Alcoa 2011 Annual Report Download - page 146

W. Pension and Other Postretirement Benefits
Alcoa maintains pension plans covering most U.S. employees and certain employees in 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 participate in a defined contribution plan
instead of a defined benefit plan.
Alcoa also maintains health care and life insurance benefit plans covering eligible U.S. retired employees and certain
retirees from foreign locations. Generally, the medical plans pay a 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. 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. All salaried and certain hourly U.S. employees that retire on or after April 1, 2008
are not eligible for postretirement life insurance benefits.
The funded status of all of Alcoa’s pension and other postretirement benefit plans are measured as of December 31.
On June 24, 2010, the United Steelworkers ratified a new four-year labor agreement covering approximately 5,400
employees at 11 U.S. locations; the previous labor agreement expired on May 31, 2010. In 2010, as a result of the
preparation for and ratification of the new agreement, Alcoa recognized $20 ($13 after-tax) in Cost of goods sold on
the accompanying Statement of Consolidated Operations for strike preparation costs, a one-time signing bonus for
employees, and an increase to pension net periodic benefit cost (see below). Additionally, as a result of the provisions
of the new labor agreement, a significant plan amendment was adopted by one of Alcoa’s U.S. pension plans.
Accordingly, this plan was required to be remeasured, and through this process, the discount rate was updated from
6.15% at December 31, 2009 to 5.95% at May 31, 2010. The plan remeasurement resulted in an increase to both
Alcoa’s pension liability of $166 and the plan’s unrecognized net actuarial loss (included in other comprehensive loss)
of $108 (after-tax). The plan remeasurement also resulted in an increase to 2010 net periodic benefit cost of $9.
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