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, 2018

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, 2018, 2017 and 2016, 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 2018, 2017 and 2016 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, 2018, we had approximately 283,000 employees employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters. These agreements expired on July 31, 2018. On October 5, 2018, the Teamsters declared that the tentative national master agreement for the U.S. Domestic Package business unit was considered ratified, and will be implemented as soon as five remaining local and supplemental agreements are negotiated and ratified. We remain in the process of negotiating and ratifying four of these local and supplemental agreements which, when ratified, will be retroactive to August 1, 2018. The UPS Freight business unit national master agreement was ratified on November 11, 2018.

We have approximately 2,800 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA"), which becomes amendable on September 1, 2021.

Our airline mechanics are covered by a collective bargaining agreement with Teamsters Local 2727. On February 8, 2019, the airline mechanics who are covered by this agreement voted to ratify a new contract which will become amendable November 1, 2023. 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, 2018, 2017 and 2016, 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 2018 and 2017 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, 2018, 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 was 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 those plans covered by the collective bargaining agreement that expired on July 31, 2018, 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 implemented. For all plans detailed in the following table, we provided more than 5% of the total plan contributions from all employers for 2018, 2017 and 2016 (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	2018	2017	Implemented	2018		2017		2016		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		5		4		No
Central Pennsylvania Teamsters Defined Benefit Plan	23-6262789-001	Green	Green	No	44		40		38		No
Eastern Shore Teamsters Pension Fund	52-0904953-001	Green	Green	No	6		5		5		No
Employer-Teamsters Local Nos. 175 & 505 Pension Trust Fund	55-6021850-001	Red	Red	Yes/Implemented	13		12		11		No
Hagerstown Motor Carriers and Teamsters Pension Fund	52-6045424-001	Red	Red	Yes/Implemented	9		8		7		No
I.A.M. National Pension Fund / National Pension Plan	51-6031295-002	Green	Green	No	38		35		31		No
International Brotherhood of Teamsters Union Local No. 710 Pension Fund	36-2377656-001	Green	Green	No	129		118		107		No
Local 705, International Brotherhood of Teamsters Pension Plan	36-6492502-001	Yellow	Yellow	Yes/Implemented	104		93		88		No
Local 804 I.B.T. & Local 447 I.A.M.—UPS Multiemployer Retirement Plan	51-6117726-001	Yellow	Yellow	Yes/Implemented	116		110		103		No
Milwaukee Drivers Pension Trust Fund	39-6045229-001	Green	Green	No	42		38		36		No
New England Teamsters & Trucking Industry Pension Fund	04-6372430-001	Red	Red	Yes/Implemented	121		114		114		No
New York State Teamsters Conference Pension and Retirement Fund	16-6063585-074	Red	Red	Yes/Implemented	108		100		91		No
Teamster Pension Fund of Philadelphia and Vicinity	23-1511735-001	Yellow	Yellow	Yes/Implemented	66		60		56		No
Teamsters Joint Council No. 83 of Virginia Pension Fund	54-6097996-001	Green	Green	No	69		64		61		No
Teamsters Local 639—Employers Pension Trust	53-0237142-001	Green	Green	No	61		55		51		No
Teamsters Negotiated Pension Plan	43-6196083-001	Green	Green	No	34		32		31		No
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Plan	52-6043608-001	Green	Green	No	22		20		19		No
United Parcel Service, Inc.—Local 177, I.B.T. Multiemployer Retirement Plan	13-1426500-419	Red	Red	Yes/Implemented	95		88		83		No
Western Conference of Teamsters Pension Plan	91-6145047-001	Green	Green	No	868		772		694		No
Western Pennsylvania Teamsters and Employers Pension Fund	25-6029946-001	Red	Red	Yes/Implemented	31		30		28		No
All Other Multiemployer Pension Plans					56		66		56
				Total Contributions	$	2,042	$	1,870	$	1,719

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, 2018 and 2017, we had $852 and $859 million, respectively, recognized in "Other non-current liabilities" as well as $7 million as of December 31, 2018 and 2017 recorded in "other current liabilities" on our consolidated balance sheets representing the remaining balance of the NETTI Fund withdrawal liability. This liability is payable in equal monthly installments over a remaining term of approximately 44 years. 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, 2018 and 2017 was $832 and $921 million, respectively. 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. For those plans covered by the collective bargaining agreement that expired on July 31, 2018, 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 implemented. 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	2018		2017		2016
Central States, South East & South West Areas Health and Welfare Fund	$	2,530	$	2,366	$	2,268
Teamsters Western Region & Local 177 Health Care Plan	656		605		571
Health & Welfare Insurance Fund Teamsters Local 653	8		7		6
Bay Area Delivery Drivers	40		37		35
Central Pennsylvania Teamsters Health & Pension Fund	29		27		25
Delta Health Systems—East Bay Drayage Drivers	30		29		27
Employer—Teamster Local Nos. 175 & 505	12		11		11
General Teamsters Local 493 Health Services & Insurance Plan	6		5		5
Joint Council #83 Health & Welfare Fund	40		37		33
Local 191 Teamsters Health Fund	13		13		12
Local 401 Teamsters Health & Welfare Fund	10		9		8
Local 443 Transportation Health Services & Insurance Plan	6		5		5
Local 804 Welfare Trust Fund	90		84		79
Milwaukee Drivers Pension Trust Fund—Milwaukee Drivers Health and Welfare Trust Fund	43		38		36
Montana Teamster Employers Trust	9		8		8
New York State Teamsters Health & Hospital Fund	62		59		56
North Coast Benefit Trust	12		11		8
Northern California General Teamsters (DELTA)	153		132		116
Northern New England Benefit Trust	54		50		47
Oregon / Teamster Employers Trust	43		38		34
Teamsters 170 Health & Welfare Fund	18		17		16
Teamsters Benefit Trust	48		46		43
Teamsters Local 251 Health & Insurance Plan	17		15		14
Teamsters Local 404 Health & Insurance Plan	8		8		7
Teamsters Local 638 Health Fund	48		43		40
Teamsters Local 639—Employers Health & Pension Trust Funds	29		27		27
Teamsters Local 671 Health Services & Insurance Plan	19		17		17
Teamsters Union 25 Health Services & Insurance Plan	56		52		50
Teamsters Union Local 677 Health Services & Insurance Plan	12		11		10
Truck Drivers and Helpers Local 355 Baltimore Area Health & Welfare Fund	18		16		16
Utah-Idaho Teamsters Security Fund	32		29		26
Washington Teamsters Welfare Trust	57		52		47
All Other Multiemployer Health and Welfare Plans	60		68		58
Total Contributions	$	4,268	$	3,972	$	3,761