Alcoa sponsors several defined benefit pension plans covering certain employees in the U.S. and foreign locations. Pension benefits generally depend on length of service, job grade, and remuneration. Substantially all benefits are paid through pension trusts that are sufficiently funded to ensure that all plans can pay benefits to retirees as they become due. Most salaried and non-bargaining hourly U.S. employees hired after March 1, 2006 and most bargaining hourly U.S. employees hired after January 1, 2020 participate in a defined contribution plan instead of a defined benefit plan.

The Company also maintains health care postretirement benefit plans covering certain eligible U.S. retired employees and certain retirees from foreign locations. Generally, the medical plans are unfunded and pay a percentage of medical expenses, reduced by deductibles and other coverage. The Company retains the right, subject to existing agreements, to change or eliminate these benefits. All salaried and certain non-bargaining hourly U.S. employees hired after January 1, 2002 and certain bargaining hourly U.S. employees hired after July 1, 2010 are not eligible for postretirement health care benefits.

As of January 1, 2023, the pension benefit plans and the other postretirement benefit plans covered an aggregate of approximately 17,000 and approximately 21,000 participants, respectively.

2023 Plan Actions. In 2023, management initiated the following actions to certain pension 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.

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 on the accompanying Statement of Consolidated Operations.

Action #3 – In the third quarter of 2023, settlement accounting and a related plan remeasurement was triggered within Alcoa’s Australian pension plan as a result of participants electing lump sum payments. As a result, Alcoa recorded a $2 decrease to Other noncurrent assets.

2022 Plan Actions. In 2022, management initiated the following actions to certain pension and other postretirement benefit plans:

Action #1 – In the third quarter of 2022, settlement accounting and related plan remeasurements were triggered within Alcoa’s U.S. 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 4,400 retirees and beneficiaries from its U.S. defined benefit pension plans. The transfer of approximately $1,000 in both plan obligations and plan assets was completed in August 2022. As a result, Alcoa recorded a $5 increase to Accrued pension benefits and a $27 increase to Other noncurrent assets and recognized a non-cash settlement loss of $617 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations.

Action #2 – In the third quarter of 2022, settlement accounting and related plan remeasurements were triggered within Alcoa’s U.S. pension plans as a result of participants electing lump sum payments. Alcoa recognized a non-cash settlement loss of $11 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations.

Action #3 – In the third quarter of 2022, settlement accounting and a related plan remeasurement was triggered within Alcoa’s U.S. salaried pension plan as a result of participants electing lump sum payments. Alcoa recorded a $23 increase to Accrued pension benefits and a $12 decrease to Other noncurrent assets and recognized a non-cash settlement loss of $1 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations.

Action #4 – In the third quarter of 2022, settlement accounting and a related plan remeasurement was triggered within Alcoa’s Australian pension plan as a result of participants electing lump sum payments. Alcoa recorded a $21 increase to Other noncurrent assets and recognized a non-cash settlement gain of $3 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations.

Action #5 – In the fourth quarter of 2022, settlement accounting was triggered within Alcoa’s U.S. pension plans as a result of participants electing lump sum payments. Alcoa recorded a $3 increase to Accrued pension benefits and recognized a non-cash settlement loss of $6 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations.

The following table presents certain information and the financial impacts of these actions on the accompanying Consolidated Financial Statements:


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(1)		Increase (decrease) to other noncurrent assets(1)			Settlement loss (gain)(2)
1	~4,400	2.90%	July 31, 2022	4.63%	$	5	$	27		$	617
2	~45	2.90%	July 31, 2022	4.63%	—		—				11
3	~5	4.57%	September 30, 2022	5.71%		23		(12	)		1
4	~25	2.46%	September 30, 2022	4.99%	—			21			(3	)
5	~20	N/A	December 31, 2022	N/A		3		—			6
	~4,495				$	31	$	36		$	632

(1)

Actions 1-4 caused interim plan remeasurements, including an update to the discount rates used to determine the benefit obligations of the affected plans. These amounts include impacts due to interim plan remeasurements.

