United Parcel Service, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2017

MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

We contribute to a number of multiemployer defined benefit plans under the terms of collective bargaining agreements that cover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:


•	Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If we negotiate to cease participating in a multiemployer plan, we may be required to pay that plan an amount based on our allocable share of its underfunded status, referred to as a "withdrawal liability". However, cessation of participation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to the collective bargaining process.

•

If any of the multiemployer pension plans in which we participate enter critical status, and our contributions are not sufficient to satisfy any rehabilitation plan funding schedule, we could be required under the Pension Protection Act of 2006 to make additional surcharge contributions to the multiemployer pension plan in the amount of five to ten percent of the existing contributions required by our labor agreement. Such surcharges would cease upon the ratification of a new collective bargaining agreement, and could not recur unless a plan re-entered critical status at a later date.

The discussion that follows sets forth the financial impact on our results of operations and cash flows for the years ended December 31, 2017, 2016 and 2015, from our participation in multiemployer benefit plans. As part of the overall collective bargaining process for wage and benefit levels, we have agreed to contribute certain amounts to the multiemployer benefit plans during the contract period. The multiemployer benefit plans set benefit levels and are responsible for benefit delivery to participants. Future contribution amounts to multiemployer benefit plans are determined only through collective bargaining, and we have no additional legal or constructive obligation to increase contributions beyond the agreed-upon amounts (except potential surcharges under the Pension Protection Act of 2006 as described above).

The number of employees covered by our multiemployer pension plans has remained consistent over the past three years, and there have been no significant changes that affect the comparability of 2017, 2016 and 2015 contributions. We recognize expense for the contractually-required contribution for each period, and we recognize a liability for any contributions due and unpaid at the end of a reporting period.

Status of Collective Bargaining Agreements

As of December 31, 2017, we had approximately 280,000 employees employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters. These agreements run through July 31, 2018. We have approximately 2,700 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA"), which runs through September 1, 2021. Our airline mechanics are covered by a collective bargaining agreement with Teamsters Local 2727, which became amendable November 1, 2013. We are currently in negotiations with Teamsters Local 2727. In addition, approximately 3,100 of our auto and maintenance mechanics who are not employed under agreements with the Teamsters are employed under collective bargaining agreements with the International Association of Machinists and Aerospace Workers (“IAM”) that will expire on July 31, 2019.

Multiemployer Pension Plans

The following table outlines our participation in multiemployer pension plans for the periods ended December 31, 2017, 2016 and 2015, and sets forth our calendar year contributions and accruals for each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2017 and 2016 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that we received from the plans’ administrators and is certified by each plan’s actuary. Plans certified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans certified in the yellow zone are less than 80% funded, and plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. As of December 31, 2017, all plans that have either a FIP or RP requirement have had the respective plan implemented.

Our collectively-bargained contributions satisfy the requirements of all implemented FIPs and RPs and do not currently require the payment of any surcharges. In addition, minimum contributions outside of the agreed upon contractual rates are not required. For the plans detailed in the following table, the expiration date of the associated collective bargaining agreements is July 31, 2018, with the exception of the Automotive Industries Pension Plan and the IAM National Pension Fund / National Pension Plan which both have a July 31, 2019 expiration date. For all plans detailed in the following table, we provided more than 5% of the total plan contributions from all employers for 2017, 2016 and 2015 (as disclosed in the annual filing with the Department of Labor for each respective plan).

Certain plans have been aggregated in the “all other multiemployer pension plans” line in the following table, as the contributions to each of these individual plans are not material.



