Pension and Other Postretirement Benefits

6 Months Ended

Jun. 30, 2023

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

M. Pension and Other Postretirement Benefits

The components of net periodic benefit cost were as follows:

	Second quarter ended June 30,						Six months ended June 30,
Pension benefits	2023			2022			2023			2022
Service cost	$	3		$	4		$	5		$	7
Interest cost(1)		29			27			60			54
Expected return on plan assets(1)		(37	)		(44	)		(76	)		(88	)
Recognized net actuarial loss(1)		7			27			14			55
Settlements(2)		21			—			21			—
Net periodic benefit cost	$	23		$	14		$	24		$	28

	Second quarter ended June 30,						Six months ended June 30,
Other postretirement benefits	2023			2022			2023			2022
Service cost	$	1		$	1		$	2		$	2
Interest cost(1)		7			4			13			8
Recognized net actuarial loss(1)		1			5			2			9
Amortization of prior service benefit(1)		(4	)		(4	)		(7	)		(7	)
Net periodic benefit cost	$	5		$	6		$	10		$	12

(1)These amounts were reported in Other expenses (income), net on the accompanying Statement of Consolidated Operations (see Note R).

(2)These amounts were reported in Restructuring and other charges, net on the accompanying Statements of Consolidated Operations (see Note D) and Cash Flows.

Plan Actions. In 2023, management initiated the following actions to certain pension and other postretirement plans:

Action #1 – In the second quarter of 2023, plan amendment accounting and related plan remeasurements were triggered within the Surinamese pension and other postretirement plans as a result of participants electing to prospectively convert their Surinamese dollar pension and Company-provided retiree medical to a United States dollar pension with no Company-provided retiree medical. As a result, Alcoa recorded a $15 increase to Accrued pension benefits and a $9 decrease to Accrued other postretirement benefits in the second quarter.

Action #2 – In the second quarter of 2023, settlement accounting and related plan remeasurements were triggered within certain Canadian pension plans as a result of the Company's purchase of group annuity contracts to transfer the obligation to pay the remaining retirement benefits of approximately 530 retirees and beneficiaries from its Canadian defined benefit pension plans. The transfer of approximately $235 in both plan obligations and plan assets was completed in April 2023. As a result, Alcoa recorded a $22 increase to Accrued pension benefits and a $5 decrease to Other noncurrent assets and recognized a non-cash settlement loss of $21 ($16 after-tax) in Restructuring and other charges, net in the second quarter.

Action #	Number of affected plan participants	Weighted average discount rate as of prior plan remeasurement date	Plan remeasurement date	Weighted average discount rate as of plan remeasurement date	Increase to accrued pension benefits liability		Decrease to other noncurrent assets			Decrease to accrued other postretirement benefits liability			Settlement loss(1)
1	~370	5.58%	March 31, 2023	5.20%	$	15	$	—		$	(9	)	$	—
2	~530	5.20%	April 30, 2023	4.80%	$	22	$	(5	)	$	—		$	21

(1)These amounts represent the net actuarial loss and were reclassified from Accumulated other comprehensive loss to Restructuring and other charges, net (see Note D) on the accompanying Statement of Consolidated Operations.

Funding and Cash Flows. It is Alcoa’s policy to fund amounts for defined benefit pension plans sufficient to meet the minimum requirements set forth in each applicable country's benefits laws and tax laws, including the Employee Retirement Income Security Act of 1974 (ERISA) for U.S. plans. From time to time, the Company contributes additional amounts as deemed appropriate.

Under ERISA regulations, a plan sponsor that establishes a pre-funding balance by making discretionary contributions to a U.S. defined benefit pension plan may elect to apply all or a portion of this balance toward its minimum required contribution obligations to the related plan in future years.

In the first and second quarters of 2023, management made such elections related to the Company’s U.S. plans and intends to do so for the remainder of 2023. As a result, Alcoa’s minimum required contribution to defined benefit pension plans in 2023 is estimated to be approximately $23, of which approximately $5 was contributed to non-U.S. plans during the second quarter of 2023. In the six-month period of 2023, $9 was contributed to non-U.S. plans.

In the second quarter of 2022, $5 was contributed to non-U.S. plans. In the six-month period of 2022, $9 was contributed to non-U.S. plans.