Alcoa Savings Plan Summary Plan Description

Transcription

1 Alcoa Savings Plan Summary Plan Description Effective July 1, 2007

2

3 Contents PLAN OVERVIEW... ii ABOUT THE PLAN Who Is Eligible?... 1 How Do I Enroll? (Your Web and Telephone Resources)... 2 When Can I Enroll?... 3 Do I Need to Name a Beneficiary?... 4 CONTRIBUTIONS... 5 What Types of Contributions Can I Make to the Plan?... 5 Important Contribution Limits... 8 How Do I Change the Amount I Contribute to the Plan?... 9 Automatic Increase Feature How Does It Work?... 9 What Contributions Does the Company Make to the Plan?... 9 INVESTMENT OPTIONS What Options Are Available to Invest My Contributions? How Can I Learn More about a Fund s Performance? Are There Any Fees or Expenses Associated with the Plan? How Do I Change My Investment Elections? How Do I Transfer Savings between Investments? Automatic Rebalancing Feature - How Does It Work? How Do I Keep Track of My Account Investments? PLAN PAYMENTS What Is Vesting? When Does Vesting Occur? When Can I Receive a Payment from the Plan? How Do I Request a Loan? How Do I Receive a Payment When I Terminate Employment? TAXATION OF PAYMENTS How Are Payments from the Plan Taxed? EMPLOYMENT STATUS CHANGES What Happens to My Savings Plan Account If I Have an Employment Status Change? ADMINISTRATIVE INFORMATION Participating Subsidiaries Plan Administrator and Sponsor Plan Year Type of Plan Identification Numbers Plan Funding Agent for Service of Legal Process Recordkeeping Services/Customer Service Plan Questions and Interpretation How to Appeal a Claim Plan Trustee and Investment Managers Your Rights to Benefits Your Rights under ERISA Pension Benefit Guaranty Corporation No Obligation to Continue Employment Future of the Plans DEFINITIONS APPENDIX A PARTICIPATING EMPLOYERS APPENDIX B LOAN PROCEDURE APPENDIX C BASIC PROSPECTUS INFORMATION APPENDIX D ACCOUNTING AND RECORDKEEPING PRACTICES Dividends Transaction Order Processing This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of Your Benefits Resources is a trademark of Hewitt Associates LLC. Ésta es la Descripción Sumaria del Plan (SPD, por sus siglas en inglés) de ahorros y del plan de retiro. Si usted no entiende cierta parte de esta información, por favor llame al ALCOA123 y pida por un representante de InfoLine que hable español. i Alcoa Savings Plan

4 Plan Overview This booklet is the Summary Plan Description (SPD) of the Alcoa Savings Plan for Non- Bargaining Employees, the Alcoa Savings Plan for Bargaining Employees, and the Alcoa Savings Plan for Subsidiary and Affiliate Employees in effect as of July 1, When Savings Plan and Alcoa Savings Plan are used in this booklet, they refer to all of these plans. These plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA). An SPD is intended to summarize the features of a plan in clear, understandable, and informal language for participants. However, the governing terms of these plans are contained in the official plan documents under which the plans operate. If there are any differences between this SPD and the plan documents, the plan documents will govern. The Alcoa Savings Plan is a defined contribution benefit plan set up under section 401(k) of the U.S. Internal Revenue Code. It is intended to enhance your financial security in retirement above the level of any pension and Social Security benefits you may have. The advantages of pre-tax contributions and tax-deferred growth make the plan better suited to long-term, retirement-oriented savings; the restrictions on pre-tax withdrawals and the additional tax on early withdrawals/payments make it less desirable for meeting short-term needs. Alcoa Inc. (the company ) also intends the Savings Plan to operate as a Section 404(c) plan under ERISA, which means that you have investment authority over your account. Under ERISA and the Department of Labor s regulations governing ERISA 404(c) plans, the company is not responsible for losses that may result from your investment choices. Alcoa Savings Plan ii

