Pension and Other Postretirement Benefits

6 Months Ended

Jun. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits

N. Pension and Other Postretirement Benefits – The components of net periodic benefit cost were as follows:


	Second quarter ended June 30,						Six months ended June 30,
Pension benefits	2016			2015			2016			2015
Service cost	$	41		$	44		$	81		$	88
Interest cost		122			145			244			289
Expected return on plan assets		(186	)		(189	)		(371	)		(377	)
Recognized net actuarial loss		102			117			204			235
Amortization of prior service cost		4			4			8			8
Settlements*		2			—			2			1
Special termination benefits*		—			10			1			12

Net periodic benefit cost	$	85		$	131		$	169		$	256

*	Except for Settlements of $2 in both the second quarter and six months ended June 30, 2016, these amounts were recorded in Restructuring and other charges on the accompanying Statement of Consolidated Operations (see Note D).


	Second quarter ended June 30,						Six months ended June 30,
Other postretirement benefits	2016			2015			2016			2015
Service cost	$	4		$	4		$	7		$	7
Interest cost		19			23			37			46
Recognized net actuarial loss		5			5			11			9
Amortization of prior service benefit		(7	)		(10	)		(13	)		(19	)
Curtailments*		—			(1	)		—			(1	)
Special termination benefits*		—			1			—			1

Net periodic benefit cost	$	21		$	22		$	42		$	43

*	These amounts were recorded in Restructuring and other charges on the accompanying Statement of Consolidated Operations (see Note D).

In conjunction with the annual measurement of the funded status of Alcoa’s pension and other postretirement benefit plans at December 31, 2015, management elected to change the manner in which the interest cost component of net periodic benefit cost is determined in 2016 and beyond. Previously, the interest cost component was determined by multiplying the single equivalent rate and the aggregate discounted cash flows of the plans’ projected benefit obligations. Under the new methodology, the interest cost component is determined by aggregating the product of the discounted cash flows of the plans’ projected benefit obligations for each year and an individual spot rate (referred to as the “spot rate” approach). In the 2016 second quarter and six-month period, this change resulted in a lower interest cost component of net periodic benefit cost under the new methodology compared to the previous methodology of $24 and $48, respectively, for pension plans and $4 and $8, respectively, for other postretirement benefit plans. Management believes this new methodology, which represents a change in an accounting estimate, is a better measure of the interest cost as each year’s cash flows are specifically linked to the interest rates of bond payments in the same respective year.