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Pension and Other Postretirement Benefits | 9 Months Ended
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Sep. 30, 2014
Compensation and Retirement Disclosure [Abstract] |
Pension and Other Postretirement Benefits | O. Pension and Other Postretirement Benefits – The components of net periodic benefit cost were as follows:
|  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
Pension benefits |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Service cost |  | $ | 42 |  |  | $ | 49 |  |  | $ | 125 |  |  | $ | 148 |
Interest cost |  |  | 157 |  |  |  | 150 |  |  |  | 476 |  |  |  | 453 |
Expected return on plan assets |  |  | (198 | ) |  |  | (196 | ) |  |  | (586 | ) |  |  | (592 | )
Recognized net actuarial loss |  |  | 97 |  |  |  | 122 |  |  |  | 292 |  |  |  | 369 |
Amortization of prior service cost |  |  | 5 |  |  |  | 4 |  |  |  | 14 |  |  |  | 14 |
Settlement* |  |  | 18 |  |  |  | — |  |  |  | 18 |  |  |  | 2 |
Curtailment* |  |  | — |  |  |  | 6 |  |  |  | — |  |  |  | 6 |
Special termination benefits* |  |  | — |  |  |  | 72 |  |  |  | — |  |  |  | 72 |
Net periodic benefit cost |  | $ | 121 |  |  | $ | 207 |  |  | $ | 339 |  |  | $ | 472 |
* | These amounts were recorded in Restructuring and other charges on the accompanying Statement of Consolidated Operations (see Note D).
|  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
Other postretirement benefits |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Service cost |  | $ | 4 |  |  | $ | 4 |  |  | $ | 12 |  |  | $ | 13 |
Interest cost |  |  | 28 |  |  |  | 28 |  |  |  | 86 |  |  |  | 85 |
Recognized net actuarial loss |  |  | 4 |  |  |  | 9 |  |  |  | 10 |  |  |  | 26 |
Amortization of prior service benefit |  |  | (6 | ) |  |  | (4 | ) |  |  | (15 | ) |  |  | (13 | )
Net periodic benefit cost |  | $ | 30 |  |  | $ | 37 |  |  | $ | 93 |  |  | $ | 111 |
On June 6, 2014, the United Steelworkers ratified a new five-year labor agreement covering approximately 6,100 employees at 10 U.S. locations; the previous labor agreement expired on May 15, 2014. In the 2014 nine-month period, as a result of the preparation for and ratification of the new agreement, Alcoa recognized $18 ($12 after-tax) in Cost of goods sold on the accompanying Statement of Consolidated Operations for, among other items, business contingency costs and a one-time signing bonus for employees. 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 4.80% at December 31, 2013 to 4.25% at May 31, 2014. The plan remeasurement resulted in an increase to both Alcoa’s pension liability of $100 and a combination of the plan’s unrecognized net actuarial loss and prior service cost (included in Accumulated other comprehensive loss) of $65 (after-tax). The plan remeasurement also resulted in a $13 decrease to 2014 annual net periodic benefit cost, of which $6 and $8 was recognized in the 2014 third quarter and nine-month period, respectively. The remaining $5 decrease will be recognized in the fourth quarter of 2014. Effective January 1, 2015, Alcoa will no longer offer postretirement health care benefits to Medicare-eligible, primarily non-bargaining, U.S. retirees through Company-sponsored plans. Qualifying retirees (hired prior to January 1, 2002), both current and future, may access these benefits in the marketplace by purchasing coverage directly from insurance carriers. This change resulted in the adoption of a significant plan amendment by certain Alcoa U.S. postretirement benefit plans. Accordingly, these plans were required to be remeasured, and through this process, the discount rate was updated from 4.80% at December 31, 2013 to 4.15% at August 31, 2014. The remeasurement of the plans resulted in a decrease to both Alcoa’s other postretirement benefits liability of $90 and a combination of the plans’ unrecognized net actuarial loss and prior service benefit (included in Accumulated other comprehensive loss) of $59 (after-tax). The remeasurement of the plans also resulted in a $7 decrease to 2014 annual net periodic benefit cost, of which $2 was recognized in the 2014 third quarter. The remaining $5 decrease will be recognized in the fourth quarter of 2014. On August 8, 2014, the Highway and Transportation Funding Act (HATFA) was signed into law by the United States government. HATFA, in part, provides temporary relief for employers who sponsor defined benefit pension plans related to funding contributions under the Employee Retirement Income Security Act of 1974. Specifically, HATFA modifies the interest rates that had been set in 2012 by the Moving Ahead for Progress in the 21st Century Act. As a result, management expects Alcoa’s estimated minimum required pension funding to decline by $100 in 2014 and by $125 in 2015.

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