Annual report pursuant to Section 13 and 15(d)

COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

v3.24.0.1
COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS
We sponsor various retirement and pension plans, including defined benefit and defined contribution plans, which cover our employees worldwide.
U.S. Pension Benefits
In the U.S. we maintain the following single-employer defined benefit pension plans:
•The UPS Retirement Plan is noncontributory and includes substantially all eligible employees of participating domestic subsidiaries hired prior to July 1, 2016 who are not members of a collective bargaining unit, as well as certain employees covered by a collective bargaining agreement. This plan generally provides for retirement benefits based on average compensation earned by employees prior to retirement. Benefits payable under this plan are subject to maximum compensation limits and the annual benefit limits for a tax-qualified defined benefit plan as prescribed by the Internal Revenue Service (“IRS”). The plan ceased accruals of additional benefits for future service and compensation for non-union participants effective January 1, 2023.
•The UPS Pension Plan is noncontributory and includes certain eligible employees of participating domestic subsidiaries and members of collective bargaining units that elect to participate in the plan. This plan generally provides for retirement benefits based on service credits earned by employees prior to retirement.
•The UPS/IBT Full-Time Employee Pension Plan is noncontributory and includes employees that were previously members of the Central States Pension Fund ("CSPF"), a multiemployer pension plan, in addition to other eligible employees who are covered under certain collective bargaining agreements. This plan generally provides for retirement benefits based on service credits earned by employees prior to retirement.
•The UPS Excess Coordinating Benefit Plan is a non-qualified plan that provides benefits to certain participants in the UPS Retirement Plan, hired prior to July 1, 2016, for amounts that exceed the benefit limits described above. The plan ceased accruals of additional benefits for future service and compensation for non-union participants effective January 1, 2023.
In the third quarter of 2023, our Teamsters employees ratified a new five-year national master agreement that contained wage and benefit rate increases for Teamsters employees in the UPS Pension Plan and UPS/IBT Full-Time Employee Pension Plan. The impacts of these increases were recognized as part of the year end measurement of these plans.
The divestiture of UPS Freight in 2021 triggered an interim remeasurement of the plan assets and benefit obligations of the UPS Pension Plan, UPS Retirement Plan and UPS Retired Employee Health Care Plan as of April 30, 2021. The interim remeasurement resulted in an actuarial gain of $2.1 billion, reflecting updated actuarial assumptions, and was recorded in other comprehensive income within the equity section of the consolidated balance sheet during the second quarter of 2021. An actuarial gain of $69 million ($52 million after tax) for a prior service credit related to the divested group and a $66 million loss ($50 million after tax) for certain plan amendments to the UPS Pension Plan were immediately recognized within Other expenses in the statement of consolidated income for the year ended December 31, 2021.
During 2021, we remeasured the UPS/IBT Full-Time Employee Pension Plan following the enactment into law of the American Rescue Plan Act, which is discussed below. The interim remeasurement resulted in a pre-tax mark-to-market gain of $3.3 billion ($2.5 billion after tax) during the year. The gain was included within Investment income and other in the statement of consolidated income for the year ended December 31, 2021.
International Pension Benefits
We also sponsor various defined benefit plans covering certain of our international employees. The majority of our international obligations are for defined benefit plans in Canada and the United Kingdom. In addition, many of our international employees are covered by government-sponsored retirement and pension plans. We are not directly responsible for providing benefits to participants of government-sponsored plans.
During 2022, we amended certain Canadian defined benefit pension plans to cease future benefit accruals effective December 31, 2023. We remeasured plan assets and benefit obligations for the plans, which resulted in curtailment gains of $34 million ($24 million after tax). These gains were included in Investment income and other in our statement of consolidated income for the year ended December 31, 2022.
U.S. Postretirement Medical Benefits
We also sponsor postretirement medical plans in the U.S. that provide healthcare benefits to certain non-union retirees, as well as select union retirees who meet certain eligibility requirements and who are not otherwise covered by multiemployer plans. Generally, this includes employees with at least 10 years of service who have reached age 55 and employees who are eligible for postretirement medical benefits from a company-sponsored plan pursuant to collective bargaining agreements. We have the right to modify or terminate certain of these plans. These benefits have been provided to certain retirees on a noncontributory basis; however, in many cases, retirees are required to contribute all or a portion of the total cost of the coverage.
