Arconic’s Pension Freeze and Pension Advice for Its Employees

Published January 22, 2018
In 2018 Arconic is freezing defined benefit pension plans for nearly 7,900 of its employees. As a replacement to this, Arconic will increase contributions to employee 401(k) plans for those affected.
  • In 2018 Arconic will freeze defined benefit pension plans for approximately 7,900 employees
  • While a 401(k) is one way to accumulate assets, it fails to provide financial stability and guarantee during retirement
  • Employees can use their 401(k) savings to purchase a Personal Pension or income annuity to secure retirement income

U.S. specialty metal maker, Arconic Inc. announced in Jan 2018 that it will freeze defined benefit pension plans for approximately 7,900 U.S.-based salaried and non-bargaining hourly employees. The freeze will take effect on April 1, 2018 and benefits earned by through March 31 will be available when employees reach retirement eligibility. Retirees already collecting benefits and former employees with vested benefits under the pension plans will not be impacted.

As a result of the reduction in future benefits Arconic expects a liability decrease of about $140 million in the first quarter of 2018. For 2018, the company expects pre-tax pension-related expenses to be about $50 million lower compared to 2017 full-year expenses.

Arconic will increase contributions to employee 401(k) plans for those affected, with a 3 percent contribution for the remainder of 2018 in addition the company’s regular 3 percent contribution and its up to 6 percent match.

Arconic 401(k): A Poor Replacement After Arconic’s Pension Freeze

But, while pensions as structured by Arconic and other corporates stopped being the appropriate retirement solution from the employer perspective, their replacement was never meant to be the 401(k). 401(k)s were created for senior executives, who already had maxed out their pensions, to accumulate more wealth to support their retirement lifestyles. And that’s what the 401(k) — and IRA — should be: a source of supplemental income once your fundamental living expenses have been covered. Since they don’t offer any guarantees or protection from the market or your own longevity, 401(k)s just cannot provide financial stability in retirement.

Arconic’s Pension Freeze is a Call to Action for Employees

Pension Freezes in 2018 itself means affected Arconic employees need to act quickly. It’s clear that companies increasingly want to focus on their core business and don’t want to manage pension plans. Private pension plan options are becoming increasingly popular, and we at Blueprint Income would suggest 2 alternatives for Arconic employees to mitigate the pension gap resulting from the pension freeze and to increase guaranteed lifetime income.

Arconic’s Pension Freeze Alternative 1 – The Personal Pension

We believe this to be the best option for all Arconic employees. The Personal Pension is the next best thing to an employer pension and a way for you to get a pension-like income in retirement without your employer.  Instead of being provided by employers, it’s backed by insurers, like an annuity. But, unlike the average annuity, you can purchase it in small amounts over time. Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check.

Here you can see what contributing to a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit. 

From there, you can fill out the information to have one of our specialists follow up with you, or continue with the enrollment process on your own. To do that, start with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

Arconic’s Pension Freeze Alternative 2 – Buy an Income Annuity

An alternative is to buy a traditional income annuity. Income annuities generally come in two types — longevity annuities and immediate annuities. Immediate annuities (as the name implies) have income starting within the next 12 months, whereas longevity annuities start income (at a predetermined level two year or more into the future). Both of these types of income annuities provide the financial security that you get from a guaranteed lifetime income stream that comes each month for as long as you’re alive. They’re ways to increase your pension check. 

At Blueprint Income, we offer income annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes, where you can compare options offered from different insurers on an apples-to-apples basis.

pacific life annuities

From there, you’ll get access to our annuity guides, team of specialists to help you analyze your retirement finances and walk you through the application process.

In short, if you’re looking to mitigate Arconic’s pension freeze and get more guaranteed lifetime income, you have two alternatives for how to get it. (Please note that these options are available to all Americans, not just Arconic employees.)

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Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.