Sears, Alcoa to cut pension contributions

Alcoa

Sears Holdings Corp. will reduce its fiscal year 2013 pension contribution by up to $360 million and Alcoa Inc. will cut its contributions by up to $130 million this year and as much as $250 million in 2013, all because of passage of funding relief in the federal highway bill.

Hoffman Estates, Ill.-based Sears had expected its minimum domestic pension contribution to be about $740 million in fiscal 2013, according to the company's 2011 annual report issued Jan. 28. Expected contributions are now estimated between $380 million and $430 million, according to an 8-K filing Monday.

The 8-K report did not mention changes to 2012 contributions, which the company expected to be about $314 million.

Fair value of the company's domestic defined benefit plans was $4.1 billion as of Jan. 28, with a funded status of 66.3%. Asset allocation was 62.8% fixed income; 31.3% equities; 5.5% cash; and 0.4% private equity.

Pittsburgh-based Alcoa expects contribution reductions this year “anywhere from the $100 million to $130 million range,” and next year “anywhere from $225 million to $250 million,” Charles D. McLane Jr., CFO, said in a second-quarter earnings call late Monday.

Alcoa had expected 2012 worldwide contributions to be about $650 million, according to its latest 10-K on Feb. 28. Responding to an analyst question about 2013 contributions, Mr. McLane said global 2013 contributions would be “more like $650 million to $700 million that the (expected) $250 million would come off of.”

Fair value of Alcoa's defined benefit pension assets was $10.3 billion as of Dec. 31, with a funded status of 76.2%. Asset allocation was 51.4% fixed income; 33.8% equities; and 14.8% other.