Annual report pursuant to Section 13 and 15(d)

Employee Benefit Plans

v3.23.1
Employee Benefit Plans
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Employee Benefit Plans
Note R – Employee Benefit Plans
401(k) Plans
The Company maintains two qualified 401(k) plans for its U.S. employees as of December 31, 2022: the Redwire 401(k) plan and the Techshot 401(k) plan. During the year ended December 31, 2022, the Company matched employee contributions 50% up to 6% for the Redwire 401(k) plan and 50% up to 8% for the Techshot 401(k) plan.
The Company maintained six qualified 401(k) plans for its U.S. employees as of December 31, 2021: the Redwire 401(k) plan, the Roccor 401(k) plan, the LoadPath 401(k) plan, the Oakman 401(k) plan, the DPSS 401(k) plan and the Techshot 401(k) plan. During the year ended December 31, 2021, the Company matched employee contributions 50% up to 6% for the Redwire 401(k) plan, 100% up to 4% for the Roccor 401(k) plan, 100% up to 6% for the LoadPath 401(k) plan, 100% up to 3% and then 50% of the next 2% for the Oakman 401(k), 100% up to 3% and then 50% of the next 2% for the DPSS 401(k) plan, and 50% up to 8% for the Techshot 401(k) plan.
During 2022, the Roccor 401(k) plan, the LoadPath 401(k) plan, the Oakman 401(k) plan, and the DPSS 401(k) plan were merged into the Redwire 401(k) plan.

The table below presents the expense for matching contributions for the following periods:
Year Ended
December 31, 2022 December 31, 2021
Total expense for matching contributions $ 2,002  $ 2,299 

Post-Retirement Benefit Plans
As a result of the Space NV acquisition, the Company sponsors various post-retirement benefit plans for certain non-U.S. employees including two cash balance plans: (i) a defined benefit pension plan with risk-based coverage for death and disability benefits (collectively, the “Base Plan”) and (ii) a supplementary pension bonus plan that provides variable remuneration linked to employees’ performance (the “Performance Plan”). These cash balance plans are defined benefit plans which provide for post-retirement benefits based on employee and employer contributions and prescribed rates of return in accordance with Belgium Regulation. Accordingly, all Space NV employees are eligible to participate in the supplementary pensions immediately upon entry into service and until the legal retirement age of 65 years (in 2022). The Company is also required to maintain dormant accounts for former employees who have elected not to transfer plan contributions to their new employer. In addition, Belgium Regulation currently provides for statutory minimum guaranteed returns on employee and employer contributions up to a specified annual rate.

The Company has taken actions to mitigate the risk related to its post-retirement benefit plans through pension risk transfer transactions whereby the Company subscribes to group insurance policies, which are funded by employee and employer premiums determined at the beginning of each plan year. Although under the majority of these group insurance policies the Company is relieved of a substantial portion of its responsibility for the associated pension obligations, the Company ultimately remains responsible for paying benefits under the plans in the event that the insurance company defaults on its obligations in future periods. Under the Company’s group insurance policies, the insurance company guarantees minimum statutory reserves, employee and employer contributions, and specified annual rates of return. Combined employee and employer premiums are invested by the insurance company in Branch 21 investment funds in accordance with Belgium Regulation, which are mainly comprised of fixed income assets, which are commingled with the plan assets of other group insurances for the purpose of providing guaranteed returns. The insurance
company has fiduciary responsibility for making investment decisions related to Branch 21 and there is no contractual requirement to legally separate the plan assets by individual account or group policy.

As a result of the foregoing, the Company has determined that the unit of account is the insurance contract and therefore, on a plan-by-plan basis, recognizes the net funded status as either an asset recorded within other non-current assets or a liability recorded within other non-current liabilities within the consolidated balance sheets. A net liability is recorded to the extent that the benefit obligation exceeds the fair value of plan assets or a net asset is recorded to the extent that the fair value of plan assets exceeds the benefit obligation.

As of December 31, 2022 and October 31, 2022, the Company maintained two dormant pension accounts for former ROS employees who have chosen not to transfer their contributions to a new employer as of the respective date. The Company’s obligations under these plans were not significant individually or in the aggregate and, as such, are not included in the following tables. Prior to the acquisition of Space NV on October 31, 2022, the Company did not participate in any defined benefit plans. Therefore, there were no corresponding amounts reflected in the Company’s consolidated financial statements prior to that date.

Balance Sheet Information
The following table provides a summary of the funded status of the Company’s post-retirement benefit plans and the presentation of such balances within the consolidated balance sheets:
December 31, 2022 October 31, 2022
Base Plan Performance Plan Base Plan Performance Plan
Projected benefit obligations $ 5,963  $ 2,486  $ 5,473  $ 2,314 
Fair value of plan assets 5,795  2,352  5,314  2,193 
Funded (underfunded) status $ (168) $ (134) $ (159) $ (121)
Consolidated Balance Sheet line item amounts:
Other non-current liabilities $ (168) $ (134) $ (159) $ (121)

There were no projected benefit obligations included in accumulated other comprehensive income (loss) as of December 31, 2022 and December 31, 2021, respectively.
Funded Status
The following table provides a reconciliation of benefit obligations, plan assets and net funded (unfunded) status of our qualified defined benefit pension plans and our retiree medical and life insurance plans:

