content_image/50475.jpg content_image/50474.jpg
## Obligations and Funded Status 

<img src='content_image/50475.jpg'>

Recognition of the subsidy for certain retiree groups as an offset to plan costs resulted in a $190 reduction in the APBO at December 31, 2003. The reduction in APBO is included with other deferred actuarial gains and losses. 

The net periodic benefit cost for postretirement benefits for the year ended December 31, 2004 reflected a reduction of $24 related to the recognition of the federal subsidy under Medicare Part D. Subsequent net periodic postretirement benefit costs will be adjusted to reflect the lower interest cost due to the lower APBO. To the extent that the deferred gains and losses are outside the corridor, the excess will continue to be recognized as prescribed under FAS 106. For other retiree groups, the 

## Components of Net Periodic Benefit Costs 

impact of the potential subsidy benefit has not been recorded because those amounts could not be reasonably estimated. 

Alcoa has not reflected any changes in participation in the company plan as a result of the Act. The reduction in APBO represents the value of the 28% subsidy and does not reflect any other changes. The subsidy is estimated to reduce the prescription drug portion of the per capita cost by 24%. 

Currently, Alcoa pays a portion of the prescription drug cost for certain retirees. The benefits for certain retirees were determined to be actuarially equivalent based on an analysis of Alcoa’s existing prescription drug plan provisions and claims experience as compared to the Medicare Part D prescription drug benefit that will be effective in 2006. 

<img src='content_image/50474.jpg'>