5 About the Plan... The Alcoa Savings Plan ( the plan ) is an important vehicle to help you build financial security for your retirement. The plan provides an ideal way for you to save and invest for a financially secure future by offering a number of important features: Choice: A wide range of investment options that allows you to diversify your savings. Convenience: Your contributions are deducted from your pay, making saving easy. Tax savings and tax-deferred growth: Your contributions and investment earnings are not taxed until you withdraw them. Employer contributions: Depending on where you work, Alcoa may match a portion of every pre-tax dollar you contribute, up to 6 percent of eligible earnings. In addition, depending on where you work and when you were hired, Alcoa may contribute a percentage of your eligible earnings, even if you decide not to make your own contributions to the plan. Flexibility: If you need to access your savings, you can take a loan or make a withdrawal. Portability: If you leave Alcoa, your savings can go with you. Easy to manage: You can use your telephone or computer with Internet access to track and manage your savings. Automatic enrollment: After 60 days of employment, you ll be automatically enrolled in the Alcoa Savings Plan at a contribution rate of 3 percent. You can choose to enroll sooner or opt out. Automatic features: You can choose to have your pre-tax savings contribution rate increase automatically or have your portfolio rebalanced. Investment tools: Numerous online tools are available to help you with your investment decisions. When you join the plan, you are taking an important step toward planning for your future financial needs. The plan helps make it simple for you to be a wise saver and investor, but it s up to you to take advantage of all that the plan has to offer. This booklet is designed to explain the key features of the plan and to help you make choices that are right for you. Who Is Eligible? You are eligible to begin contributing to the plan on your first day of work if you are a full-time or part-time employee and one of the following: a U.S. citizen or resident employed at a company identified in Appendix A (see page 46), including employees temporarily assigned to a non-u.s. location a non-u.s. citizen or resident employed at a company identified in Appendix A (see page 46) on a long-term assignment whose payroll and benefits are provided by that company a member of a unit or group of employees at a company identified in Appendix A (see page 46) who is covered by a collective bargaining agreement that provides for participation in the plan, or a member of a group of employees whose participation is approved by the Benefits Management Committee 1 Alcoa Savings Plan

6 If you are a temporary employee, you are eligible to participate in the plan after completing one year of service. If you are an employee who transfers from a non-participating company, you are eligible on the effective date of transfer, provided all other eligibility requirements are met. You are not eligible to participate in the plan if you are an employee who is: a non-u.s. citizen or resident included on the company s expatriate payroll and benefits program an agency, leased, or contract employee (as determined by the company, without regard to any court or agency decision determining common-law status), or any other individual not on the company s payroll a member of a group of employees excluded from coverage under the plan by the Benefits Management Committee a member of a unit or group of employees covered by a collective bargaining agreement that does not provide for participation in the plan How Do I Enroll? (Your Web and Telephone Resources) Enrolling in the plan is simple. You can enroll either online or by phone using the following resources: Your Benefits Resources at This interactive website is available 24 hours a day Monday through Saturday, and after 1 p.m. Eastern time on Sunday. InfoLine at ALCOA123 This automated telephone system is available 24 hours a day Monday through Saturday, and after 1 p.m. Eastern time on Sunday. The non-toll-free number for international callers is Hearing-impaired callers can use the AT&T Relay Service TTY at InfoLine representatives These specially trained individuals are available weekdays from 9 a.m. to 5 p.m. Eastern time. Though a representative can help you understand how the plan works, he or she cannot provide investment advice. As a newly eligible employee, you can enroll in the plan at any time (see When Can I Enroll? on page 3 for additional information). Each time you access either the Your Benefits Resources website or InfoLine, the company requires you to use a password along with your Social Security number so that your personal savings information is kept confidential and available only to you. By using your password, you also authorize the company to take payroll deductions and to make certain plan transactions on your behalf. Once you enroll and create a new password, you can access and manage your account using these same resources. Before you enroll in the plan, you ll need to decide how much to contribute and how your contributions will be allocated among the different investment options that you choose. You ll also need to name a beneficiary to receive the value of your account when you die. Alcoa Savings Plan 2

7 When Can I Enroll? If you are a new employee, you will be automatically enrolled in the plan after 60 days of eligible employment, unless you enroll earlier. You can enroll on your first day of employment if you are eligible to participate (see Who is Eligible? on page 1), using your Social Security number to access the system and create a new password. Otherwise, a letter will be sent to your home containing a pre-assigned, temporary password. You will need to use this password the first time you log on to the system or call InfoLine. After providing your temporary password, you ll be asked to change it to one of your own choice. New or Rehired Employees As a new or rehired employee, you can enroll in the plan at any time, either online or by phone. As explained above, you can enroll in the plan on your first day of employment or at any time thereafter. Shortly after you are hired, you ll receive an Alcoa Savings Plan Kit for New Employees that explains how to enroll, if you haven t already done so. If you are hired (or rehired) after August 1, 2006, you will be automatically enrolled in the plan following 60 days of eligible employment, unless you enroll earlier. This means that each pay period, 3 percent of your eligible earnings will be deducted from your pay and contributed to your Savings Plan account on a pre-tax basis. You may cancel the automatic enrollment before it becomes effective. Once you are automatically enrolled in the plan, however, your contributions are subject to the plan s provisions. Your contribution rate will also be subject to the automatic increase feature. This feature increases your contribution rate by 1 percent each April 1 (if your elections have been on file at least three months) until it reaches 6 percent ( Automatic Increase Feature How Does It Work? on 9 for additional information). If you choose to stop contributing after you have been automatically enrolled, any contributions already deducted from your pay will remain in your account until you are eligible to receive a payment of pre-tax savings under the plan. Transfers/Return to Work If you are a current employee, you will receive an Alcoa Savings Plan Kit for New Employees if: you transfer from an ineligible location to a location eligible to participate in the plan you return to work after a permanent separation (see page 27) You may enroll in the plan at any time once you become eligible. If you do not enroll when first eligible, you will be automatically enrolled in the plan following 60 days of eligible employment as described in the New or Rehired Employees section above. 3 Alcoa Savings Plan