Base Plan Performance Plan
Change in benefit obligations
Beginning balance as of October 31, 2022
 $ 5,473  $ 2,314 
Service cost 43  — 
Interest cost 35  14 
Employee contributions 35  — 
Employer contributions —  — 
Benefits paid —  — 
Actuarial (gain) loss (8) (4)
Foreign currency translation 385  162 
Ending Balance as of December 31, 2022
 $ 5,963  $ 2,486 
Change in plan assets
Beginning balance as of October 31, 2022
 $ 5,314  $ 2,193 
Expected return on plan assets 34  14 
Employee contributions 35  — 
Employer contributions 61  — 
Benefits paid —  — 
Actuarial gain (loss) (5) (8)
Expenses paid (18) — 
Foreign currency translation 374  153 
Ending Balance as of December 31, 2022
 $ 5,795  $ 2,352 
Funded (underfunded) status as of October 31, 2022
 $ (159) $ (121)
Funded (underfunded) status as of December 31, 2022
 (168) (134)

Income Statement Information
The following table provides the components of net periodic benefit cost and other amounts recognized in the consolidated statements of operations during the periods presented:
Two Months Ended December 31, 2022
Base Plan Performance Plan
Net periodic benefit cost:
Service cost $ 43  $ — 
Interest cost 35  14 
Expected return on plan assets (34) (14)
Amortization of net actuarial (gain) loss (3) 4 
Net periodic benefit cost $ 41  $ 4 
Fair Value Measurements
The benefit obligations and assets of the Company’s defined benefit pension plans are measured using actuarial valuations, which are derived based on the terms of the insurance contract and other key assumptions provided for under Belgium Regulation. The assumptions made in this analysis affect both the calculation of the benefit obligations as of the measurement date and the calculation of net periodic pension costs in subsequent periods. When reassessing these assumptions, the Company considers past and current market conditions and makes judgments about future market trends. The Company also considers factors such as the timing and amounts of expected contributions to the plans and expected benefit payments to plan participants. The following disclosures include
information related to key assumptions used to determine the projected benefit obligation and plan assets, which drive the net funded status recognized on the Company’s consolidated balance sheets. Assumptions are reviewed at least annually and adjusted as appropriate.

The following tables provide the assumptions used to determine the fair value of projected benefit obligations and the net periodic benefit cost, as they pertain to the Company’s cash balance plans as of December 31, 2022 and October 31, 2022:

Base Plan Performance Plan
Discount rate 3.75  % 3.65  %
Expected return on plan assets 3.75  % 3.65  %
Retirement age 65 65

For the calculation of the projected benefit obligation, all statutory minimum reserves are based on premiums paid by the employee and employer, plus guaranteed returns provided for under Belgium Regulation. Under the terms of the insurance contracts, all minimum reserves are provided 100% coverage while the return on plan assets is guaranteed for an additional amount plus opportunities for profit sharing as determined by the insurance entity. The difference between historical guaranteed rates of return and the guarantee provided by the insurance entity plus any profit sharing allocated to the participant accounts results in an unfunded or funded status that represents the Company’s projected benefit obligation for the respective plans.

The amount of plan assets includes amounts contributed by the employee and employer and amounts earned from investing the contributions, less benefits paid. In accordance with the Company’s group insurance policies, contributions are invested in commingled investment funds, consisting of underlying equity and fixed income securities, respectively. In accordance with Belgium Regulation, a member of a supplementary pension plan whose employment contract comes to an end has the right to transfer their vested reserves to the pension institution of their new employer, contingent upon certain conditions. Accordingly, for ASC 715 purposes, the best evidence of fair value for plan assets is the cash surrender value as of the Measurement Date.

The following table presents the fair value of the plan assets, represented by the Company’s investment in insurance contracts as of the respective dates, which are not separately recorded on the Company’s consolidated balance sheets nor subject to leveling in accordance with ASC 820.

December 31, 2022 October 31, 2022
Base Plan Performance Plan Base Plan Performance Plan
Insurance contracts at cash surrender value $ 5,795  $ 2,352  $ 5,314  $ 2,193 

The Company’s exposure to actuarial gains or losses is limited due to the fact that the assumptions underlying the actuarial analysis, including those presented in the table above, are provisioned for under Belgium Regulation. Similarly, the guarantees provided by the insurance company are based on minimum statutory reserve requirements which results in the same discount rate used to determine both the fair value of the projected benefit obligation as well as the expected (guaranteed) rate of return on plan assets.

Investment Policy
The providers of the Company’s group insurance policies have the fiduciary responsibility for making investment decisions related to the assets of the Company’s defined benefit pension plans. Investment objectives for the assets of these plans are (1) to minimize the net present value of expected funding contributions; (2) to ensure there is a high probability that each plan meets or exceeds our actuarial long-term rate of return assumptions; and (3) to diversify assets to minimize the risk of large losses. The nature and duration of benefit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appropriate asset allocation to achieve the investment objectives. Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives within prudent risk parameters and in accordance with Belgium Regulations. Risk management practices include the use of external investment managers; the maintenance of a portfolio diversified by asset class, investment approach and security holdings; and the maintenance of sufficient liquidity to meet benefit obligations as they come due.
Contributions and Estimated Future Benefit Payments
The required funding of our qualified defined benefit pension plans is determined in accordance with Belgium Regulation. The following table presents contributions made by the employee and employer for the period presented as well as the following year:

Two Months Ended December 31, 2022
Contributions by: Base Plan Performance Plan
Employee $ 35  $ — 
Employer 61  — 
Contributions expected to be made in 2023:
Employee $ 313  $ — 
Employer 380  — 

The following table provides the projected timing of payments for benefits earned to date and benefits expected to be earned for future service by current active employees under our defined benefit plan:
Year Base Plan Performance Plan
2023 $ 3  $ — 
2024 87  — 
2025 68  — 
2026 446  — 
2027 —  — 
Years 2028 - 2032 1,973  2,326