Defined Contribution Plans
We sponsor a defined contribution plan for employees not covered under collective bargaining agreements, and several smaller defined contribution plans for certain employees covered under collective bargaining agreements. We match, in cash, a portion of the participating employees’ contributions. Matching contributions charged to expense were $161, $153 and $153 million for 2023, 2022 and 2021, respectively.
Beginning in 2023, non-union employees, including those previously accruing benefits in the UPS Retirement Plan, receive a retirement contribution of 5% to 8% (3% to 8% prior to 2023 for employees hired after July 1, 2016) of eligible compensation to the UPS 401(k) Savings Plan based on years of vesting service. Retirement contributions charged to expense were $380, $83 and $107 million for 2023, 2022 and 2021, respectively. In addition, the UPS 401(k) Savings Plan provides for transition contributions to certain participants hired prior to 2008. The amount charged to expense for transition contributions in 2023 was $128 million. There were no transition contributions in previous years.
Contributions under this plan are subject to maximum compensation and contribution limits for a tax-qualified defined contribution plan as prescribed by the IRS. The UPS Restoration Savings Plan is a non-qualified plan that provides benefits to certain participants in the UPS 401(k) Savings Plan for amounts that exceed these benefit limits.
Contributions are also made to defined contribution money purchase plans under certain collective bargaining agreements. Amounts charged to expense were $132, $119 and $112 million for 2023, 2022 and 2021, respectively.
We also sponsor certain international defined contribution plans, which are not individually material.
Net Periodic Benefit Cost
Information about net periodic benefit cost for the company-sponsored pension and postretirement defined benefit plans is as follows (in millions):
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2021 2023 2022 2021 2023 2022 2021
Net Periodic Benefit Cost:
Service cost $ 1,172  $ 2,024  $ 1,897  $ 20  $ 30  $ 28  $ 43  $ 68  $ 76 
Interest cost 2,508  1,950  1,948  116  83  81  66  45  38 
Expected return on plan assets (2,967) (3,280) (3,327) (12) (4) (5) (84) (78) (68)
Amortization of prior service cost 106  93  139  2  —  7  1  1  2 
Actuarial (gain) loss 393  (875) (3,284) —  —  24  (42) (152) (12)
Curtailment and settlement (gain) loss —  —  —  —  —  —  8  (34) — 
Net periodic benefit cost $ 1,212  $ (88) $ (2,627) $ 126  $ 109  $ 135  $ (8) $ (150) $ 36 
Actuarial Assumptions
The table below provides the weighted-average actuarial assumptions used to determine the net periodic benefit cost:
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2021 2023 2022 2021 2023 2022 2021
Service cost discount rate 5.79  % 3.13  % 2.90  % 6.06  % 3.28  % 2.88  % 5.09  % 2.78  % 2.38  %
Interest cost discount rate 5.79  % 3.13  % 2.90  % 6.06  % 3.28  % 2.88  % 5.02  % 2.74  % 2.22  %
Rate of compensation increase 3.25  % 4.29  % 4.50  % N/A N/A N/A 3.20  % 3.17  % 2.93  %
Expected return on plan assets 7.07  % 5.90  % 6.50  % 6.62  % 4.77  % 3.65  % 5.13  % 3.87  % 3.68  %
Cash balance interest credit rate 4.21  % 2.50  % 2.50  % N/A N/A N/A 3.69  % 2.94  % 2.74  %
The table below provides the weighted-average actuarial assumptions used to determine the benefit obligations of our plans:
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2023 2022 2023 2022
Discount rate 5.42  % 5.79  % 5.80  % 6.06  % 4.21  % 4.63  %
Rate of compensation increase 3.25  % 3.25  % N/A N/A 3.19  % 3.20  %
Cash balance interest credit rate 3.83  % 4.21  % N/A N/A 3.31  % 3.69  %
A discount rate is used to determine the present value of our future benefit obligations. To determine the discount rate for our U.S. pension and postretirement benefit plans, we use a bond matching approach to select specific bonds that would satisfy our projected benefit payments. We believe the bond matching approach reflects the process we would employ to settle our pension and postretirement benefit obligations. For our international plans, the discount rate is determined by matching the expected cash flows of the plan, where available, or of a sample plan of similar duration, to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. These assumptions are updated each measurement date, which is typically annually.
