Alcoa 1998 Annual Report Download - page 52

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50
Q. Pension Plans and Other Postretirement Benefits
Alcoa maintains pension plans covering most U.S. employees
and certain other employees. 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.
Alcoa maintains health care and life insurance benefit plans
covering most eligible U.S. retired employees and certain other
retirees. Generally, the medical plans pay a stated percentage
of medical expenses, reduced by deductibles and other coverages.
These plans are generally unfunded, except for certain benefits
funded through a trust. Life benefits are generally provided
by insurance contracts. Alcoa retains the right, subject to existing
agreements, to change or eliminate these benefits.
The table below reflects the status of Alcoa’s pension and post-
retirement benefit plans.
December 31
Pension benefits
1998 1997
Postretirement benefits
1998 1997
Change in benefit obligation
Benefit obligation at beginning of year $4,700.3 $4,534.9 $ 1,675.1 $ 1,559.8
Service cost 118.8 95.4 17.8 17.8
Interest cost 317.8 304.6 111.9 104.7
Amendments 8.1 .8 .8 2.0
Actuarial losses 164.8 167.2 30.5 96.1
Alumax acquisition 473.3 —148.2 —
Divestitures (46.6) (7.9) (4.8) (3.5)
Benefits paid (332.6) (337.0) (117.0) (101.2)
Exchange rate (10.1) (57.7) (.3) (.6)
Benefit obligation at end of year $5,393.8 $4,700.3 $ 1,862.2 $ 1,675.1
Change in plan assets
Fair value of plan assets at beginning of year $5,100.8 $4,335.2 $ 88.3 $75.1
Actual return on plan assets 600.5 1,042.0 11.6 13.2
Alumax acquisition 428.4 ———
Divestiture (50.1) (10.3) ——
Employer contributions 47.2 113.7 ——
Participants contributions 11.3 12.3 ——
Benefits paid (350.6) (316.4) ——
Administrative expenses (16.6) (15.8) ——
Exchange rate (12.8) (59.9) ——
Fair value of plan assets at end of year $5,758.1 $5,100.8 $ 99.9 $88.3
Funded status 364.3 400.5 (1,762.3) (1,586.8)
Unrecognized net actuarial loss (789.2) (785.9) (47.6) (82.3)
Unrecognized net prior service cost (credit) 90.4 126.3 (150.8) (185.5)
Unrecognized transition obligation 1.9 4.5 ——
Net amount recognized $ (332.6) $ (254.6) $(1,960.7) $(1,854.6)
Amount recognized in the balance sheet consists of:
Prepaid benefit 58.5 26.4 ——
Accrued benefit liability (424.7) (310.6) (1,960.7) (1,854.6)
Intangible asset 9.3 14.0 ——
Accumulated other comprehensive income 24.3 15.6 ——
Net amount recognized $ (332.6) $ (254.6) $(1,960.7) $(1,854.6)
The components of net periodic benefit costs are reflected below.
December 31
Pension benefits
1998 1997 1996
Postretirement benefits
1998 1997 1996
Components of net periodic benefit costs
Service cost $ 118.8 $ 95.4 $ 101.7 $ 17.8 $ 17.8 $ 19.3
Interest cost 317.8 304.6 291.0 111.9 104.7 104.4
Expected return on plan assets (390.6) (346.2) (324.1) (8.0) (6.8) (5.8)
Amortization of prior service
cost (benefit) 48.3 36.7 34.5 (34.0) (34.2) (40.9)
Recognized actuarial (gain) loss (7.2) .7 1.0 (5.2) (3.4) (3.2)
Amortization of transition obligation 1.6 1.4 2.3 ———
Net periodic benefit costs $ 88.7 $ 92.6 $ 106.4 $ 82.5 $ 78.1 $ 73.8