(2)

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

2021 Plan Actions. In 2021, management initiated the following actions to certain pension and other postretirement benefit plans:

Action #1 – On March 31, 2021, Alcoa completed the sale of the Warrick Rolling Mill to Kaiser Aluminum Corporation for total consideration of $670, which included the assumption of $69 in other postretirement benefit liabilities. Approximately 1,150 employees at the rolling operations, which includes the casthouse, hot mill, cold mills, and coating and slitting lines, became employees of Kaiser. As a result, the affected plan was remeasured, including an update to the discount rate used to determine the benefit obligation of the plan. Accrued other postretirement benefits reflects a decrease of $40 related to the remeasurement in addition to the $69 assumed by Kaiser. Further, Alcoa recognized a curtailment gain of $17 (pre- and after-tax) and a settlement loss of $26 (pre- and after-tax).

Action #2 – In the second quarter of 2021, settlement accounting and a related plan remeasurement was triggered within Alcoa’s U.S. salaried pension plan as a result of a high number of participants electing lump sum payments. This includes former employees of the Warrick Rolling Mill, as well as other Alcoa employees making this election at retirement. Alcoa recorded a $90 decrease to Accrued pension benefits related to this remeasurement and recognized a settlement loss of $39 (pre- and after-tax).

Action #3 – In the third quarter of 2021, settlement accounting and a related plan remeasurement was triggered within Alcoa’s U.S. salaried pension plan as a result of participants electing lump sum payments. Alcoa recorded a $7 increase to Accrued pension benefits related to this remeasurement and recognized a settlement loss of $7 (pre- and after-tax).

Action #4 – In the third quarter of 2021, settlement accounting and a related plan remeasurement was triggered within Alcoa’s Australian pension plan as a result of participants electing lump sum payments. Alcoa recorded a $38 decrease to Accrued pension benefits related to this remeasurement and recognized a settlement loss of $1 (pre- and after-tax).

Action #5 – In the fourth quarter of 2021, the Company purchased a group annuity contract to transfer the obligation to pay the remaining retirement benefits of approximately 800 retirees and deferred vested participants from one of its Suriname pension plans to an insurance company. The transfer of $55 in both plan obligations and plan assets were completed on October 19, 2021. As a result, the Company recorded a settlement loss of $63 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations in the fourth quarter of 2021.

Action #6 – In the fourth quarter of 2021, settlement accounting and related plan remeasurements were triggered within Alcoa’s U.S. pension plans as a result of the Company purchasing group annuity contracts to transfer the obligation to pay remaining retirement benefits of approximately 14,000 retirees and beneficiaries from its U.S. defined benefit pension plans and transferred approximately $1,540 in both plan obligations and plan assets. The transfers were completed on November 23, 2021 and December 16, 2021. As a result, the Company recorded a $84 decrease to Accrued pension benefits related to this remeasurement and recognized a non-cash settlement loss of $848 (pre- and after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations in the fourth quarter of 2021.

Action #7 – In the fourth quarter of 2021, settlement accounting and related plan remeasurements were triggered within Alcoa’s U.S. pension plans as a result of participants electing lump sum payments (and the group annuity contracts discussed in Action 6 above). Alcoa recorded a $1 decrease to Accrued pension benefits related to this remeasurement and recognized a settlement loss of $10 (pre- and after-tax).

The following table presents certain information and the financial impacts of these actions on the accompanying Consolidated Financial Statements:


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 (decrease) to accrued pension benefits liability			Decrease to accrued other postretirement benefits liability			Curtailment gain(1)			Settlement loss(1)
1	~840	2.45%	March 31, 2021	3.06%	$	—		$	(106	)	$	(17	)	$	26
2	~120	2.38%	June 30, 2021	2.71%		(90	)		—			—			39
3	~20	2.71%	September 30, 2021	2.74%		7			—			—			7
4	~20	1.34%	September 30, 2021	1.53%		(38	)		—			—			1
5	~800	N/A	N/A	N/A	N/A				—			—			63
6	~14,000	2.59%	November 30, 2021	2.79%		(84	)		—			—			848
7	~60	2.59%	November 30, 2021	2.79%		(1	)		—			—			10
					$	(206	)	$	(106	)	$	(17	)	$	994

(1)

These amounts primarily represent the accelerated amortization of a portion of the existing prior service benefit for curtailments and net actuarial loss for settlements and were reclassified from Accumulated other comprehensive loss to Restructuring and other charges, net (see Note D) on the accompanying Statement of Consolidated Operations.

