Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Annuities

Alcoa Plans to Buy Pension Risk Transfer Annuities

Your article was successfully shared with the contacts you provided.

Alcoa Corp. is freezing its defined benefit pension plan and buying annuities to reduce its exposure to pension plan risk.

Executives at the Pittsburgh-based aluminum supplier announced the retiree benefits moves Wednesday, when the company released its fourth-quarter earnings.

(Related: N.Y. Daily News Acquired by Tronc, Journalism’s Would-Be Savior)

Alcoa posted a $196 million net loss for the fourth quarter, but it reported strong operating earnings for the full year, and it ended 2017 with about $1.4 billion in cash, up from about $900 million in cash a year earlier.

Alcoa said it will try to reduce its exposure to retiree benefits obligations by freezing the defined benefit pension plans it now offers for salaried employees in the United States and Canada. The plans have about 800 participants. The freeze will take effect Jan. 1, 2021, the company said.

Starting in 2021, Alcoa will also stop providing a subsidy for U.S. retirees who are under 65 and do not qualify for Medicare, the company said.

To manage exposure to the pension plan obligations already on the books, Alcoa will spend $300 million on annuities.

The company hopes to use annuities to transfer pension risk for about 9,000 retirees, executive said during a conference call with securities analysts.

Alcoa would be spending about $33,000 per retiree on transferring pension risk.

Alcoa said it will phase annuitization in over time.

The company said it now has about $2 billion in net U.S. pension liabilities on its books and $1.2 billion in net liabilities for retiree health benefits.

A year earlier, the company had $1.5 billion in net U.S. pension liabilities and $1.3 billion in net retiree health benefits liabilities.

—Read Athene’s Challenge to Prudential Could Prove Bonanza for Apollo on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on
Facebook and Twitter.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.