The Association of U S West Retirees



Alcoa's Pension Will Be Closed To New Workers
By Kris Maher and Paul Glader, Staff Reporters

Tuesday, January 17, 2006

Alcoa Inc. said that beginning in March new salaried employees won't be eligible to participate in its U.S. pension plan, joining other employers moving away from such plans in favor of defined-contribution plans based on employee and company contributions.

Other companies that have closed their pensions to newly hired workers include Aon Corp. and NCR Corp.  Since Jan. 1, new salaried employees hired by Lockheed Martin Corp. haven't been eligible for its defined-benefit pension plan or retiree health benefits, following a change announced last fall.

Alcoa's pension change is less extreme and more common than those recently announced by International Business Machines Corp. and Verizon Communications Inc.  Those companies are "freezing" their pension plans for current salaried workers, meaning that no one in the pension plan will build new benefits after a certain date.

In most cases, employers have cited the cost savings of freezing or ending defined-benefit pension plans, and said moving away from the plans would help them compete with younger companies that haven't made pension promises and with foreign competitors whose employees often receive government benefits.

Alcoa, the world's largest aluminum producer, has been fighting to improve its financial performance in recent quarters by trimming operations costs, selling underperforming assets and shifting production to lower cost regions of the world.

But Alcoa said that while closing the plan for new hires would limit its long-term liability, it said there would be no immediate impact on the company's profitability.  A company spokesman said the changes were being made primarily to offer greater  flexibility to workers.

"It's not being done to save costs.  The cost savings are minimal," said Kevin G. Lowery, a company spokesman.  "Workers don't tend to go to a company and stay there forever.  They tend to have many different employers throughout their work career.  A 401(k) plan allows people to take it with them."

Alcoa, a Pittsburgh company with 48,000 U.S. employees, said it will make a contribution of 3% of an employee's annual salary and bonus to the retirement plan.  The company said it will also match the first 6% of salary that an employee contributes to the plan.  The changes won't affect current Alcoa employees or retirees, who will continue to participate in their current defined-benefit pension and defined-contribution plans.  The retirement plan for new employees takes effect March 1.

Unionized workers, whose benefits are determined through collective bargaining agreements, also aren't affected by the current change.  But some analysts said they believe that the company could ask for similar plan changes from unions, at least for future hires.

"It's easy to do this with the salaried workers because they don't have a union," said Stewart Spector, an aluminum industry consultant in Boynton Beach, Fla.  "I would imagine this has to be part of [union] contract negotiations."

A master contract with the United Steelworkers of America covering 9,000 Alcoa workers expires at the end of May.  It was unclear yesterday whether discussions related to that contract have begun.

"The union's position is that the defined-benefit pension system is the bedrock of economic security of our members, and attempts to undermine it are resisted on principle," said Marco Trbovich, a spokesman for the Steelworkers.

Write to Kris Maher at and Paul Glader at