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.
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.