	EIN / Pension Plan	Pension Protection Act Zone Status		FIP / RP Status Pending /	(in millions) UPS Contributions and Accruals						Surcharge
Pension Fund	Number	2017	2016	Implemented	2017		2016		2015		Imposed
Alaska Teamster-Employer Pension Plan	92-6003463-024	Red	Red	Yes/Implemented	$	5	$	5	$	5	No
Automotive Industries Pension Plan	94-1133245-001	Red	Red	Yes/Implemented	5		4		4		No
Central Pennsylvania Teamsters Defined Benefit Plan	23-6262789-001	Green	Green	No	40		38		36		No
Eastern Shore Teamsters Pension Fund	52-0904953-001	Green	Green	No	5		5		4		No
Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund	55-6021850-001	Red	Red	Yes/Implemented	12		11		11		No
Hagerstown Motor Carriers and Teamsters Pension Fund	52-6045424-001	Red	Red	Yes/Implemented	8		7		7		No
I.A.M. National Pension Fund / National Pension Plan	51-6031295-002	Green	Green	No	35		31		29		No
International Brotherhood of Teamsters Union Local No. 710 Pension Fund	36-2377656-001	Green	Green	No	118		107		106		No
Local 705, International Brotherhood of Teamsters Pension Plan	36-6492502-001	Yellow	Red	Yes/Implemented	93		88		91		No
Local 804 I.B.T. & Local 447 I.A.M.—UPS Multiemployer Retirement Plan	51-6117726-001	Yellow	Red	Yes/Implemented	110		103		97		No
Milwaukee Drivers Pension Trust Fund	39-6045229-001	Green	Green	No	38		36		35		No
New England Teamsters & Trucking Industry Pension Fund	04-6372430-001	Red	Red	Yes/Implemented	114		114		110		No
New York State Teamsters Conference Pension and Retirement Fund	16-6063585-074	Red	Red	Yes/Implemented	100		91		86		No
Teamster Pension Fund of Philadelphia and Vicinity	23-1511735-001	Yellow	Yellow	Yes/Implemented	60		56		53		No
Teamsters Joint Council No. 83 of Virginia Pension Fund	54-6097996-001	Green	Yellow	No	64		61		57		No
Teamsters Local 639—Employers Pension Trust	53-0237142-001	Green	Green	No	55		51		48		No
Teamsters Negotiated Pension Plan	43-6196083-001	Green	Green	No	32		31		30		No
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Plan	52-6043608-001	Green	Yellow	No	20		19		17		No
United Parcel Service, Inc.—Local 177, I.B.T. Multiemployer Retirement Plan	13-1426500-419	Red	Red	Yes/Implemented	88		83		83		No
Western Conference of Teamsters Pension Plan	91-6145047-001	Green	Green	No	772		694		646		No
Western Pennsylvania Teamsters and Employers Pension Fund	25-6029946-001	Red	Red	Yes/Implemented	30		28		26		No
All Other Multiemployer Pension Plans					66		56		42
				Total Contributions	$	1,870	$	1,719	$	1,623

Agreement with the New England Teamsters and Trucking Industry Pension Fund

In 2012, we reached an agreement with the New England Teamsters and Trucking Industry Pension Fund ("NETTI Fund"), a multiemployer pension plan in which UPS is a participant, to restructure the pension liabilities for approximately 10,200 UPS employees represented by the Teamsters. As of December 31, 2017 and 2016, we had $859 and $866 million, respectively, recognized in "other non-current liabilities" on our consolidated balance sheets representing the remaining balance of the NETTI Fund withdrawal liability. Based on the borrowing rates currently available to the Company for long-term financing of a similar maturity, the fair value of the NETTI Fund withdrawal liability as of December 31, 2017 and 2016 was $921 and $861 million. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.

Multiemployer Health and Welfare Plans

We also contribute to several multiemployer health and welfare plans that cover both active and retired employees. Healthcare benefits are provided to participants who meet certain eligibility requirements as covered under the applicable collective bargaining unit. The following table sets forth our calendar year plan contributions and accruals. Certain plans have been aggregated in the “all other multiemployer health and welfare plans” line in the table, as the contributions to each of these individual plans are not material.



	(in millions) UPS Contributions and Accruals
Health and Welfare Fund	2017		2016		2015
Central States, South East & South West Areas Health and Welfare Fund	$	2,366	$	2,268	$	2,081
Teamsters Western Region & Local 177 Health Care Plan	605		571		515
Health & Welfare Insurance Fund Teamsters Local 653	7		6		6
Bay Area Delivery Drivers	37		35		34
Central Pennsylvania Teamsters Health & Pension Fund	27		25		23
Delta Health Systems—East Bay Drayage Drivers	29		27		27
Employer—Teamster Local Nos. 175 & 505	11		11		10
Joint Council #83 Health & Welfare Fund	37		33		28
Local 191 Teamsters Health Fund	13		12		11
Local 401 Teamsters Health & Welfare Fund	9		8		7
Local 804 Welfare Trust Fund	84		79		75
Milwaukee Drivers Pension Trust Fund—Milwaukee Drivers Health and Welfare Trust Fund	38		36		34
Montana Teamster Employers Trust	8		8		7
New York State Teamsters Health & Hospital Fund	59		56		53
North Coast Benefit Trust	11		8		8
Northern California General Teamsters (DELTA)	132		116		108
Northern New England Benefit Trust	50		47		42
Oregon / Teamster Employers Trust	38		34		31
Teamsters 170 Health & Welfare Fund	17		16		15
Teamsters Benefit Trust	46		43		36
Teamsters Local 251 Health & Insurance Plan	15		14		13
Teamsters Local 404 Health & Insurance Plan	8		7		7
Teamsters Local 638 Health Fund	43		40		39
Teamsters Local 639—Employers Health & Pension Trust Funds	27		27		26
Teamsters Local 671 Health Services & Insurance Plan	17		17		15
Teamsters Union 25 Health Services & Insurance Plan	52		50		46
Teamsters Union Local 677 Health Services & Insurance Plan	11		10		10
Truck Drivers and Helpers Local 355 Baltimore Area Health & Welfare Fund	16		16		15
Utah-Idaho Teamsters Security Fund	29		26		25
Washington Teamsters Welfare Trust	52		47		44
All Other Multiemployer Health and Welfare Plans	78		68		95
Total Contributions	$	3,972	$	3,761	$	3,486