Page 180 - Martin Marietta - 2025 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Pension Benefit Obligation and Pension Expense – Selection of Assumptions

The Companysponsors noncontributory defined benefit pension plansthatcover substantially allemployees anda
Supplemental Excess RetirementPlan(SERP) for certain retirees.Annually, asofDecember31, management remeasures the
defined benefitpension plans’ projectedbenefit obligationbased on the present valueof the projected futurebenefit
paymentstoall participants forservices renderedtodate, reflecting expected future pay increases throughthe participants’
expected retirement dates.
Annual pensionexpense (inclusive of SERP expense), referredtoasnet periodic benefitcost withinthe consolidated financial
statements, consists of severalcomponents, whichare calculated annually:
C
C
 ServiceCost, which representsthe present value of benefits attributed to services rendered inthe current year,
measuredby expected futuresalary levelstoassumed retirement dates;
 Interest Cost, which representsone year’s additional interest on the projected benefitobligation;
t
s
 Expected Return on Assets, which representsthe expected investment return on pensionplanassets; and
x
 Amortization ofPrior ServiceCostand Actuarial Gains andLosses, which representscomponentsthatare
i
i
o
recognizedovertime ratherthan immediately. Priorservice cost represents credit giventoemployees foryears of
service alreadyaccrued. Actuarialgains andlossesarise from changes inassumptions regarding future events, a
change inthe benefitobligation resulting from experience different from assumedor whenactual returns on
pension assets differ fromexpected returns andare amortizedoverthe participants'average remaining service
periodona plan-by-plan basis.
Management believesthe selectionof assumptions related to theannualpension expenseand relatedprojected benefit
obligation isa critical accountingestimatedue to thehighdegreeof volatilityinthe expenseand obligationdependent on
selectedassumptions. Thekey assumptions include thediscount rate, rateofincrease in futurecompensationlevels, expected
long-term rate of return on pensionplanassetsand mortality table and mortalityimprovement scale.

Management’sselection of thediscount rate isbased on an analysis that estimatesthe current rate of return forhigh-quality,
fixed-income investments with maturities matching the payment of pensionbenefitsthatcould be purchased to settlethe
obligations. The Companyselecteda hypothetical portfolioofMoody’s Aa bonds, with maturities that matchthe benefit
obligations,todetermine thediscount rate. At December 31,2024, the Company selected adiscount rateassumption of 6.00%,
a 42-basis-point increase compared with the December31, 2023 assumption.Of the four keyassumptions,the discount rate is
generally the most volatile andsensitive estimate.Accordingly, achange inthisassumption canhavea significant impacton
the annual pensionexpense andthe projectedbenefit obligation.
Management’s selectionof the rate of increase in future compensation levels, which reflects cost of living adjustments and
meritand promotion increases, isgenerally basedonthe Company’shistorical increases in pensionableearnings, while giving
consideration to anyfutureexpectations. Ahigher rateofincrease results in higher pensionexpense anda higher projected
benefit obligation. Theassumedlong-term rate of increase is 4.50%.
Management’s selectionof the expected long-term rateofreturnonpension fund assets is basedonthe currentasset class
mix of the Company'spension plan assets,current capital marketconditionsand astochastic forecastoffutureconditions.
Based on thecurrently projected returns on theseassets and related expenses,the Company selectedanexpected returnon
assets of 6.75%,the same as the prior-year rate.
The differencebetween theexpected returnand theactual returnonpension assets is included inactuarial gainsand losses,
which areamortized into annual pension expenseaspreviously described.
At December31, 2024 and 2023, the Company estimatedthe remaininglives of participants in the pension plansusing the
Society of Actuaries’ Pri-2012 Base Mortality Table. The no-collartable wasused for salaried participants andthe blue-collar
table wasused for hourly participants,bothadjustedto reflect thehistoricalexperienceof the Company’sparticipantsand a
geospatial mortalityanalysis. The Company selected the MP-2020 scale for mortalityimprovement at December 31,2024 and
2023.

Page72 ♦ 2024 Annual Report