Obligations and Funded Status


	Pension benefits						Other postretirement benefits
December 31,	2023			2022			2023			2022
Change in benefit obligation
Benefit obligation at beginning of year	$	2,518		$	4,594		$	536		$	710
Service cost		11			13			3			4
Interest cost		119			107			26			15
Amendments		2			—			—			—
Actuarial losses (gains)		117			(803	)		(7	)		(140	)
Settlements		(280	)		(1,090	)		—			—
Benefits paid, net of participants’ contributions		(133	)		(211	)		(52	)		(53	)
Suriname resident election transfer		12			—			(12	)		—
Foreign currency translation impact		27			(92	)		—			—
Benefit obligation at end of year	$	2,393		$	2,518		$	494		$	536
Change in plan assets
Fair value of plan assets at beginning of year	$	2,434		$	4,306		$	—		$	—
Actual return on plan assets		141			(528	)		—			—
Employer contributions		24			18			—			—
Participant contributions		3			4			—			—
Benefits paid		(125	)		(204	)		—			—
Administrative expenses		(9	)		(6	)		—			—
Settlements		(280	)		(1,090	)		—			—
Annuity purchase premium refund		7			22			—			—
Foreign currency translation impact		24			(88	)		—			—
Fair value of plan assets at end of year	$	2,219		$	2,434		$	—		$	—
Funded status	$	(174	)	$	(84	)	$	(494	)	$	(536	)
Less: Amounts attributed to joint venture partners		(11	)		(6	)		—			—
Net funded status	$	(163	)	$	(78	)	$	(494	)	$	(536	)
Amounts recognized in the Consolidated Balance Sheet consist of:
Noncurrent assets	$	125		$	146		$	—		$	—
Current liabilities		(10	)		(11	)		(51	)		(55	)
Noncurrent liabilities		(278	)		(213	)		(443	)		(481	)
Net amount recognized	$	(163	)	$	(78	)	$	(494	)	$	(536	)
Amounts recognized in Accumulated Other Comprehensive Loss consist of:
Net actuarial loss	$	1,098		$	1,016		$	88		$	95
Prior service cost (benefit)		4			2			(97	)		(111	)
Total, before tax effect		1,102			1,018			(9	)		(16	)
Less: Amounts attributed to joint venture partners		33			27			—			—
Net amount recognized, before tax effect	$	1,069		$	991		$	(9	)	$	(16	)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) consist of:
Net actuarial loss (benefit)	$	131		$	(141	)	$	(2	)	$	(140	)
Amortization of accumulated net actuarial loss		(49	)		(720	)		(5	)		(18	)
Prior service cost		2			—			—			—
Amortization of prior service benefit		—			—			14			14
Total, before tax effect		84			(861	)		7			(144	)
Less: Amounts attributed to joint venture partners		6			(11	)		—			—
Net amount recognized, before tax effect	$	78		$	(850	)	$	7		$	(144	)

At December 31, 2023, the benefit obligation, fair value of plan assets, and funded status for U.S. pension plans were $1,119, $1,054, and ($65), respectively. At December 31, 2022, the benefit obligation, fair value of plan assets, and funded status for U.S. pension plans were $1,113, $1,064, and ($49), respectively.

Components of Net Periodic Benefit Cost


	Pension benefits(1)									Other postretirement benefits
	2023			2022			2021			2023			2022			2021
Service cost	$	10		$	13		$	22		$	3		$	4		$	4
Interest cost(2)		114			104			116			26			15			15
Expected return on plan assets(2)		(146	)		(151	)		(281	)		—			—			—
Recognized net actuarial loss(2)		28			88			190			5			18			21
Amortization of prior service cost (benefit)(2)		—			—			—			(14	)		(14	)		(14	)
Settlements(3)		21			632			968			—			—			26
Curtailments(4)		—			—			—			—			—			(17	)
Net periodic benefit cost(5)	$	27		$	686		$	1,015		$	20		$	23		$	35

(1)

In 2023, 2022, and 2021, net periodic benefit cost for U.S pension plans was $6, $698, and $962, respectively.

