Pension and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of obligations and Funded Status

Obligations and Funded Status


	Pension benefits						Other postretirement benefits
December 31,	2012			2011			2012			2011
Change in benefit obligation
Benefit obligation at beginning of year	$	13,526		$	12,343		$	2,844		$	2,902
Service cost		203			183			14			17
Interest cost		647			687			132			159
Amendments		6			40			-			(1	)
Actuarial losses		1,120			1,163			107			17
Settlements		-			(32	)		-			-
Curtailments		-			(7	)		-			-
Benefits paid, net of participants’ contributions		(833	)		(813	)		(256	)		(275	)
Medicare Part D subsidy receipts		-			-			21			25
Foreign currency translation impact		82			(38	)		1			-
Benefit obligation at end of year*	$	14,751		$	13,526		$	2,863		$	2,844
Change in plan assets
Fair value of plan assets at beginning of year	$	10,311		$	9,451		$	8		$	58
Actual return on plan assets		925			783			-			2
Employer contributions		571			945			-			-
Participants’ contributions		32			35			-			-
Benefits paid		(822	)		(805	)		(8	)		(52	)
Administrative expenses		(42	)		(38	)		-			-
Settlements		-			(34	)		-			-
Foreign currency translation impact		68			(26	)		-			-
Fair value of plan assets at end of year*	$	11,043		$	10,311		$	-		$	8
Funded status*	$	(3,708	)	$	(3,215	)	$	(2,863	)	$	(2,836	)
Less: Amounts attributed to joint venture partners		(40	)		(34	)		(4	)		(5	)
Net funded status	$	(3,668	)	$	(3,181	)	$	(2,859	)	$	(2,831	)
Amounts recognized in the Consolidated Balance Sheet consist of:
Noncurrent assets	$	86		$	109		$	-		$	-
Current liabilities		(32	)		(29	)		(256	)		(248	)
Noncurrent liabilities		(3,722	)		(3,261	)		(2,603	)		(2,583	)
Net amount recognized	$	(3,668	)	$	(3,181	)	$	(2,859	)	$	(2,831	)
Amounts recognized in Accumulated Other Comprehensive Loss consist of:
Net actuarial loss	$	5,880		$	5,191		$	593		$	511
Prior service cost (benefit)		119			129			(76	)		(92	)
Total, before tax effect		5,999			5,320			517			419
Less: Amounts attributed to joint venture partners		54			46			(1	)		(1	)
Net amount recognized, before tax effect	$	5,945		$	5,274		$	518		$	420
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss consist of:
Net actuarial loss	$	1,073		$	1,216		$	107		$	17
Amortization of accumulated net actuarial loss		(384	)		(246	)		(25	)		(26	)
Prior service cost (benefit)		9			42			-			(1	)
Amortization of prior service (cost) benefit		(19	)		(19	)		16			17
Total, before tax effect		679			993			98			7
Less: Amounts attributed to joint venture partners		8			10			-			(1	)
Net amount recognized, before tax effect	$	671		$	983		$	98		$	8

At December 31, 2012, the benefit obligation, fair value of plan assets, and funded status for U.S. pension plans were $11,521, $8,437, and $(3,084), respectively. At December 31, 2011, the benefit obligation, fair value of plan assets, and funded status for U.S. pension plans were $10,702, $7,988, and $(2,714), respectively.

Schedule of Pension Plan Benefit Obligations

Pension Plan Benefit Obligations


	Pension benefits
	2012		2011
The projected benefit obligation and accumulated benefit obligation for all defined benefit pension plans was as follows:
Projected benefit obligation	$	14,751	$	13,526
Accumulated benefit obligation		14,186		13,025

The aggregate projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets was as follows:
Projected benefit obligation		13,973		12,828
Fair value of plan assets		10,142		9,470

The aggregate accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets was as follows:
Accumulated benefit obligation		13,421		12,184
Fair value of plan assets		10,123		9,281

Components of Net Periodic Benefit Cost

Components of Net Periodic Benefit Cost


	Pension benefits⁽¹⁾									Other postretirement benefits⁽²⁾
	2012			2011			2010			2012			2011			2010
Service cost	$	186		$	165		$	148		$	14		$	17		$	20
Interest cost		639			678			682			131			158			174
Expected return on plan assets		(808	)		(806	)		(787	)		-			(2	)		(7	)
Recognized net actuarial loss		384			247			181			25			26			33
Amortization of prior service cost (benefit)		19			19			17			(16	)		(17	)		(15	)
Settlements⁽³⁾		-			2			2			-			-			(3	)
Curtailments⁽⁴⁾		-			(9	)		(10	)		-			-			-
Net periodic benefit cost⁽⁵⁾	$	420		$	296		$	233		$	154		$	182		$	202

⁽¹⁾	In 2012, 2011, and 2010, net periodic benefit cost for U.S pension plans was $288, $190, and $155, respectively.

⁽²⁾	In 2012, 2011, and 2010, net periodic benefit cost for other postretirement benefits reflects a reduction of $64, $43, and $39, respectively, related to the recognition of the federal subsidy awarded under Medicare Part D.

⁽³⁾	In all periods presented, settlements were due to the payment of significant lump sum benefits and/or purchases of annuity contracts.

⁽⁴⁾	In each period presented, curtailments were due to elimination of benefits or workforce reductions (see Note D).

⁽⁵⁾	Amounts attributed to joint venture partners are not included.

