Arconic Inc. announced Monday that it will freeze U.S. defined benefit pension plans for its salaried and non-bargained hourly workforce and instead contribute to a 401(k) plan for the employees.
The aluminum maker, whose operations include Arconic Davenport Works in Riverdale, said the change will impact 7,900 U.S. employees and will be effective April 1. The pension freeze will not impact retirees already collecting benefits or former employees with vested benefits.
Arconic said benefits already earned through March 31 still will be available to employees upon retirement.
The company now will contribute 3 percent of the employee's eligible compensation to the company's 401(k) plan and will match employee's contributions of up to 6 percent of eligible compensation to the plan. Arconic also is providing the affected employees with an additional transition contribution of 3 percent of eligible compensation for the remaining nine months of 2018.
"This transition balances our need to deliver competitive, equitable benefits to all employees while maintaining market competitiveness," Vas Nair, Arconic's executive vice president of human resources, said in a news release.
According to Arconic, the change is consistent with what new salaried employees are offered.
New hires have been under a different retirement plan since the then Alcoa eliminated its defined benefit pension plan in 2006. As of March 1, 2006, new U.S. salaried employees have received a 401(k) defined contribution plan. That change did not impact the existing Alcoa employees or retirees.
The company would not provide specific details, but it said the vast majority of new salaried employees receive a 3 percent employer contribution and a 6 percent match of eligible compensation to the applicable plan.
Arconic is the company created when Alcoa split into two companies on Nov. 1, 2016.
As a result of the new pension freeze, Arconic said its liabilities should decrease about $140 million in the first quarter as a result of the reduction of future benefits. It also said its pre-tax pension-related expense will decrease by about $50 million for 2018.
The company's Quad-City facility in Riverdale employs more than 400 salaried employees among its 2,500-person workforce. It was not clear how many would be impacted by the pension freeze.