v3.20.2
Pension and Other Postretirement Benefits
 6 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits​
Arconic Corporation sponsors several defined benefit pension and other postretirement plans covering eligible employees and retirees in U.S. and foreign locations, as well as certain legacy plans previously sponsored by ParentCo. Prior to January 1, 2020 for U.S. plans and prior to April 1, 2020 for certain non-U.S. plans, eligible employees and retirees related to the Arconic Corporation Businesses participated in ParentCo-sponsored defined benefit pension and other postretirement plans (the “Shared Plans”), which included participants related to the Howmet Aerospace Businesses and ParentCo corporate participants, as well as eligible retirees from previously closed or sold operations. Also, prior to the Separation Date, other eligible employees and retirees related to the Arconic Corporation Businesses participated in certain non-U.S. defined benefit pension and other postretirement plans (the “Direct Plans”).
The Company accounted for the portion of the Shared Plans related to its employees as multiemployer benefit plans. Accordingly, Arconic Corporation did not record an asset or liability to recognize the funded status of the Shared Plans. However, the related pension and other postretirement benefit expenses attributable to Arconic Corporation were based primarily on pensionable compensation of active Arconic Corporation participants and estimated interest costs, respectively. The Company also recorded an allocation of pension and other postretirement benefit expenses for the Shared Plans attributable to ParentCo corporate participants, as well as to participants related to closed and sold operations (see Cost Allocations in Note A).
The Direct Plans were accounted for as defined benefit pension and other postretirement plans. Accordingly, the funded status of each Direct Plan was recorded in the Company’s Consolidated Balance Sheet. Actuarial gains and losses that had not yet been recognized in earnings were recorded in Accumulated other comprehensive loss until they were amortized as a component of net periodic benefit cost. The determination of benefit obligations and recognition of expenses related to Direct Plans were dependent on various assumptions, including discount rates, long-term expected rates of return on plan assets, and future compensation increases. Management developed each assumption using relevant company experience in conjunction with market-related data for each of the plans.
In preparation for the Separation, effective January 1, 2020, certain U.S. pension and other postretirement benefit plans previously sponsored by ParentCo (the “U.S. Shared Plans” - see above) were separated into standalone plans for both Arconic Corporation (the “New Direct Plans”) and Howmet Aerospace. Accordingly, on January 1, 2020, Arconic Corporation recognized an aggregate liability of $1,920, of which $60 was current, reflecting the combined net unfunded status of the New Direct Plans, comprised of a benefit obligation of $4,255 and plan assets of $2,335, as well as $1,752 (net of tax impact) in Accumulated other comprehensive loss representing a net actuarial loss. In 2020, Arconic Corporation expects to recognize approximately $100 in combined net periodic benefit cost, of which approximately $25 is service cost. Also, in 2020, Arconic Corporation expects to make approximately $260 in pension contributions and $55 in other postretirement benefit payments, related to the New Direct Plans.
Additionally, effective on the Separation Date, certain other Shared Plans (the “Additional New Direct Plans,” and, collectively with the Direct Plans and New Direct Plans, the “Cumulative Direct Plans”) were assumed by Arconic Corporation. Accordingly, on April 1, 2020, Arconic Corporation recognized a noncurrent asset of $65 and a noncurrent liability of $15, reflecting the combined net funded status of the Additional New Direct Plans, as well as $50 (net of tax impact) in Accumulated other comprehensive loss representing a net actuarial loss.
In 2020, the Company expects to make approximately $280 in pension contributions to the Cumulative Direct Plans. This amount includes the previously mentioned $260 related to the New Direct Plans and $10 related to a non-U.S. plan (see below).
The following table summarizes the total expenses (excluding settlements and curtailments) recognized by Arconic Corporation related to the pension and other postretirement benefits described above:
​​​Pension benefitsOther postretirement benefits
​​​Second quarter ended June 30,Six months ended June 30,Second quarter ended June 30,Six months ended June 30,
Type of Plan​Type of Expense2020​20192020​20192020​20192020​2019
Cumulative Direct Plans​Net periodic benefit cost$18  $2  $39  $3  $6  $—  $12  $—  
Shared Plans​Multiemployer contribution—  14  —  30  —  6  —  11  
Shared Plans​Cost allocation—  5  (1) 10  —  1  —  2  
​​​$18  $21  $38  $43  $6  $7  $12  $13  
The components of net periodic benefit cost for defined benefit plans classified as Cumulative Direct Plans were as follows:
Second quarter ended June 30,Six months ended June 30,
2020​2019​2020​2019
Pension benefits
Service cost$5  $1  $10  $1  
Interest cost28  1  54  2  
Expected return on plan assets(45) (1) (85) (2) 
Recognized net actuarial loss31  1  61  2  
Amortization of prior service benefit(1) —  (1) —  
Settlement55  —  55  —  
Net periodic benefit cost*$73  $2  $94  $3  
Other postretirement benefits
Service cost$1  $—  $2  $—  
Interest cost4  —  8  —  
Recognized net actuarial loss1  —  3  —  
Amortization of prior service benefit—  —  (1) —  
Net periodic benefit cost*$6  $—  $12  $—  
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* Service cost was included within Cost of goods sold, Settlement was included within Restructuring and other charges, and all other components were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations.
In June 2020, Arconic Corporation and Howmet Aerospace, together, executed several liability management actions related to approximately 1,800 participants in a U.K. defined benefit pension plan. The primary action was the purchase of a group annuity contract to transfer the obligation to pay the remaining retirement benefits of certain plan participants to an insurance company. On a combined basis, these actions resulted in the settlement of approximately $400 in plan obligations and the transfer of approximately $460 in plan assets. In the 2020 second quarter, the Company contributed $10 to the plan to facilitate these actions and maintain the funding level of the remaining plan obligations. Prior to these actions, this plan had approximately 3,350 participants combined.
Accordingly, this plan was required to be remeasured, and through this process, the discount rate was updated from 2.05% at December 31, 2019 to 1.55% at June 30, 2020. The remeasurement of this plan, along with the settlement events, resulted in a $250 net reduction to the Company’s remaining plan obligation and both a decrease to the Company’s pension benefit asset and a settlement charge of approximately $55 in the 2020 second quarter. The settlement charge represents the accelerated amortization of a portion of the existing net actuarial loss associated with this plan. This amount was reclassified to earnings through Restructuring and other charges (see Note E) from Accumulated other comprehensive loss. Subsequent to this remeasurement, the remaining respective plan obligations and plan assets attributable to Arconic Corporation and Howmet Aerospace were transferred into separate plans and the existing U.K. plan was terminated. As of June 30, 2020, the Company’s remaining plan obligation was approximately $240 and the plan assets were approximately $260 related to 1,050 plan participants.