8 Do I Need to Name a Beneficiary? When you enroll in the plan, you are strongly encouraged to designate a beneficiary the person(s) who will receive your account balance upon your death. You can name one or more beneficiaries and specify the percentage each beneficiary will receive. You will receive confirmation of your beneficiary designation by mail. If you are married, your spouse is automatically your beneficiary. If you want to designate someone other than, or in addition to, your spouse as your primary beneficiary, your spouse s written consent is required. Once you make your beneficiary designation, a form will be sent to you with a section for your spouse s signature, which must be witnessed by a notary public. The notarized form must then be returned as directed in order for the designation to take effect. If you do not name a beneficiary, your account will be paid to your spouse if you are married, or to your estate if you are not married. You should periodically review your beneficiary designation to make sure it is current. You can change your beneficiary at any time using the Your Benefits Resources website or by speaking with an InfoLine representative. Alcoa Savings Plan 4

9 Contributions What Types of Contributions Can I Make to the Plan? The plan allows you to make contributions several ways, including: pre-tax contributions after-tax contributions catch-up contributions, if eligible variable pay contributions, if eligible negotiated deferrals, if applicable rollovers You decide how much to contribute to the plan. Your contributions (other than rollovers) are made conveniently through payroll deductions. Pre-Tax and After-Tax Contributions When you enroll, you can choose to save on a pre-tax basis, an after-tax basis, or a combination of the two. You decide what percentage of your eligible earnings you wish to contribute. Most employees can save from 1 percent to 16 percent (in whole percentages) of eligible earnings. You can save: 1 to 16 percent of your eligible earnings on a pre-tax basis, or 1 to 16 percent of your eligible earnings on an after-tax basis. You can also choose to save a combination of both pre- and after-tax contributions, but the most you can save is 16 percent. However, if you are at least age 50 (or are turning age 50 by the end of the year), you can contribute more than 16 percent through catch-up contributions (see page 7 for additional information). While most employees can contribute up to 16 percent of their eligible earnings, restrictions apply to certain highly paid employees (see Important Contribution Limits on page 8). You can obtain current limitation amounts on the Your Benefits Resources website or by calling InfoLine at ALCOA123. Depending on where you work, pre-tax savings are also eligible for company matching contributions while after-tax savings are not (see Company Matching Contributions on page 10 for additional information). If you are a new employee who is automatically enrolled in the plan (see When Can I Enroll? on page 3), 3 percent of your eligible earnings will be initially deducted from your pay on a pre-tax basis. You can change this amount (or cancel it entirely before it becomes effective) using the Your Benefits Resources website or InfoLine. Your contribution will also be subject to the automatic increase feature (see page 9). What s the Difference between Pre-Tax and After-Tax Savings? Pre-tax savings are taken from your pay before you pay federal taxes. If you save on a pre-tax basis, you actually instruct the company to deduct a percentage of your pay and deposit it to your 5 Alcoa Savings Plan

10 Savings Plan account before any federal taxes are withheld. Because the amount you have deducted is not included in your current taxable income, you defer paying federal income tax on that portion of your income as long as it remains in the plan. When you receive a payment from the plan, your pre-tax savings and earnings will be taxable; however, you may be eligible for additional tax advantages at that time. Most states and cities follow the federal tax rules for pre-tax savings. However, depending on where you live, you may have to pay state and local taxes on pre-tax savings. Also, your pre-tax contributions are considered wages for Social Security taxes and are subject to FICA taxes. You should check with a professional tax advisor if you need additional information on how pre-tax contributions affect your individual situation. After-tax savings are taken from your pay after taxes have already been withheld. Any earnings on your after-tax savings will not be taxed as long as they remain in the plan. When your after-tax contributions are paid to you, you will only pay taxes on the earnings related to your after-tax savings. Example of Pre-Tax vs. After-Tax Savings Your pre-tax contributions go directly into your account before federal taxes are withheld. For example, Al is single, earns $30,000 per year, and wishes to save 6% of his eligible earnings. Based on these assumptions, Al will save more and pay less in taxes for the current year by contributing to the plan on a pre-tax basis. 6% Pre-Tax Contribution 6% After-Tax Contribution Eligible Earnings $30,000 $30,000 Pre-Tax Contribution $1,800 $0 Taxable Income $28,200 $30,000 Estimated Federal Taxes (15%)* $2,963 $3,233 After-Tax Contribution $0 $1,606 Net Take-Home Pay $25,237 $25,161 Increased Take Home Pay with Pre-Tax Contributions $76 ($25,237 less $25,161) N/A * Based on standard deductions and one exemption. In this example, Al will pay $270 less in federal taxes and save $194 more for the future. So, by contributing on a pre-tax basis rather than on an after-tax basis, Al is able to save more and increase his take-home pay. Your actual savings would depend on current tax rates and your own financial situation. Alcoa Savings Plan 6

