Annual report pursuant to Section 13 and 15(d)

MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

v2.4.0.8
MULTIEMPLOYER EMPLOYEE BENEFIT PLANS
12 Months Ended
Dec. 31, 2013
Multiemployer Plans [Abstract]  
MULTIEMPLOYER EMPLOYEE BENEFIT PLANS
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 the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
If we choose to stop participating in some of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, 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.
The discussion that follows sets forth the financial impact on our results of operations and cash flows for the years ended December 31, 2013, 2012 and 2011 from our participation in multiemployer benefit plans. Several factors could cause us to make significantly higher future contributions to these plans, including unfavorable investment performance, changes in demographics and increased benefits to participants. However, all surcharges are subject to the collective bargaining process. At this time, we are unable to determine the amount of additional future contributions, if any, or whether any material adverse effect on our financial condition, results of operations or liquidity would result from our participation in these plans.
The number of employees covered by our multiemployer plans has remained consistent over the past three years, and there have been no significant changes that affect the comparability of 2013, 2012 and 2011 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.
Multiemployer Pension Plans
The following table outlines our participation in multiemployer pension plans for the periods ended December 31, 2013, 2012 and 2011, and sets forth our calendar year contributions into 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 2013 and 2012 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. Among other factors, 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, 2013, all plans that have either a FIP or RP requirement have had the respective FIP or RP 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 rate are not required. For the plans detailed in the following table, the expiration date of the associated collective bargaining agreements was July 31, 2013 (see Note 16), with the exception of the Automotive Industries Pension Plan and the IAM National Pension Fund / National Pension Plan which both have a July 31, 2014 expiration date. For those plans covered by the collective bargaining agreement that expired on July 31, 2013, we have accrued a liability for the estimated contributions (which are included in the following table) under our new collective bargaining agreement that has been approved, but not yet ratified (see note 16). For all plans detailed in the following table, we provided more than 5% of the total plan contributions from all employers for 2013, 2012 and 2011 (as disclosed in the Form 5500 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
 
2013
 
2012
 
Implemented
 
2013
 
2012
 
2011
 
Imposed
Alaska Teamster-Employer Pension Plan
92-6003463-024
 
Red
 
Red
 
Yes/Implemented
 
$
5

 
$
4

 
$
4

 
No
Automotive Industries Pension Plan
94-1133245-001
 
Red
 
Red
 
Yes/Implemented
 
4

 
4

 
4

 
No
Central Pennsylvania Teamsters Defined Benefit Plan
23-6262789-001
 
Green
 
Yellow
 
Yes/Implemented
 
30

 
29

 
27

 
No
Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund
55-6021850-001
 
Green
 
Green
 
No
 
9

 
9

 
8

 
No
Hagerstown Motor Carriers and Teamsters Pension Fund
52-6045424-001
 
Red
 
Red
 
Yes/Implemented
 
5

 
5

 
5

 
No
I.A.M. National Pension Fund / National Pension Plan
51-6031295-002
 
Green
 
Green
 
No
 
27

 
24

 
25

 
No
International Brotherhood of Teamsters Union Local No. 710 Pension Fund
36-2377656-001
 
Green
 
Green
 
No
 
88

 
75

 
74

 
No
Local 705, International Brotherhood of Teamsters Pension Plan
36-6492502-001
 
Red
 
Red
 
Yes/Implemented
 
68

 
46

 
58

 
No
Local 804 I.B.T. & Local 447 I.A.M.—UPS Multiemployer Retirement Plan
51-6117726-001
 
Red
 
Red
 
Yes/Implemented
 
88

 
87

 
84

 
No
Milwaukee Drivers Pension Trust Fund
39-6045229-001
 
Green
 
Green
 
No
 
29

 
26

 
26

 
No
New England Teamsters & Trucking Industry Pension Fund
04-6372430-001
 
Red
 
Red
 
Yes/Implemented
 
102

 
124

 
124

 
No
New York State Teamsters Conference Pension and Retirement Fund
16-6063585-074
 
Red
 
Red
 
Yes/Implemented
 
72

 
65

 
57

 
No
Teamster Pension Fund of Philadelphia and Vicinity
23-1511735-001
 
Yellow
 
Yellow
 
Yes/Implemented
 
46

 
44

 
41

 
No
Teamsters Joint Council No. 83 of Virginia Pension Fund
54-6097996-001
 
Yellow
 
Yellow
 
Yes/Implemented
 
49

 
44

 
41

 
No
Teamsters Local 639—Employers Pension Trust
53-0237142-001
 
Green
 
Green
 
No
 
41

 
36

 
33

 
No
Teamsters Negotiated Pension Plan
43-6196083-001
 
Yellow
 
Red
 
Yes/Implemented
 
26

 
24

 
22

 
No
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Plan
52-6043608-001
 
Yellow
 
Yellow
 
Yes/Implemented
 
14

 
14

 
12

 
No
United Parcel Service, Inc.—Local 177, I.B.T. Multiemployer Retirement Plan
13-1426500-419
 