Schedule of Amounts Expected to be Recognized in Net Periodic Benefit Cost

Amounts Expected to be Recognized in Net Periodic Benefit Cost


	Pension benefits		Other postretirement benefits
	2013		2013
Net actuarial loss recognition	$	494	$	36
Prior service cost (benefit) recognition		19		(18	)

Schedule of Assumed Health Care Cost Trend Rates

Assumed health care cost trend rates for U.S. other postretirement benefit plans were as follows (assumptions for non-U.S plans did not differ materially):


	2012			2011			2010
Health care cost trend rate assumed for next year		6.0	%		6.5	%		6.5	%
Rate to which the cost trend rate gradually declines		4.5	%		5.0	%		5.0	%
Year that the rate reaches the rate at which it is assumed to remain		2017			2016			2015

Schedule of One-Percentage Point Change in Assumed Rates of Health Care Cost Trend Rates

A one-percentage point change in these assumed rates would have the following effects:


	1% increase		1% decrease
Effect on other postretirement benefit obligations	$	124	$	(114	)
Effect on total of service and interest cost components		5		(5	)

Schedule of Pension and Postretirement Plans Investment Policy and Weighted Average Asset Allocations

Alcoa’s pension and other postretirement plans’ investment policy and weighted average asset allocations at December 31, 2012 and 2011, by asset class, were as follows:


				Plan assets at December 31,
Asset class	Policy range			2012			2011
Equities		20–55	%		33	%		34	%
Fixed income		25–55	%		50			50
Other investments		15–35	%		17			16
Total					100	%		100	%

Schedule of Fair Value of Pension and Postretirement Plans' Assets

The following table presents the fair value of pension and other postretirement plans’ assets classified under the appropriate level of the fair value hierarchy:


December 31, 2012	Level 1		Level 2		Level 3		Total
Equities:
Equity securities	$	1,016	$	1,196	$	117	$	2,329
Short and long equity hedge funds		-		-		756		756
Private equity		-		-		550		550
	$	1,016	$	1,196	$	1,423	$	3,635
Fixed income:
Intermediate and long duration government/credit	$	1,169	$	3,689	$	215	$	5,073
Other		-		507		-		507
	$	1,169	$	4,196	$	215	$	5,580
Other investments:
Real estate	$	113	$	83	$	377	$	573
Macro hedge funds		-		-		796		796
Other		212		-		247		459
	$	325	$	83	$	1,420	$	1,828
Total	$	2,510	$	5,475	$	3,058	$	11,043

December 31, 2011	Level 1		Level 2		Level 3		Total
Equities
Equity securities*	$	904	$	1,203	$	110	$	2,217
Short and long equity hedge funds		-		-		731		731
Private equity		-		-		542		542
	$	904	$	1,203	$	1,383	$	3,490
Fixed income:
Intermediate and long duration government/credit	$	1,223	$	3,540	$	211	$	4,974
Other		-		340		-		340
	$	1,223	$	3,880	$	211	$	5,314
Other investments:
Real estate	$	97	$	74	$	375	$	546
Macro hedge funds		-		-		668		668
Other		198		-		123		321
	$	295	$	74	$	1,166	$	1,535
Total**	$	2,422	$	5,157	$	2,760	$	10,339

*	At December 31, 2011, Level 1 equity securities include $36 of Alcoa common stock related to the January 2011 plan contribution (see Funding and Cash Flows section below).

**	As of December 31, 2011, the total fair value of pension and other postretirement plans’ assets excludes a net payable of $20, which represents securities purchased not yet settled less interest and dividends earned on various investments.

Schedule of Reconciliation of Activity for Investments

The following table presents a reconciliation of activity for such investments:


	2012			2011
Balance at beginning of year	$	2,760		$	1,499
Realized gains		52			67
Unrealized gains		142			100
Purchases		634			1,221
Sales		(538	)		(124	)
Issuances		-			-
Settlements		-			-
Foreign currency translation impact		8			(3	)
Transfers in and (or) out of Level 3*		-			-
Balance at end of year	$	3,058		$	2,760

*	In 2012 and 2011, there were no transfers of financial instruments into or out of Level 3

Schedule of Benefit Payments Expected to be Paid and Expected Medicare Part D Subsidy Receipts

Benefit payments expected to be paid to pension and other postretirement benefit plans’ participants and expected Medicare Part D subsidy receipts are as follows:


Year ended December 31,	Pension benefits		Gross Other post- retirement benefits		Medicare Part D subsidy receipts		Net Other post- retirement benefits
2013	$	880	$	285	$	30	$	255
2014		870		280		30		250
2015		880		280		30		250
2016		890		275		30		245
2017		910		270		35		235
2018 through 2022		4,620		1,200		170		1,030
	$	9,050	$	2,590	$	325	$	2,265

Benefit Obligation [Member]

Schedule of Weighted Average Assumptions Used to Determine Benefit Obligations and Net Periodic Benefit Cost

Weighted average assumptions used to determine benefit obligations for U.S. pension and other postretirement benefit plans were as follows (assumptions for non-U.S plans did not differ materially):


December 31,	2012			2011
Discount rate		4.15	%		4.90	%
Rate of compensation increase		3.5			3.5

Net Periodic Benefit Cost [Member]

Schedule of Weighted Average Assumptions Used to Determine Benefit Obligations and Net Periodic Benefit Cost

Weighted average assumptions used to determine net periodic benefit cost for U.S. pension and other postretirement benefit plans were as follows (assumptions for non-U.S plans did not differ materially):


	2012			2011			2010
Discount rate*		4.90	%		5.75	%		6.15	%
Expected long-term rate of return on plan assets		8.50			8.50			8.75
Rate of compensation increase		3.50			3.50			3.50

In all periods presented, the respective discount rates were used to determine net periodic benefit cost for most U.S. pension plans for the full annual period. However, the discount rates for a limited number of plans were updated during 2011 and 2010 to reflect the remeasurement of these plans due to new union labor agreements, settlements, and (or) curtailments. The updated discount rates used were not significantly different from the discount rates presented.