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Alcoa shifts new workers from pensions to 401(k)
By Dan McCue
Staff Writer
Aluminum giant Alcoa will eliminate its defined benefit pension plan for most new salaried employees effective March 1.
Instead, the company, which operates a plant in Mt. Holly, will offer a more generous 401(k) defined contribution plan to incoming workers.
Kevin Lowery, a company spokesman, said new hires that are members of collective bargaining units and certain non-bargaining groups will not be affected by the change in policy.
The same is true of current employees or retirees, who will continue to participate in their existing pension and defined contribution savings plans.
The move comes on the heals of Alcoa reporting a 16% decline in its fourth-quarter profits, mainly due to lowered production at refineries in Jamaica and Texas due to the Gulf Coast hurricanes, restructuring costs and unforeseen labor and facility problems at overseas plants.
“A big part of our moving away from pensions for new hires and beefing up our 401(k) plan is to make sure we have benefits that are competitive in the marketplace,” Lowery said. “Like all employers, we want to recruit the best available workers and retain the valued employees we have.”
He said Alcoa periodically evaluates its benefit plans to ensure they are in line with the marketplace. The most recent review found that roughly 65% of employers currently have a 401(k) program as a retirement vehicle.
“In years gone by, when you went to work for a company, you went there to stay,” Lowery said. “Today the average person has many different employers over the course of his working life.”
Because 401(k)s are portable and can be rolled into a subsequent employer’s 401(k) program, it is a more appealing retirement vehicle than a traditional pension plan, Lowery said.
“Another factor that makes 401(k)s more appealing than traditional pension plans are their flexibility,” he said. “Workers have more of a choice today in regards to where their retirement money is invested.”
Under the new plan, Alcoa will contribute 3% of an employee’s annual salary and bonus to the retirement account regardless of whether the employee contributes to the plan. In addition, the company will match the first 6% of salary that an employee contributes to the plan.
Lowery said while he didn’t know whether Alcoa’s Mt. Holly plant is currently hiring, he expected the new investment plan to be a boon rather than a detriment to its long-term recruiting efforts.
The plant, which opened in 1977 and currently employs about 600 people, produces aluminum ingot that is processed by customers into products such as foil, cans and automotive parts shipped throughout the United States and Mexico.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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