Alcoa's Pension Will Be
Closed To New Workers
By Kris Maher
and Paul Glader, Staff
THE WALL STREET JOURNAL
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
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
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.
Kris Maher at
firstname.lastname@example.org and Paul Glader at