11 Catch-Up Contributions As you approach retirement, you can make additional pre-tax contributions of up to $5,000 per year above the applicable limit to your Savings Plan account (see Important Contribution Limits on page 8). You can take advantage of the catch-up contribution option if you are: at least age 50 (or are turning age 50 by the end of the year in which you make your catch-up contributions); and contributing the maximum pre-tax amount to the plan. Catch-up contributions are voluntary and are separate from the pre-tax or after-tax contribution rate you elected. Catch-up contributions will be listed separately on your paycheck and on your quarterly account statements. Your catch-up contributions will be invested in the same funds as your other Alcoa Savings Plan elections are at the time they are made. Catch-up contributions are not eligible for the company matching contribution. Catch-up contributions are made on a per-pay-period basis. If you elect this option, you must specify the dollar amount that you want to contribute from each pay. For example, if you enter $2,000, then $2,000 will be deducted from your next pay and contributed to your Savings Plan account. If your pay schedule changes after you make your election (for example, from monthly to twice monthly), you must adjust the total dollar amount you want to contribute from each pay. Your catch-up contributions will automatically stop once you reach the maximum of $5,000 or at the end of the year, whichever occurs first. The Internal Revenue Service (IRS) may adjust this amount annually for inflation or cost-of-living changes. You will be advised of the maximum amount you may contribute when you make your annual election. You can start, increase, decrease, or stop catch-up contributions at any time during the year via the Your Benefits Resources website or by calling InfoLine at ALCOA123. Catch-up contribution elections do not carry over from year to year. You must make this election each year as permitted by law. Variable Pay Contributions You may direct eligible variable pay (any payment you receive from performance pay and/or profit sharing or gain sharing awards, if available at your location or provided for by your collective bargaining agreement) into your Savings Plan account as a separate pre-tax contribution. You make your initial variable pay election when you enroll in the plan via the Your Benefits Resources website or InfoLine. You can choose to contribute from zero to 50 percent (in 10 percent increments) of your variable pay, up to a maximum of $1,500 per year. Your variable pay contributions are invested based on your investment election in effect at the time the contribution is made. 7 Alcoa Savings Plan

12 You can also change your variable pay election for future variable pay awards at any time via the Your Benefits Resources website or InfoLine. It is your responsibility to know when a variable pay award will be made. The election you have on file at the time the award is made will determine how much of the award will be directed to your Savings Plan account. The company does not match any variable pay contributions. Negotiated Deferrals If you re covered by a collective bargaining agreement that provides for negotiated deferrals (also known as cost-of-living adjustments or COLAs), these payments can be directed to your plan account as separate pre-tax contributions. At some locations, negotiated deferrals are deposited automatically into your account. Certain negotiated lump-sum payments may also be directed to your plan account as separate pre-tax contributions if your applicable collective bargaining agreement provides for such deferrals. Negotiated deferrals and lump-sum payments are invested based on your investment election in effect at the time the deferral is made. The company does not match any negotiated deferrals or lump-sum payments. Important Contribution Limits Pre-Tax Dollar Limit: The IRS limits the amount you can save annually on a pre-tax basis. The maximum amount you can contribute for 2007 is $15,500 (excluding catch-up contributions). The limit may be indexed for inflation in increments of $500. Compensation Limit: The IRS also limits the amount of your eligible earnings that can be used to calculate your percentage of savings. The limit currently is set at $225,000 for This limit may be indexed for inflation in increments of $5,000. Pre-Tax Limits for Highly Compensated Employees: The IRS requires plan contributions to pass special tests. Contributions must be balanced so that the plan s tax advantages do not discriminate in favor of highly paid employees. The plan must pass these tests each calendar year to maintain its qualified status and keep its tax advantages. Due to these testing concerns, the contributions of certain highly paid employees are restricted. If you are one of these employees, you can save from 1 percent to 10 percent of eligible earnings, in whole percentages. You can save from: 1 to 6 percent of your eligible earnings on a pre-tax basis, or 1 to 10 percent of your eligible earnings on an after-tax basis. If you choose to save using a combination of pre- and after-tax contributions, the most you can save is 10 percent of your eligible earnings. The company will notify you if you are affected by these tests. If your contributions are restricted, you will receive separate information about other plans to which you might be entitled. Alcoa Savings Plan 8