As of December 31, 2023, the impact of each basis point change in the discount rate on the projected benefit obligation of our pension and postretirement medical benefit plans is as follows (in millions):
  Increase (Decrease) in the Projected Benefit Obligation
  Pension Benefits Postretirement Medical Benefits
One basis point increase in discount rate $ (62) $ (1)
One basis point decrease in discount rate $ 65  $ 2 
The Society of Actuaries ("SOA") published mortality tables and improvement scales are used in developing the best estimate of mortality for our U.S. plans. In October 2023, the SOA elected to not release a new mortality improvement scale. Based on our perspective of future longevity, we elected to maintain the MP 2021 mortality scale assumption for purposes of measuring pension and other postretirement benefit obligations.
Assumptions for the expected return on plan assets are used to determine a component of net periodic benefit cost for the year. The assumption for our U.S. plans is developed using a long-term projection of returns for each asset class. Our asset allocation targets are reviewed annually and, if necessary, updated taking into consideration plan changes, funded status and actual performance. The expected return for each asset class is a function of passive, long-term capital market assumptions and excess returns generated from active management. The capital market assumptions used are provided by independent investment advisors, while excess return assumptions are supported by historical performance, fund mandates and investment expectations. As a result of our long-term U.S. capital market assumptions and investment objectives for pension assets, the weighted-average long-term expected rate of return on assets increased from 5.90% during 2022 to 7.07% in 2023.
For plans outside the U.S., consideration is given to local market expectations of long-term returns. Strategic asset allocations are determined by plan, based on the nature of liabilities and considering the demographic composition of the plan participants.
Actuarial Assumptions - Central States Pension Fund
UPS was a contributing employer to the CSPF until 2007, at which time UPS withdrew from the CSPF. Under a collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”), UPS agreed to provide coordinating benefits in the UPS/IBT Full-Time Employee Pension Plan (“UPS/IBT Plan”) for UPS participants whose last employer was UPS and who had not retired as of January 1, 2008 (“the UPS Transfer Group”) in the event that benefits are reduced by the CSPF consistent with the terms of our withdrawal agreement with the CSPF. Under this agreement, benefits to the UPS Transfer Group cannot be reduced without our consent and can only be reduced in accordance with law.
Subsequent to our withdrawal, the CSPF incurred extensive asset losses and indicated that it was projected to become insolvent. In such event, the CSPF benefits would be reduced to the legally permitted Pension Benefit Guaranty Corporation ("PBGC") limits, triggering the coordinating benefits provision in the collective bargaining agreement.
In 2021, the American Rescue Plan Act (“ARPA”) was enacted into law. The ARPA contains provisions that allow for qualifying multiemployer pension plans to apply for special financial assistance ("SFA") from the PBGC, which will be funded by the U.S. government. Following SFA approval, a qualifying multiemployer pension plan will receive a lump sum payment to enable it to continue paying unreduced pension benefits through 2051. The multiemployer plan is not obligated to repay the SFA. The ARPA is intended to prevent both the PBGC and certain financially distressed multiemployer pension plans, including the CSPF, from becoming insolvent through 2051. The CSPF submitted an application for SFA that was approved in December 2022. In January 2023, $35.8 billion was paid to the CSPF by the PBGC.
The passage of the ARPA triggered a remeasurement of the UPS/IBT Plan under ASC Topic 715. Accordingly, we remeasured the plan assets and pension benefit obligation as of March 31, 2021, which resulted in an actuarial gain of $6.4 billion, reflecting a reduction of the liability for coordinating benefits of $5.1 billion and a gain from other updated actuarial assumptions of $1.3 billion. We recorded a gain of $3.1 billion in accumulated other comprehensive income within the equity section of our consolidated balance sheet and a mark-to-market gain of $3.3 billion within Investment income and other in our statement of consolidated income during the first quarter of 2021.
We account for the potential obligation to pay coordinating benefits under ASC Topic 715, which requires us to provide a best estimate of various actuarial assumptions in measuring our pension benefit obligation at the December 31 measurement date. As of December 31, 2023, our best estimate of coordinating benefits that may be required to be paid by the UPS/IBT Plan after SFA funds have been exhausted was immaterial.