(2)

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

(3)

These amounts were reported in Restructuring and other charges, net on the accompanying Statement of Consolidated Operations (see Note D). In 2023, 2022 and 2021, settlements were due to management actions (see Plan Actions above).

(4)

These amounts were reported in Restructuring and other charges, net on the accompanying Statement of Consolidated Operations (see Note D). In 2021, curtailments were due to management actions (see Plan Actions above).

(5)

Amounts attributed to joint venture partners are not included.

Assumptions. Liabilities and expenses for pension and other postretirement benefits are determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount the future estimated liability, the expected long-term rate of return on plan assets, and several assumptions relating to the employee workforce (salary increases, health care cost trend rates, retirement age, and mortality).

The yield curve model used to develop the discount rate parallels the plans’ projected cash flows and has a weighted average duration of 10 years. The underlying cash flows of the high-quality corporate bonds included in the model exceed the cash flows needed to satisfy the Company’s plan obligations multiple times. If a deep market of high-quality corporate bonds does not exist in a country, then the yield on government bonds plus a corporate bond yield spread is used.

For 2023, 2022, and 2021, the expected long-term rate of return used by management was based on the prevailing and planned strategic asset allocations, as well as estimates of future returns by asset class. For 2024, management anticipates that 6.13% will be the weighted average expected long-term rate of return.

The assumed health care cost trend rate is used to measure the expected cost of gross eligible charges covered by the Company’s other postretirement benefit plans. For 2024, a 6.5% trend rate will be used, reflecting management’s best estimate of the change in future health care costs covered by the plans.

The principal objectives underlying the investment of the pension plan assets are to ensure that the Company can properly fund benefit obligations as they become due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within various asset classes to protect asset values against adverse movements. Investment risk is controlled by rebalancing to target allocations on a periodic basis and ongoing monitoring of investment manager performance.

The portfolio includes an allocation to investments in long-duration corporate credit and government debt, public and private market equities, intermediate duration corporate credit and government debt, global-listed infrastructure, high-yield bonds and bank loans, real estate, and securitized credit.

In late 2022, management began restructuring the asset portfolios of certain non-U.S. pension plans. The new strategy increased the amount and duration of the fixed income asset portfolios to reduce exposure to interest rates and was substantially implemented at the end of the first quarter in 2023.

Investment practices comply with the requirements of applicable laws and regulations in the respective jurisdictions, including the Employee Retirement Income Security Act of 1974 (ERISA) in the United States.

The following section describes the valuation methodologies used by the trustees to measure the fair value of pension plan assets. For plan assets measured at net asset value, this refers to the net asset value of the investment on a per share basis (or its equivalent) as a practical expedient. Otherwise, an indication of the level in the fair value hierarchy in which each type of asset is generally classified is provided (see Note P for the definition of fair value and a description of the fair value hierarchy).

Equities—These securities consist of: (i) direct investments in the stock of publicly traded U.S. and non-U.S. companies and are valued based on the closing price reported in an active market on which the individual securities are traded (generally classified in Level 1); (ii) the plans’ share of commingled funds that are invested in the stock of publicly traded companies and are valued at net

asset value; and (iii) direct investments in long/short equity hedge funds and private equity (limited partnerships and venture capital partnerships) and are valued at net asset value.

Fixed income—These securities consist of: (i) U.S. government debt and are generally valued using quoted prices (included in Level 1); (ii) cash and cash equivalents invested in publicly-traded funds and are valued based on the closing price reported in an active market on which the individual securities are traded (generally classified in Level 1); (iii) publicly traded U.S. and non-U.S. fixed interest obligations (principally corporate bonds and debentures) and are valued through consultation and evaluation with brokers in the institutional market using quoted prices and other observable market data (included in Level 2); and (iv) cash and cash equivalents invested in institutional funds and are valued at net asset value.