13 Rollovers/Direct Transfers into the Plan In general, you can directly transfer or roll over your savings from a previous employer s qualified retirement plan or Individual Retirement Account (IRA) into the Alcoa Savings Plan. You must make the rollover contribution within 60 days of the date you receive the qualified payment from the prior plan or the date you withdraw the qualified payment from a conduit IRA. If you wish to make a direct transfer or rollover into the plan, you can request a Rollover Contribution form by calling InfoLine at ALCOA123. How Do I Change the Amount I Contribute to the Plan? You may increase, decrease, stop, or resume your pre-tax and/or after-tax contributions to the plan at any time through the Your Benefits Resources website or InfoLine at ALCOA123. Your change will take effect as of the first full pay period after your request is processed. You may also wish to take advantage of the Automatic Increase feature described below. Automatic Increase Feature How Does It Work? The automatic increase feature is a convenient way to incrementally increase your pre-tax contribution rate to gradually build your savings over time. It s easy to do. First, you select the target contribution rate you want to reach at some point in the future. If you are not already participating in the plan, you must also select an initial contribution rate. Next, you choose the amount by which you want your contribution rate to increase each year until your target contribution rate is met. Once you make your selections, the rest is done automatically. On April 1 of each year (if your elections have been on file for at least three months), your contribution rate will increase by your selected percent rate until your target rate is reached. You elect the automatic increase feature via the Your Benefits Resources website or InfoLine. You can also adjust or stop your automatic increase election at any time. If you are a new employee who is automatically enrolled in the plan (see When Can I Enroll? on page 3), the amount you are contributing will be increased by 1 percent each April 1 (following at least three months of participation) until you reach the contribution rate of 6 percent. You may decline the automatic increase feature via the Your Benefits Resources website or InfoLine. What Contributions Does the Company Make to the Plan? Depending on your date of hire and where you work, the company may contribute: company matching contributions employer retirement income contributions discretionary contributions 9 Alcoa Savings Plan

14 When you first become eligible to participate in the plan, you ll receive a letter advising you of the amount or percentage that will be contributed to your account by the company, if applicable. This letter serves as supplemental information to this SPD and should be kept with this booklet. Company Matching Contributions Depending on where you work, Alcoa may match a portion of every pre-tax dollar you save in the plan, up to 6 percent of your eligible earnings. Each location or division of the company decides the amount of its matching contribution (if any). Company matching contributions are made each pay period and are invested automatically in the Alcoa Stock Fund. They are not taxed as long as they remain in your plan account. You earn a right to the company matching contributions once you are vested in the plan (see page 22). Company matching contributions must remain in your account until they are vested or until you reach age 55, whichever occurs first. Once either of these events occurs, you can transfer company matching contributions to other plan funds. Employer Retirement Income Contributions (ERIC) If you are an employee hired or rehired on or after March 1, 2006 or, as of such effective date provided under the terms of your collective bargaining agreement or by your location, and you are not eligible for a defined benefit pension plan, you may be eligible to receive employer retirement income contributions, regardless of whether you contribute to the plan. Employer retirement income contributions are based on a percentage of your eligible earnings, which include your base compensation and, if applicable, any variable compensation plan awards (excluding individual performance bonuses), incentive compensation, profit sharing, gain sharing, or other compensation plans approved by the plan administrator. An employer retirement income contribution will be made each pay period based on your eligible earnings for that period. The contribution will be invested in the same manner as your current investment elections. If you have not enrolled in the plan, your contributions will automatically be invested in the Fixed Income Fund. Discretionary Contribution In addition to or instead of, company matching contributions, some locations may choose to make a discretionary employer contribution as part of the company-provided retirement income benefits. If you are eligible, the company will make the contribution to the plan on your behalf, whether or not you currently participate in the plan. Individual locations decide whether to make a contribution in any given year based on current or accumulated earnings and profits during a plan year. If a discretionary contribution is provided, the contribution amount is based on either uniform dollar amounts or a percentage of your eligible earnings for that period. Each location has the option to invest the discretionary contribution in the Alcoa Stock Fund. Otherwise, the contribution will be invested as follows: Alcoa Savings Plan 10

15 If you are a Savings Plan participant, the contribution will be invested according to your current investment elections. If you are not a plan participant, your contribution will automatically be invested in the Fixed Income Fund. Regardless of where the discretionary contribution is invested, you may transfer the amount between the plan s investment funds. If the contribution is designated as restricted, you cannot withdraw it or take a loan against it while you are employed by the company. However, if the discretionary contribution is designated as non-restricted, you may withdraw it or take a loan against it in accordance with plan rules. 11 Alcoa Savings Plan

16 Investment Options What Options Are Available to Invest My Contributions? The plan offers a variety of investment options, ranging from a conservative stable-value fund to more risky and aggressive funds. This well-balanced selection gives you the opportunity to invest your savings among several different types of stock, bond, and balanced investments funds. Spreading your savings among different investments is called diversification a strategy that lowers your investment risk and provides a better opportunity for account growth in the long term. Some funds are organized as mutual funds while others are collective trust funds or stock funds each option represents a different type of investment with its own degree of risk and potential return as shown in the table below. This wide range of investments allows you to choose the mix that best meets your personal financial goals. Asset Class LifePath Portfolios Risk/Return Target Maturity Barclays LifePath Retirement Target Maturity Barclays LifePath 2010 Target Maturity Barclays LifePath 2020 Target Maturity Barclays LifePath 2030 Target Maturity Barclays LifePath 2040 Will vary from High to Low as Target Maturity Date Approaches Asset Class Build Your Own Portfolio Risk/Return Stable Value Fixed Income Fund Low Intermediate Bond Vanguard Institutional Total Bond Market Index Fund Balanced American Funds - American Balanced Fund Low/Moderate Large-Cap Equity Vanguard Institutional Index Fund Plus Shares American Funds - Investment Company of America American Funds - AMCAP Fund Low Moderate Moderate Moderate Global Equity American Funds - New Perspective Fund Moderate/High International Morgan Stanley Institutional Fund International Equity Portfolio Moderate/High Mid-Cap Equity Putnam Vista Fund Moderate/High Small-Cap Equity Mellon Small-Cap Core Fund High Emerging Markets Morgan Stanley Institutional Fund Emerging Markets Portfolio High Company Stock Alcoa Stock Fund High Brokerage Window Schwab Personal Choice Retirement Account (PCRA) Variable Alcoa Savings Plan 12