The value of our estimate for future coordinating benefits will continue to be influenced by a number of factors, including interpretations of the ARPA, future legislative actions, actuarial assumptions and the ability of the CSPF to sustain its long-term commitments. Actual events may result in a change in our best estimate of the projected benefit obligation. We will continue to assess the impact of these uncertainties in accordance with ASC Topic 715.
Other Actuarial Assumptions
Healthcare cost trends are used to project future postretirement medical benefits payable from our plans. For purposes of measuring our U.S. plan obligations as of December 31, 2023, a 7.25% annual rate of increase in postretirement medical benefit costs was assumed; the rate was assumed to decrease gradually to 4.50% by 2035 and to remain at that level thereafter.
Funded Status
The following table discloses the funded status of our plans and the amounts recognized in our consolidated balance sheets as of December 31 (in millions):
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2023 2022 2023 2022
Funded Status:
Fair value of plan assets $ 43,491  $ 42,058  $ 98  $ 215  $ 1,893  $ 1,643 
Benefit obligation (47,712) (43,504) (1,974) (2,016) (1,601) (1,416)
Funded status $ (4,221) $ (1,446) $ (1,876) $ (1,801) $ 292  $ 227 
Funded Status Recognized in our Balance Sheet:
Other non-current assets $ —  $ 1,408  $ —  $ —  $ 510  $ 416 
Other current liabilities (26) (24) (123) (7) (7) (6)
Pension and postretirement benefit obligations (4,195) (2,830) (1,753) (1,794) (211) (183)
Net asset (liability) $ (4,221) $ (1,446) $ (1,876) $ (1,801) $ 292  $ 227 
Amounts Recognized in AOCI(1):
Unrecognized net prior service cost $ (1,326) $ (734) $ (2) $ (3) $ (7) $ (8)
Unrecognized net actuarial gain (loss) (2,097) 80  129  201  99  115 
Gross unrecognized cost (3,423) (654) 127  198  92  107 
Deferred tax assets (liabilities) 831  168  (31) (48) (28) (30)
Net unrecognized cost $ (2,592) $ (486) $ 96  $ 150  $ 64  $ 77 
(1)    Accumulated Other Comprehensive Income (Loss)
The accumulated benefit obligation for our pension plans as of December 31, 2023 and 2022 was $49.2 and $44.8 billion, respectively. The accumulated benefit obligation for our postretirement medical benefit plans as of both December 31, 2023 and 2022 was $2.0 billion.
Benefit payments under the pension plans include $35 and $31 million paid from employer assets for the years ended December 31, 2023 and 2022, respectively. Benefit payments (net of participant contributions) under the postretirement medical benefit plans include $51 and $174 million paid from employer assets for the years ended December 31, 2023 and 2022, respectively. Such benefit payments from employer assets are also categorized as employer contributions.
As of December 31, 2023 and 2022, the projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets for pension plans with benefit obligations in excess of plan assets were as follows (in millions):
  Projected Benefit Obligation
Exceeds the Fair Value of Plan Assets		 Accumulated Benefit Obligation
Exceeds the Fair Value of Plan Assets
2023 2022 2023 2022
U.S. Pension Benefits:
Projected benefit obligation $ 47,712  $ 24,452  $ 47,712  $ 24,452 
Accumulated benefit obligation 47,674  24,414  47,674  24,414 
Fair value of plan assets 43,491  21,598  43,491  21,598 
International Pension Benefits:
Projected benefit obligation $ 345  $ 311  $ 315  $ 274 
Accumulated benefit obligation 304  278  281  246 
Fair value of plan assets 127  121  100  86 
The accumulated postretirement benefit obligation presented in the funded status table exceeds plan assets for all U.S. postretirement medical benefit plans.