Red
 
Red
 
Yes/Implemented
 
68

 
62

 
57

 
No
Western Conference of Teamsters Pension Plan
91-6145047-001
 
Green
 
Green
 
No
 
553

 
520

 
476

 
No
Western Pennsylvania Teamsters and Employers Pension Fund
25-6029946-001
 
Red
 
Red
 
Yes/Implemented
 
23

 
24

 
21

 
No
All Other Multiemployer Pension Plans
 
 
 
 
 
 
 
 
49

 
59

 
44

 
 
 
 
 
 
 
 
 
Total Contributions
 
$
1,396

 
$
1,325

 
$
1,243

 
 

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. The agreement reflected a decision by the NETTI Fund's trustees to restructure the NETTI Fund through plan amendments to utilize a "two pool approach", which effectively subdivided the plan assets and liabilities between two groups of beneficiaries. As part of this agreement, UPS agreed to withdraw from the original pool of the NETTI Fund, of which it had historically been a participant, and reenter the NETTI Fund's newly-established pool as a new employer.
Upon ratification of the agreement by the Teamsters in September 2012, we withdrew from the original pool of the NETTI Fund and incurred an undiscounted withdrawal liability of $2.162 billion to be paid in equal monthly installments over 50 years. The undiscounted withdrawal liability was calculated by independent actuaries employed by the NETTI Fund, in accordance with the governing plan documents and the applicable requirements of the Employee Retirement Income Security Act of 1974. In 2012, we recorded a charge to expense to establish an $896 million withdrawal liability on our consolidated balance sheet, which represents the present value of the $2.162 billion future payment obligation discounted at a 4.25% interest rate. This discount rate represents the estimated credit-adjusted market rate of interest at which we could obtain financing of a similar maturity and seniority. As this agreement is not a contribution to the plan, the amounts reflected in the previous table do not include this $896 million non-cash transaction.
The $896 million charge to expense recorded in 2012 is included in "compensation and benefits" expense in the statements of consolidated income, while the corresponding withdrawal liability is included in "other non-current liabilities" on the consolidated balance sheet. We impute interest on the withdrawal liability using the 4.25% discount rate, while the monthly payments made to the NETTI Fund reduce the remaining balance of the withdrawal liability.
Our status in the newly-established pool of the NETTI Fund is accounted for as the participation in a new multiemployer pension plan, and therefore we recognize expense based on 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.
Based on the borrowing rates currently available to the Company for long-term financing of a similar maturity, the fair value of the NETTI withdrawal liability as of December 31, 2013 was $783 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. Health care 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. For those plans covered by the collective bargaining agreement that expired on July 31, 2013, we have accrued a liability for the estimated contributions (which are included in the following table) under our new collective bargaining agreement that has been approved, but not yet ratified (see note 16). 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
2013
 
2012
 
2011
Bay Area Delivery Drivers
$
29

 
$
28

 
$
27

Central Pennsylvania Teamsters Health & Pension Fund
20

 
19

 
18

Central States, South East & South West Areas Health and Welfare Fund
505

 
471

 
452

Delta Health Systems—East Bay Drayage Drivers
24

 
24

 
17

Employer—Teamster Local Nos. 175 & 505
9

 
8

 
8

Joint Council #83 Health & Welfare Fund
24

 
25

 
25

Local 191 Teamsters Health Fund
9

 
9

 
9

Local 401 Teamsters Health & Welfare Fund
6

 
6

 
6

Local 804 Welfare Trust Fund
67

 
62

 
58

Milwaukee Drivers Pension Trust Fund—Milwaukee Drivers Health and Welfare Trust Fund
31

 
29

 
28

Montana Teamster Employers Trust
6

 
6

 
6

New York State Teamsters Health & Hospital Fund
46

 
44

 
41

North Coast Benefit Trust
8

 
7

 
7

Northern California General Teamsters (DELTA)
84

 
75

 
73

Northern New England Benefit Trust
35

 
33

 
32

Oregon / Teamster Employers Trust
28

 
27

 
27

Teamsters 170 Health & Welfare Fund
12

 
12

 
12

Teamsters Benefit Trust
38

 
32

 
29

Teamsters Local 251 Health & Insurance Plan
11

 
10

 
10

Teamsters Local 404 Health & Insurance Plan
6

 
6

 
6

Teamsters Local 638 Health Fund
32

 
29

 
28

Teamsters Local 639—Employers Health & Pension Trust Funds
24

 
22

 
22

Teamsters Local 671 Health Services & Insurance Plan
13

 
12

 
13

Teamsters Union 25 Health Services & Insurance Plan
37

 
36

 
34

Teamsters Union Local 677 Health Services & Insurance Plan
8

 
8

 
8

Truck Drivers and Helpers Local 355 Baltimore Area Health & Welfare Fund
13

 
13

 
12

Utah-Idaho Teamsters Security Fund
18

 
16

 
15

Washington Teamsters Welfare Trust
35

 
32

 
30

All Other Multiemployer Health and Welfare Plans
44

 
55

 
50

Total Contributions
$
1,222

 
$
1,156

 
$
1,103