Alcoa has announced it will eliminate its defined benefit pension plan for most new U.S. salaried employees effective March 1, 2006. In its place, the company will offer a competitive, more-flexible and portable 401(k) defined contribution plan for new hires. The changes will not affect current Alcoa employees or retirees, who will continue to participate in their current defined benefit pension and defined contribution savings plans.
"We have very competitive benefit plans at Alcoa, and we periodically evaluate the level of competitiveness to ensure our plans are in line with the marketplace," said Paul Thomas, Executive VP, People, ABS, and Culture. "We will move to a defined contribution system for new hires - a contribution to a 401(k) plan of three percent of salary and bonus, in addition to our match programs on the first six percent contributed - that gives employees significant flexibility and portability of their retirement savings."
Under the new plan, the company will make a contribution of three percent of an employee's annual salary and bonus to the retirement plan, whether or not the employee contributes to the 401(k) plan. In addition, the company will match the first six percent of salary that an employee contributes to the savings plan.
A review of the benefits marketplace indicates nearly 65 percent of employers now have a 401(k) plan as their primary retirement vehicle.
While the elimination of the defined benefit plan for new hires will limit long-term liability for the Company, there is no immediate impact on the company's profitability. The change also allows new hires more say on where their retirement savings are invested, and provides them portability of that retirement fund when they leave the company.
The changes will not impact current Alcoa employees or retirees. "We will continue to monitor the marketplace and make appropriate modifications to our benefits programs that maintain our competitiveness," said Thomas. Workers covered by collective bargaining units and certain non-bargained hourly workers are also not impacted by the change.