17 You are not limited to one investment choice. You can invest in any one or a combination of the funds, in 1 percent increments, as long as the total equals 100 percent. Your investment choice applies to all the money you contribute and to any rollover contributions. Whatever mix you select remains in effect until you change it (see How Do I Change My Investment Elections? on page 19 for additional information). Important Information about Your Investment Choices The company intends the plan to be an ERISA 404(c) plan, which means that you have investment authority over your account. Under ERISA and the Department of Labor s regulations governing ERISA 404(c) plans, the company is not responsible for losses that may result from your investment choices. Your investments in any of the plan s options are as safe as they would be if you made them outside of the plan no more, no less. Alcoa does not guarantee the safety of your investments. For these reasons, you are strongly encouraged to educate yourself on all available options before you make investment decisions. Your enrollment kit and the Your Benefits Resources website contain basic information on all the investment options. To receive a fund s complete prospectus which contains details such as operating expenses, financial statements, and past and current performance visit the Your Benefits Resources website, the fund manager s website, or call InfoLine at ALCOA123. For an explanation of the plan s unit accounting and processing methods for investment transactions, please see Appendix D. Following is a brief description of the investment options currently available to you. The Benefits Management Committee, at its discretion, may change or terminate these options or select additional investment options at any time. Investment Options LifePath Portfolio Options: The plan offers five investment options targeted toward the year you want to retire. Each LifePath Portfolio is a collective trust fund managed by Barclays Global Investors, N.A. The LifePath Portfolios include different investments that are selected and allocated based on specific levels of risk and return. They are designed as complete investment options. Rather than you selecting individual investment funds and creating your own portfolio, LifePath Portfolios offer a diversified, professionally managed retirement strategy based on the projected retirement date (or other future date) that you choose. Once you select a portfolio, that portfolio s manager monitors the level of risk appropriate for each stage of life. It is important to keep in mind that a LifePath Portfolio with a target retirement date far in the future will be invested more aggressively than one with a retirement date in the near future. The portfolio s manager will keep the portfolio diversified, taking greater risk in earlier years and less risk as the portfolio s retirement date approaches. You should consider your own risk tolerance when selecting an investment option. The following LifePath Portfolios are available. If the year you are targeting falls between two different portfolio years, such as 2016, you can select the portfolio that most closely matches the year you plan to retire, or you can choose two LifePath Portfolios. 13 Alcoa Savings Plan

18 LifePath Portfolio Retirement: This portfolio is designed for participants who expect to begin withdrawing assets in the near future and who seek income and moderate long-term growth. The portfolio intends to hold about 34 percent of its assets in underlying funds that invest primarily in stocks, 65 percent that invest primarily in bonds, and the remaining 1 percent that invest primarily in money market instruments. LifePath Portfolio 2010: This portfolio is designed for participants who expect to begin withdrawing assets around the year The portfolio intends to hold about 45 percent of its assets in underlying funds that invest primarily in stocks, 54 percent that invest primarily in bonds, and the remaining 1 percent that invest primarily in money market instruments. As 2010 approaches, this allocation will become more conservative and have lower expected returns as the investment in bonds and other low-risk options increases. LifePath Portfolio 2020: This portfolio is designed for participants who expect to begin withdrawing assets around the year The portfolio intends to hold about 62 percent of its assets in underlying funds that invest primarily in stocks, 37 percent that invest primarily in bonds, and the remaining 1 percent that invest primarily in money market instruments. As 2020 approaches, this allocation will become more conservative and have lower expected returns as the investment in bonds and other low-risk options increases. LifePath Portfolio 2030: This portfolio is designed for participants who expect to begin withdrawing assets around the year The portfolio intends to hold about 76 percent of its assets in underlying funds that invest primarily in stocks, 23 percent that invest primarily in bonds, and the remaining 1 percent that invest primarily in money market instruments. As 2030 approaches, this allocation will become more conservative and have lower expected returns as the investment in bonds and other low-risk options increases. LifePath Portfolio 2040: This portfolio is designed for participants who expect to begin withdrawing assets around the year The portfolio intends to hold about 87 percent of its assets in underlying funds that invest primarily in stocks, 12 percent that invest primarily in bonds, and the remaining 1 percent that invest primarily in money market instruments. As 2040 approaches, this allocation will become more conservative and have lower expected returns as the investment in bonds and other low-risk options increases. NOTE: If you select a LifePath Portfolio, any applicable company matching contributions will continue to be invested in the Alcoa Stock Fund unless you transfer them. If you elect the automatic rebalancing feature (see page 20), any vested company matching contributions will be automatically transferred to the LifePath Portfolio each time your account is rebalanced. Fixed Income Fund Ticker Symbol: N/A Type of Fund: Stable-Value Fund Investment Manager: Fidelity Management Trust Company This collective trust fund seeks to preserve principal and provide a relatively stable rate of income over time. Secondary to the preservation of principal is the goal to generate over time a yield in excess of the short-term yields available in the marketplace. Alcoa Savings Plan 14

