v3.22.2.2
Pension and Other Postretirement Benefits
 9 Months Ended
Sep. 30, 2022
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
The components of net periodic benefit cost for defined benefit plans were as follows:
Third quarter ended September 30,Nine months ended September 30,
2022202120222021
Pension benefits
Service cost$3 $5 $12 $16 
Interest cost18 15 51 48 
Expected return on plan assets(21)(24)(68)(84)
Recognized net actuarial loss18 19 56 75 
Amortization of prior service cost1 — 2 — 
Settlements (1)
15 5 16 573 
Net periodic benefit cost(2)
$34 $20 $69 $628 
Other postretirement benefits
Service cost$1 $2 $3 $5 
Interest cost2 3 8 8 
Recognized net actuarial loss2 2 6 7 
Amortization of prior service benefit(2)(2)(6)(5)
Net periodic benefit cost(2)
$3 $5 $11 $15 
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(1)    In the 2022 third quarter and nine-month period, Settlements included $15 related to the payment of lump-sum benefits (see below). Settlements included $549 in the 2021 nine-month period due to the purchase of a group annuity contract and $5 and $24 in the 2021 third quarter and nine-month period, respectively, related to the payment of lump-sum benefits (see Note H to the Consolidated Financial Statements in Part II Item 8 of Arconic’s Annual Report on Form 10-K for the year ended December 31, 2021 (filed on February 22, 2022)).    
(2)    Service cost was reported in Cost of goods sold, Settlements were reported in Restructuring and other charges, and all other components were reported in Other expenses, net on the accompanying Statement of Consolidated Operations.
Pension Funding—In January 2021, the Company contributed a total of $200 to its two funded U.S. defined benefit pension plans, comprised of the estimated minimum required funding for 2021 of $183 and an additional $17. In April 2021, the Company contributed a total of $250 to its two funded U.S. defined benefit pension plans to maintain the funding level of the remaining plan obligations not transferred under a group annuity contract. Arconic had no minimum required funding due in the 2022 first quarter and contributed $7 in both the 2022 second quarter and third quarter to these two plans. The Company expects to contribute a total of $8 to these two plans in the remainder of 2022.
United Steelworkers Labor Agreement—On May 14, 2022, the Company and the United Steelworkers reached a tentative four-year labor agreement covering approximately 3,300 employees at four U.S. locations; the previous labor agreement expired on May 15, 2022. The tentative agreement was ratified by the union employees on June 1, 2022. In the 2022 second quarter, Arconic recognized $19 in Cost of goods sold on the accompanying Statement of Consolidated Operations primarily for a one-time signing bonus for the covered employees. Additionally, the new labor agreement provides for, among other items, established annual wage increases and higher multipliers used to calculate the union employees’ future pension retirement benefits.
The change to pension benefits qualifies as a significant plan amendment to the Company’s U.S. hourly defined benefit pension plan, and, as a result, Arconic was required to complete a remeasurement of this plan (generally completed as of December 31st each year), including an interim actuarial valuation of the plan obligations. Communication of the benefit change to the union employees occurred on May 15, 2022 and the effective date of this amendment was May 16, 2022. For purposes of performing an interim remeasurement of the plan, the Company applied a practical expedient to the remeasurement date and selected May 31, 2022. Accordingly, the discount rate used in calculating the plan obligations increased to 4.66% at May 31, 2022 from 2.96% at December 31, 2021. The remeasurement of this plan, together with the amendment for increased benefits, resulted in a $13 net decrease to Accrued pension benefits and a $10 (after-tax) net decrease to Accumulated other comprehensive loss (see Note K) on the accompanying Consolidated Balance Sheet. Additionally, annual net periodic benefit cost to be recognized for this plan in 2022 will increase by $8, comprised of a $2 decrease in service cost and a $10 increase in non-service costs. These amounts will be recognized ratably over the remainder of 2022 (June through December).
Lump Sum Benefit Payments—In the 2022 third quarter, management concluded that it was now probable that lump-sum benefit payments expected to be paid in 2022 under Arconic’s U.S. salary defined benefit pension plan will exceed the pre-determined threshold (sum of annual service cost and interest cost) requiring settlement accounting. As a result, the Company was required to complete a remeasurement of this plan (generally completed as of December 31st each year), including an interim actuarial valuation of the plan obligations. For purposes of performing an interim remeasurement of the plan, Arconic applied a practical expedient to the remeasurement date and selected September 30, 2022. Accordingly, the discount rate used in calculating the plan obligations increased to 5.71% at September 30, 2022 from 2.82% at December 31, 2021. The remeasurement of this plan, together with the settlement of benefits, resulted in a $34 net decrease to Accrued pension benefits and a $26 (after-tax) net decrease to Accumulated other comprehensive loss (see Note K) on the accompanying Consolidated Balance Sheet. Unfavorable plan asset performance offset most of the impact of the increase in the discount rate. Also, the settlement resulted in the accelerated amortization of a portion of the existing net actuarial loss associated with this plan in the amount of $15 ($12 after-tax). This amount was reclassified to earnings through Restructuring and other charges (see Note E) from Accumulated other comprehensive loss (see Note K). Additionally, annual net periodic benefit cost to be recognized for this plan in 2022 will increase by $8, all of which relates to non-service costs. This amount will be recognized ratably over the remainder of 2022 (October through December).