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Pension and Other Postretirement Benefits | 6 Months Ended
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Jun. 30, 2021
Compensation And Retirement Disclosure [Abstract] |
Pension and Other Postretirement Benefits | L. 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 |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Service cost |  | $ | 5 |  |  | $ | 13 |  |  | $ | 10 |  |  | $ | 27 |
Interest cost(1) |  |  | 29 |  |  |  | 41 |  |  |  | 58 |  |  |  | 83 |
Expected return on plan assets(1) |  |  | (73 | ) |  |  | (73 | ) |  |  | (146 | ) |  |  | (147 | )
Recognized net actuarial loss(1) |  |  | 50 |  |  |  | 53 |  |  |  | 101 |  |  |  | 104 |
Settlements(2) |  |  | 39 |  |  |  | — |  |  |  | 39 |  |  |  | — |
Curtailments(2) |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 4 |
Net periodic benefit cost |  | $ | 50 |  |  | $ | 35 |  |  | $ | 62 |  |  | $ | 71 |
|  | Second quarter ended June 30, |  |  | Six months ended June 30, |
Other postretirement benefits |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Service cost |  | $ | 1 |  |  | $ | 1 |  |  | $ | 3 |  |  | $ | 2 |
Interest cost(1) |  |  | 4 |  |  |  | 5 |  |  |  | 8 |  |  |  | 10 |
Recognized net actuarial loss(1) |  |  | 5 |  |  |  | 5 |  |  |  | 11 |  |  |  | 9 |
Amortization of prior service benefit(1) |  |  | (4 | ) |  |  | (4 | ) |  |  | (8 | ) |  |  | (7 | )
Settlements(2) |  |  | — |  |  |  | — |  |  |  | 26 |  |  |  | — |
Curtailments(2) |  |  | — |  |  |  | (2 | ) |  |  | (17 | ) |  |  | (2 | )
Net periodic benefit cost |  | $ | 6 |  |  | $ | 5 |  |  | $ | 23 |  |  | $ | 12 |
(1) | These amounts were reported in Other (income) expenses, net on the accompanying Statement of Consolidated Operations (see Note Q).
(2) | These amounts were reported in Restructuring and other charges, net on the accompanying Statements of Consolidated Operations (see Note D) and of Cash Flows.
Plan Actions. In 2021, management initiated the following actions to certain pension and other postretirement benefit plans: Action #1 – On March 31, 2021, Alcoa completed the sale of the Warrick Rolling Mill to Kaiser Aluminum Corporation for total consideration of $670, which included the assumption of $66 in other postretirement benefit liabilities (after a post-closing adjustment that lowered the amount by $6 in the second quarter of 2021). The consideration amount is subject to further customary post-closing adjustments. Approximately 1,150 employees at the rolling operations, which includes the casthouse, hot mill, cold mills, and coating and slitting lines, became employees of Kaiser. As a result, the affected plan was remeasured, including an update to the discount rate used to determine the benefit obligation of the plan. Accrued other postretirement benefits reflects a decrease of $40 related to the remeasurement in addition to the $66 assumed by Kaiser. Further, Alcoa recognized a curtailment gain of $17 and a settlement charge of $26. Action #2 – In the second quarter of 2021, settlement accounting and a related plan remeasurement was triggered within Alcoa’s U.S. salaried pension plan as a result of a high number of participants electing lump sum payments. This includes former employees of the Warrick Rolling Mill, as well as other Alcoa employees making this election at retirement. Alcoa recorded a $90 decrease to Accrued pension benefits related to this remeasurement and recognized a settlement charge of $39. The following table presents certain information and the financial impacts of this action on the accompanying Consolidated Financial Statements:
Action # |  | Number of affected plan participants |  | Weighted average discount rate as of December 31, 2020 |  |  | Plan remeasurement date |  | Weighted average discount rate as of plan remeasurement date |  |  | Decrease to accrued pension benefits liability |  |  | Decrease to accrued other postretirement benefits liability |  |  | Curtailment gain(1) |  |  | Settlement charge(1) |
1 |  | ~840 |  | 2.45% |  |  | March 31, 2021 |  | 3.06% |  |  | $ | — |  |  | $ | (106 | ) |  | $ | (17 | ) |  | $ | 26 |
2 |  | ~120 |  | 2.38% |  |  | June 30, 2021 |  | 2.71% |  |  | $ | (90 | ) |  | $ | — |  |  | $ | — |  |  | $ | 39 |
(1) | These amounts represent the accelerated amortization of a portion of the existing prior service benefit for curtailments and net actuarial loss for settlements and were reclassified from Accumulated other comprehensive loss to Restructuring and other charges, net (see Note D) on the accompanying Statement of Consolidated Operations.
Funding and Cash Flows. It is Alcoa’s policy to fund amounts for defined benefit pension plans sufficient to meet the minimum requirements set forth in applicable country benefits laws and tax laws, including ERISA for U.S. plans. From time to time, the Company contributes additional amounts as deemed appropriate. On April 1, 2021, Alcoa made $500 in unscheduled contributions to certain U.S. defined benefit pension plans. The additional contributions were discretionary in nature and were funded with net proceeds from a March 2021 debt issuance (see Note K) plus available cash on hand. Under ERISA regulations, a plan sponsor that establishes a pre-funding balance by making discretionary contributions to a U.S. defined benefit pension plan may elect to apply all or a portion of this balance toward its minimum required contribution obligations to the related plan in future years. In the second quarter of 2021, management made such election related to the Company’s U.S. plans. Alcoa’s minimum required contribution to defined benefit pension plans in 2021 is estimated to be approximately $80, assuming election of the use of the pre-funding balance for the U.S. plan requirement for the remainder of 2021. In the second quarter of 2021, $6 was contributed to non-U.S. plans and $54 was elected to be deducted from the pre-funding balance of the U.S. plans. In the six month period of 2021, $49 and $20 were contributed to U.S. and non-U.S. plans, respectively. In the six month period of 2020, approximately $40 and $19 were contributed to U.S. and non-U.S. plans, respectively.

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