Alcoa Corp. is freezing its defined benefit pension plan for Canadian and U.S. salaried employees.
Effective Jan. 1, 2021, the change affects approximately 800 workers who will move into defined contribution plans. The defined benefit plan will close on Dec. 31, 2020, with benefits earned up to that point protected, according to the bauxite and aluminum producer’s fourth quarter report on Friday.
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“In our continuous drive to strengthen the balance sheet, today we informed salaried employees in the United States and Canada of upcoming changes to their retirement benefits,” said Roy Harvey, president and chief executive officer, in the report.
“The decisions were difficult and affect current employees who have been part of our Alcoa family the longest. But to reduce our liabilities, change is necessary; it will enable us to better prepare for an uncertain and cyclical environment as we position our company for the future.”
In the report, Alcoa also noted it intends to make discretionary contributions beyond those required to the Canadian and U.S. defined benefit plans of US$300 million in 2018. It also plans to de-risk the plan by purchasing annuities while maintaining minimum contribution levels.
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Former employees already collecting benefits through the defined benefit plan, as well as those covered by collective bargaining agreements, won’t experience any changes due to the plan closure, noted the report.
Also effective Jan. 1, 2021, Alcoa will no longer contribute to retiree medical coverage for its U.S. salaried employees. The company anticipates that these changes will reduce its liabilities by US$35 million.