benefits begin, with delivery within 60 days. PSUs and LTIP do not accelerate; they are prorated by days and paid at the end of the performance period based on actual results.
How much tax is withheld when Lockheed Martin RSUs vest?
The award agreement bases share withholding on the highest individual tax rate, 37% for 2026, for Insiders and, unless you elect otherwise in a company election window, for everyone else. That is above the 22% flat supplemental rate federal rules allow and can over-withhold for a household in a lower bracket, or under-withhold if a 22% election is made by a household in the 32% or 35% bracket. Medicare tax applies as well. Texas has no state income tax.
Can I defer my Lockheed Martin LTIP payout?
Eligible employees may defer all or part of an LTIP payment or annual incentive into the DMICP by an irrevocable election made no later than six months before the end of the performance period. At election you choose when payments begin after termination, and whether they come as a lump sum or up to 25 annual installments on January 15 or July 15 Payment Dates. The balance is an unsecured promise of the company, and a termination before age 55 triggers a lump sum.
Sources and further reading
- Lockheed Martin Corporation, 2026 Proxy Statement (DEF 14A filed March 26, 2026): 2025 Long-Term Incentive Compensation; 2026 Compensation Design Changes; Anti-Hedging and Anti-Pledging Policy; Grants of Plan-Based Awards footnotes; Option Exercises and Stock Vested; Nonqualified Deferred Compensation; Potential Payments Upon Termination or Change in Control
- Lockheed Martin Corporation, Restricted Stock Unit Award Agreement (Annual), award date February 25, 2026, Exhibit 10.1 to the Form 10-Q for the quarter ended March 29, 2026: sections 2, 3, 4, 5, 6, 7 and 17
- Lockheed Martin Corporation, Performance Stock Unit Award Agreement for the 2026-2028 performance period, Exhibit 10.2 to the Form 10-Q for the quarter ended March 29, 2026: sections 1, 2, 3, 4, 5 and 8
- Lockheed Martin Corporation, Long-Term Incentive Performance Award Agreement for the 2025-2027 performance period, Exhibit 10.3 to the Form 10-Q for the quarter ended March 30, 2025: sections 1, 3, 4, 5 and 8
- Lockheed Martin Corporation, Restricted Stock Unit Award Agreement (Installment), award date February 26, 2025, Exhibit 10.4 to the Form 10-Q for the quarter ended March 30, 2025: sections 2 and 5
- Lockheed Martin Corporation, Policy on Compliance with United States Securities Laws (insider trading policy), Exhibit 19 to the Form 10-K for the year ended December 31, 2024: sections 5.10 to 5.13, 6.7, 7 and 8
- Lockheed Martin Corporation, Deferred Management Incentive Compensation Plan, as amended and restated generally effective January 1, 2020, Exhibit 10.8 to the Form 10-K for the year ended December 31, 2019: Articles II, III, V and VI
- Lockheed Martin Corporation, Form 10-K for the year ended December 31, 2025: Note 13, Stock-Based Compensation; Item 10, insider trading policy; Item 12, DMICP; exhibit index
- IRS Publication 525 (2025), Taxable and Nontaxable Income: Restricted Property
- IRS Publication 15 (2026), Employer's Tax Guide: section 7, supplemental wages; section 9, Medicare and Additional Medicare Tax; 2026 Social Security wage base
- IRS, tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill (Rev. Proc. 2025-32): 2026 rate brackets
- Rev. Proc. 2025-32, section 3.01, 2026 tax rate tables
- 26 CFR 31.3121(v)(2)-1(a)(2), special timing rule for FICA on nonqualified deferred compensation
- IRS Instructions for Form 1099-B, Box 1e, cost or other basis for equity-based compensation granted or acquired after 2013
- IRS Instructions for Form 8949, columns (f) and (g), code B basis adjustment
- Texas Constitution, Article 8, Section 24-a, individual income tax prohibited
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