19 Vanguard Institutional Total Bond Market Index Fund Ticker Symbol: VITBX Type of Fund: Intermediate Bond Fund Investment Manager: The Vanguard Group ( This mutual fund seeks to maintain exposure to the entire U.S. investment-grade bond market by paralleling the performance of the Lehman Brothers Aggregate Bond Index. The Index includes more than 5,000 securities in the three primary classes: U.S. government, mortgage-backed, and investment-grade quality corporate bonds. The fund uses a passive approach to maintain investment characteristics similar to the Index. American Funds - American Balanced Fund - Class A Ticker Symbol: ABALX Type of Fund: Balanced/Asset Allocation Fund Investment Manager: Capital Research & Management Co. ( This mutual fund seeks conservation of capital, current income, and long-term growth of both capital and income by investing in a broadly diversified portfolio of stocks and bonds. The fund invests in a broad range of securities, including stocks and investment grade bonds. Normally, the fund will maintain at least 50 percent of the value of its assets in common stocks and at least 25 percent of the value of its assets in debt securities, including money market securities. The fund may invest up to 10 percent in common stocks and other securities of issuers that are domiciled outside the U.S. Vanguard Institutional Index Fund Plus Shares Ticker Symbol: VIIIX Type of Fund: Large-Cap Equity Fund Investment Manager: The Vanguard Group ( This mutual fund uses a passive management or indexing investment approach designed to track the performance of the Standard & Poor s 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The fund attempts to replicate the target Index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weightings in the Index. American Funds - The Investment Company of America - Class A Ticker Symbol: AIVSX Type of Fund: Large-Cap Equity Fund Investment Manager: Capital Research & Management Co. ( This mutual fund seeks long-term growth of capital and income. The fund invests primarily in common stocks, but it also may invest in high-quality convertibles and debt securities. When choosing securities, management gives the possibility of appreciation and potential dividends more weight than current yield. Stocks are chosen from a list prepared by the fund s directors. The fund may invest up to 15 percent of assets in foreign issues. 15 Alcoa Savings Plan

20 American Funds - AMCAP Fund - Class A Ticker Symbol: AMCPX Type of Fund: Mid- to Large-Cap Equity Fund Investment Manager: Capital Research & Management Co. ( This mutual fund seeks long-term growth of capital; current income is incidental. The basic investment philosophy of the investment manager is to seek to invest in attractively valued companies that, in its opinion, represent above-average, long-term investment opportunities. The fund invests primarily in stocks of issuers located in the U.S., but may invest in non-u.s. securities to a limited extent. The fund may also hold cash or money market instruments. American Funds - New Perspective Fund - Class A Ticker Symbol: ANWPX Type of Fund: Global Equity Fund Investment Manager: Capital Research & Management Co. ( This mutual fund seeks long-term growth of capital; potential for income is a secondary consideration. The fund emphasizes established companies in major world markets. It invests primarily in common stocks of foreign and U.S. companies. The advisor looks for worldwide changes in international trade patterns and economic/political relationships and then searches for companies that may benefit from the new opportunities created by such changes. The advisor closely follows securities, industries, governments, and currency-exchange markets worldwide. Morgan Stanley Institutional Fund International Equity Portfolio - Class A Ticker Symbol: MSIQX Type of Fund: International Equity Fund Investment Manager: Morgan Stanley Investment Management ( This mutual fund seeks long-term capital appreciation by diversifying investments among strategically selected securities of non-u.s. issuers. The fund s strategy is to purchase attractive stocks of strong companies at a substantial discount to their long-term fair value, comparing companies across geographic borders. Securities will be selected primarily from developed countries in Europe, Australia, and the Far East, but may include limited exposure to emerging markets. Putnam Vista Fund - Class A Ticker Symbol: PVISX Type of Fund: Mid-Cap Equity Fund Investment Manager: Putnam Investment Management Inc. ( This mutual fund seeks capital appreciation. It invests primarily in common stocks issued by midsized companies believed to offer above-average growth potential. It also may invest in preferred stocks, convertible securities, and debt securities. The fund may invest up to 20 percent of assets in securities principally traded in foreign markets. Mellon Small-Cap Core Fund Ticker Symbol: N/A Type of Fund: Small-Cap Equity Fund Investment Manager: Mellon Equity Associates ( This collective trust fund seeks long-term growth of capital by investing primarily in common stocks of small capitalization companies. A disciplined investment approach is used to identify opportunities and manage the risks of small-cap investing. The fund manager evaluates Alcoa Savings Plan 16

