Aluminum producer Alcoa has signed a group annuity contract to transfer $290 million in obligations and related assets of its defined benefit pension plans for US retirees and beneficiaries. The company also has made a discretionary contribution of $100 million to those plans.
Both the annuitization and the discretionary payment are intended to reduce the risk associated with the volatility of its pension obligations. As part of the annuity contract, the $290 million in obligations and related assets will be transferred later in August to Athene Annuity and Life Company.
Athene will assume benefit payments for approximately 10,500 participants, which will begin in October. Participants will not see any change in the amount of their benefits. Through its subsidiaries, Athene has more than 800,000 policyholders and $114.8 billion in assets as of June 30. It has an A rating from A.M. Best, and an A- from Standard and Poor’s Global Ratings, and Fitch Ratings.
Alcoa also said it is notifying certain US salaried retirees that it will no longer provide retiree life insurance as of Sept. 1. As part of this change, Alcoa will make a one-time transition payment to the affected retirees totaling approximately $25 million.
As of June 30, Alcoa’s net liability for pension and other post-employment benefits was $2.7 billion, down from $3.5 billion at the end of 2017. Alcoa said the annuity transfer, pension contribution, and elimination of retiree life insurance will further reduce the company’s net pension and OPEB liability by approximately $175 million.
Tags: Alcoa, De-Risking, Group Annuity, Pension