Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2022

Compensation And Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits

K. Pension and Other Postretirement Benefits

The components of net periodic benefit cost were as follows:

	Third quarter ended September 30,						Nine months ended September 30,
Pension benefits	2022			2021			2022			2021
Service cost	$	3		$	6		$	10		$	16
Interest cost(1)		24			30			78			88
Expected return on plan assets(1)		(35	)		(71	)		(123	)		(217	)
Recognized net actuarial loss(1)		19			48			74			149
Settlements(2)		626			8			626			47
Net periodic benefit cost	$	637		$	21		$	665		$	83

	Third quarter ended September 30,						Nine months ended September 30,
Other postretirement benefits	2022			2021			2022			2021
Service cost	$	1			—		$	3		$	3
Interest cost(1)		4			4			12			12
Recognized net actuarial loss(1)		5			5			14			16
Amortization of prior service benefit(1)		(4	)		(3	)		(11	)		(11	)
Settlements(2)		—			—			—			26
Curtailments(2)		—			—			—			(17	)
Net periodic benefit cost	$	6		$	6		$	18		$	29

⁽¹⁾ These amounts were reported in Other expense (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 Cash Flows.

Plan Actions. In 2022, management initiated the following actions to certain pension 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 on August 11, 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.  

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		Increase (decrease) to other noncurrent assets			Settlement loss (gain)(1)
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	)

⁽¹⁾ 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.

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, second and third quarters of 2022, management made such elections related to the Company’s U.S. plans and intends to do so for the remainder of 2022. As a result, Alcoa’s minimum required contribution to defined benefit pension plans in 2022 is estimated to be approximately $15, of which approximately $3 was contributed to non-U.S. plans during the third quarter of 2022. In the nine-month period of 2022, $12 was contributed to non-U.S. plans.

In the third quarter of 2021, $6 was contributed to non-U.S. plans. In the nine-month period of 2021, $49 and $26 were contributed to U.S. and non-U.S. plans, respectively.