21 thousands of stocks and generally focuses on those with a market cap between $100 million and $3 billion. The fund is managed with a commitment to broad diversification. Morgan Stanley Institutional Fund Emerging Markets Portfolio - Class A Ticker Symbol: MGEMX Type of Fund: Emerging Markets Fund Investment Manager: Morgan Stanley Investment Management ( This mutual fund seeks to maximize long-term capital appreciation by investing in emerging markets with improving economic outlooks. The strategy focuses on growth-oriented securities selling at reasonable valuations, emphasizing thorough macroeconomic and fundamental research, as well as broad diversification to manage risk. Investment decisions are made using a blend of value-driven country allocation and growth-driven stock selection. Alcoa Stock Fund This stock fund seeks long-term growth through capital appreciation and dividend income by investing in the common stock of Alcoa Inc. The fund s return is directly linked to the performance of Alcoa Inc. common stock, although its actual return may vary slightly due to a small cash balance maintained by the fund to provide liquidity for participant-initiated withdrawals and transfers. Participation in this fund allows you to vote in stockholder meetings based on the number of equivalent shares in your account. Your rights are the same as those of other stockholders. In addition to receiving an annual report, you will receive information about voting and a proxy before each annual meeting. Basic prospectus information on this fund is provided in Appendix C. This is a company stock fund, and Mellon Bank, N.A. is the trustee. This option has been established as an employee stock ownership plan under the U.S. Internal Revenue Code, which allows you to choose how your dividends are handled (see Dividends on page 55). Schwab Personal Choice Retirement Account (PCRA) This option is a self-directed brokerage account that allows you to select and manage investments from a variety of options that are not available in the Alcoa Savings Plan. The PCRA is offered through Charles Schwab & Co., Inc., member SIPC/NYSE. You cannot use your PCRA to buy or sell shares from any of the other Savings Plan investment options, including Alcoa stock. There are several differences between the PCRA option and the plan s other investment options: You cannot direct payroll contributions into this option. Instead, you must first open a PCRA with Charles Schwab and then make deposits ($1,000 minimum). You fund your PCRA by transferring existing money from your other plan investment options. It is your responsibility to manage your own investments within your PCRA. This differs from other plan options, which are actively managed by professional portfolio managers whose sole job is to monitor and analyze the performance of the underlying securities they choose. 17 Alcoa Savings Plan

22 The Charles Schwab standard commission fee schedule applies to all trades you initiate through the PCRA. There may be other applicable fees, depending on the investments you choose. The PCRA option can fall any where from conservative to aggressive on the investment spectrum, depending on the type of investments you choose to make and the level of diversification you have within your PCRA. Frozen Investment Funds The T. Rowe Price Small-Cap Value Fund, T. Rowe Price Institutional International Fund, and the Vanguard Star Fund offered under the Reynolds Metals Company savings plans are mutual funds that were merged into the Alcoa Savings Plan in 2002 and are frozen. If you are a former Reynolds Metals Company employee with savings in any of these funds, you will be permitted to transfer amounts out of these funds and request withdrawals and loans of amounts invested in these funds. Because they are frozen, you will not be able to transfer existing savings or direct any future contributions or loan repayments into these funds. How Can I Learn More about a Fund s Performance? Past and current performance for each investment fund (except the PCRA) can be found on the Your Benefits Resources website. Information is provided on the current net asset values (NAVs); daily, quarter-to-date, and year-to-date returns; and 3-, 5-, and 10-year annualized returns. If you do not have access to a computer, an InfoLine representative can give you a fund s NAV as of the close of the previous business day. You can request that performance information or a mutual fund s prospectus, which includes the fund s historical performance, be sent to you. You also can check the financial section of most major newspapers using a mutual fund s ticker symbol or visit the fund manager s website. Are There Any Fees or Expenses Associated with the Plan? The company closely monitors the performance, investment management fees, and expenses of each fund offered in the plan. While many of the fees and expenses are paid by the company, others are charged directly to an investment fund s performance. As a general rule, transaction or load fees (fees charged for buying or selling shares) are not charged when you elect a particular investment option. The fund managers typically waive these fees because of the large amount of assets invested by plan participants. Fund managers, however, do charge management and operating expenses directly to an investment fund. These include commissions and fees charged when shares are sold. Also, some of the activities normally performed by fund managers are performed by the plan s recordkeeper. The recordkeeper receives reimbursement from some fund managers for those activities. In turn, these reimbursements are applied toward reducing the amount that is charged to the plan for recordkeeping expenses. Alcoa has chosen to pay for recordkeeping expenses, along with a variety of other plan costs, rather than pass them on to participants. Alcoa Savings Plan 18