WASHINGTON - The Pension Benefit Guaranty Corporation reached an agreement with Alcoa Inc. to provide an additional $150 million in pension contributions to the company's two largest pension plans, which cover more than 83,000 people.
"These contributions will improve the financial status of both plans and help to further secure the pensions of Alcoa's workers and retirees," said PBGC Director Tom Reeder. "We're always looking to work with plan sponsors to give people better retirement security, and we appreciate that Alcoa shared this priority and was a helpful partner in the process."
On Sept. 28, 2015, Alcoa, a producer of lightweight metals, announced its intent to split the company into two new publicly traded entities: Alcoa Corp., a producer of bauxite, alumina and aluminum products, and Arconic Inc, a maker of high performance materials and products for industries such as automotive and aerospace.
Once the transaction is complete, Arconic will carry about $9 billion in long-term debt. This, in addition to the financial condition of the two largest plans, created the potential for additional risk to the company and its pension plans.
Alcoa Inc. sponsors eight pension plans that cover more than 102,000 workers and retirees. A majority of participants in the two largest plans, Alcoa Retirement Plan I and Alcoa Retirement Plan II, comprise 91 percent of the company's pension obligations. These participants will be split between Alcoa Corp. and Arconic when the transaction is finalized.
The additional $150 million in pension funding contributions will be made by Arconic in three payments of $50 million each during a 30-month period.
PBGC's agreement with Alcoa Inc. will improve the financial status of the plans and address the agency's concerns in connection with the transaction.
The Alcoa agreement is a product of PBGC's Early Warning Program, in which the agency monitors companies with large, underfunded defined benefit pension plans to identify corporate transactions that could jeopardize pensions. PBGC works with employers to arrange suitable protections for those pensions and the pension insurance program.