Alcoa Corp., Pittsburgh, announced Wednesday it will freeze its defined benefit plans for its U.S. and Canadian salaried employees, effective Jan. 1, 2021.
Salaried employees in the U.S. and Canada will cease accruing retirement benefits for future service under DB plans. Instead, the 800 affected employees will be moved to country-specific defined contribution plans.
Alcoa will contribute 3% of affected participants' eligible earnings to their DC plans in addition to its existing employer savings match.
Benefits earned from these DB plans through Dec. 31, 2020, will be protected and included in the benefits provided to the employees at the end of their employment with Alcoa or when becoming eligible for retirement, the company announced in its fourth-quarter earnings statement.
Participants already collecting benefits under the pension plans and those currently covered by collective bargaining agreements will not be impacted by the changes.
Alcoa also expects to make discretionary and required contributions to the U.S. and Canada DB plans in 2018 approximating a combined total of $300 million. The company also intends to make annuity purchases to lower risk and cost while maintaining minimum required contribution levels in connection with the discretionary contributions, it said in the earnings statement.
Alcoa expects these actions to reduce its net pension liability by $35 million and record non-cash, non-operating income of about $20 million in the first quarter of 2018.
Alcoa had $3.5 billion in its U.S. DB plan as of Sept. 30, according to Pensions & Investments data. The asset allocation was 25% alternatives, 19% global equities, 15% domestic equities, 12% domestic fixed income, 10% international equities, 6% each global/international fixed income and cash, 5% private equity and 2% equity real estate.
Information on the Canadian plan could not be learned by press time.
Alcoa spokeswoman Monica Orbe could not be immediately reached for further comment by press time.