Other investments—These investments include, among others: (i) real estate investment trusts valued based on the closing price reported in an active market on which the investments are traded (included in Level 1); (ii) the plans’ share of commingled funds that are invested in real estate partnerships and are valued at net asset value; (iii) direct investments in private real estate (includes limited partnerships) and are valued at net asset value; and (iv) absolute return strategy funds and are valued at net asset value.

The fair value methods described above may not be indicative of net realizable value or reflective of future fair values. Additionally, while Alcoa believes the valuation methods used by the plans’ trustees are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table presents the fair value of pension plan assets classified under either the appropriate level of the fair value hierarchy or net asset value:


December 31, 2023	Level 1		Level 2		Level 3		Net Asset Value		Total
Equities:
Equity securities	$	108	$	—	$	—	$	134	$	242
Private equity		—		—		—		127		127
	$	108	$	—	$	—	$	261	$	369
Fixed income:
Intermediate and long-duration government/credit	$	403	$	517	$	—	$	496	$	1,416
Cash and cash equivalent funds		14		—		—		114		128
	$	417	$	517	$	—	$	610	$	1,544
Other investments:
Real estate	$	21	$	—	$	—	$	253	$	274
Other		—		—		—		19		19
	$	21	$	—	$	—	$	272	$	293
Total(1)	$	546	$	517	$	—	$	1,143	$	2,206
December 31, 2022	Level 1		Level 2		Level 3		Net Asset Value		Total
Equities:
Equity securities	$	71	$	—	$	—	$	480	$	551
Long/short equity hedge funds		—		—		—		8		8
Private equity		—		—		—		145		145
	$	71	$	—	$	—	$	633	$	704
Fixed income:
Intermediate and long-duration government/credit	$	390	$	426	$	—	$	420	$	1,236
Cash and cash equivalent funds		38		—		—		118		156
	$	428	$	426	$	—	$	538	$	1,392
Other investments:
Real estate	$	20	$	—	$	—	$	282	$	302
Other		—		—		—		28		28
	$	20	$	—	$	—	$	310	$	330
Total(2)	$	519	$	426	$	—	$	1,481	$	2,426

(1)

As of December 31, 2023, the total fair value of pension plan assets excludes a net receivable of $13, which primarily represents securities not yet settled plus interest and dividends earned on various investments.

(2)

As of December 31, 2022, the total fair value of pension plan assets excludes a net receivable of $8, which primarily represents securities not yet settled plus interest and dividends earned on various investments.

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 applicable country benefits laws and tax laws, including ERISA for U.S. plans. From time to time, the Company contributes additional amounts as deemed appropriate.

In 2023, 2022, and 2021, cash contributions to Alcoa’s defined benefit pension plans were $24, $17, and $579.

During 2021, Alcoa made $500 in unscheduled contributions to certain U.S. defined benefit pension plans. The additional contributions were discretionary in nature and were funded with net proceeds from a March 2021 debt issuance (see Note M) plus available cash on hand. There were no discretionary contributions made in 2022 or 2023.

Alcoa’s minimum required contribution to defined benefit pension plans in 2024 is estimated to be $60, of which approximately $40 is for U.S. plans. 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 2024, management intends to make such election related to the Company’s U.S. plans.

The Company sponsors savings and investment plans in several countries, primarily in Australia and the United States. In the United States, employees may contribute a portion of their compensation to the plans, and Alcoa matches a specified percentage of these contributions in equivalent form of the investments elected by the employee. Also, the Company makes contributions to a retirement savings account based on a percentage of eligible compensation for certain U.S. employees that are not able to participate in Alcoa’s defined benefit pension plans. The Company’s expenses related to all defined contribution plans were $80 in 2023, $71 in 2022, and $72 in 2021.

The Company contributes to member-funded pension plans for the employees of Aluminerie de Bécancour Inc. and Aluminerie de Deschambault in Canada. Alcoa makes contributions to the plans based on a percentage of the employees’ eligible compensation. The Company’s expenses related to the member-funded pension plans were $16 in 2023, $17 in 2022, and $17 in 2021.

The Company contributes to a target benefit plan for the employees of Baie-Comeau in Canada. Alcoa makes contributions to the plan based on a percentage of the employees’ eligible compensation. The Company’s expenses related to the target benefit plan were $8 in 2023, $9 in 2022, and $9 in 2021.