Pension and Other Postretirement Benefits

3 Months Ended

Mar. 31, 2021

Compensation And Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits

L. Pension and Other Postretirement Benefits – The components of net periodic benefit cost were as follows:

	Pension benefits						Other postretirement benefits
First quarter ended March 31,	2021			2020			2021			2020
Service cost	$	5		$	14		$	2		$	1
Interest cost(1)		29			42			4			5
Expected return on plan assets(1)		(73	)		(74	)		—			—
Recognized net actuarial loss(1)		51			51			6			4
Amortization of prior service cost(1)		—			—			(4	)		(3	)
Settlements(2)		—			—			26			—
Curtailments(2)		—			3			(17	)		—
Net periodic benefit cost	$	12		$	36		$	17		$	7

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

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

Plan Actions. In 2021, management initiated the following actions to certain 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 $72 in other postretirement benefit liabilities (subject to further post-closing adjustments). The consideration amount is subject to customary post-closing adjustments. 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 $72 assumed by Kaiser. Further, Alcoa recognized a curtailment gain of $17 and a settlement charge of $26.

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

Action #	Number of affected plan participants	Weighted average discount rate as of December 31, 2020	Plan remeasurement date	Weighted average discount rate as of plan remeasurement date	Decrease to accrued other postretirement benefits liability			Curtailment gain(1)			Settlement charge(1)
1	~840	2.45%	March 31, 2021	3.06%	$	(112	)	$	(17	)	$	26

⁽¹⁾ These amounts 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.

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.

On April 1, 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 K) plus available cash on hand.

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 2021, management will consider making such election related to the Company’s U.S. plans.

The Company intends to adopt the single-employer pension relief provisions under the American Rescue Plan Act of 2021. As a result, Alcoa’s minimum required contribution to defined benefit pension plans in 2021 is estimated to be approximately $135, of which approximately $49 and $14 were contributed to U.S. and non-U.S. plans, respectively, during the first quarter ended 2021.