Benefit Obligations and Fair Value of Plan Assets
The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of plan assets as of the respective measurement dates in each year (in millions):
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2023 2022 2023 2022
Benefit Obligations:
Projected benefit obligation at beginning of year $ 43,504  $ 61,378  $ 2,016  $ 2,592  $ 1,416  $ 2,106 
Service cost 1,172  2,024  20  30  43  68 
Interest cost 2,508  1,950  116  83  66  45 
Gross benefits paid (2,437) (2,151) (265) (268) (46) (45)
Plan participants’ contributions —  —  34  31  4  3 
Plan amendments(1)
699  145  —  —  —  — 
Actuarial (gain)/loss 2,266  (19,842) 53  (452) 99  (575)
Foreign currency exchange rate changes —  —  —  —  51  (150)
Curtailments and settlements —  —  —  —  (38) (40)
Other —  —  —  —  6  4 
Projected benefit obligation at end of year $ 47,712  $ 43,504  $ 1,974  $ 2,016  $ 1,601  $ 1,416 
  U.S. Pension Benefits U.S. Postretirement
Medical Benefits		 International
Pension Benefits
  2023 2022 2023 2022 2023 2022
Fair Value of Plan Assets:
Fair value of plan assets at beginning of year $ 42,058  $ 55,954  $ 215  $ 115  $ 1,643  $ 2,106 
Actual return on plan assets 2,664  (13,657) (8) (15) 201  (349)
Employer contributions 1,206  1,912  122  352  65  78 
Plan participants’ contributions —  —  34  31  4  3 
Gross benefits paid (2,437) (2,151) (265) (268) (46) (45)
Foreign currency exchange rate changes —  —  —  —  64  (144)
Curtailments and settlements —  —  —  —  (38) (6)
Other —  —  —  —  —  — 
Fair value of plan assets at end of year $ 43,491  $ 42,058  $ 98  $ 215  $ 1,893  $ 1,643 
(1)    Plan amendments in 2023 and 2022 were related to collective bargaining agreements with the Teamsters and the Independent Pilots Association, respectively.
2023 - $2.4 billion pre-tax actuarial loss related to benefit obligations:
•Discount Rates ($2.3 billion pre-tax loss): The weighted-average discount rate for our pension and postretirement medical plans decreased from 5.77% as of December 31, 2022 to 5.40% as of December 31, 2023, primarily due to a decrease in credit spreads on AA-rated corporate bonds.
•Demographic and Assumption Changes ($0.1 billion pre-tax loss): This represents the difference between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation changes, rates of termination, retirement, mortality and other changes.
2022 - $20.9 billion pre-tax actuarial gain related to benefit obligations:
•Discount Rates ($21.1 billion pre-tax gain): The weighted-average discount rate for our pension and postretirement medical plans increased from 3.11% as of December 31, 2021 to 5.77% as of December 31, 2022, primarily due to an increase in U.S. treasury yields, as well as an increase in credit spreads on AA-rated corporate bonds.
•Demographic and Assumption Changes ($0.2 billion pre-tax loss): This represents the difference between actual and estimated participant data and demographic factors, including healthcare cost trends, compensation changes, rates of termination, retirement, mortality and other changes.
Pension and Postretirement Plan Assets
Pension assets are invested in accordance with applicable laws and regulations, as well as investment guidelines established by plan trustees. The strategic asset mixes are specifically tailored for each plan given distinct factors, including liability and liquidity needs. Equities, alternative investments, and other higher-yielding assets are utilized to generate returns and promote growth. Derivatives, repurchase/reverse repurchase agreements and fixed income securities are utilized as tools for duration management, mitigating interest rate risk, and minimizing funded status volatility.
The primary long-term investment objectives for pension assets are to provide for a reasonable amount of long-term capital growth to meet future obligations while minimizing risk exposures and reducing funded status volatility. To meet these objectives, investment managers are engaged to actively manage assets within the guidelines and strategies set forth by our investment committee. Active managers are monitored regularly and their performance is compared to applicable benchmarks.
Fair Value Measurements
Plan assets valued utilizing Level 1 inputs include equity investments, corporate debt instruments, U.S. government securities, derivatives and other instruments. Fair values were determined by closing prices for those securities traded on national stock exchanges, while securities traded in the over-the-counter market and listed securities for which no sale was reported on the valuation date are valued at the mean between the last reported bid and ask prices.
Level 2 assets include fixed income securities that are valued based on yields currently available on comparable securities of other issues with similar credit ratings; mortgage-backed securities that are valued based on cash flow and yield models using acceptable modeling and pricing conventions; certain investments that are pooled with other investments in a commingled fund; and derivatives and other instruments primarily valued using pricing models that rely on market observable inputs such as yield curves, foreign currency exchange rates and investment forward price. We value our investments in commingled funds by taking the percentage ownership of the underlying assets, each of which has a readily determinable fair value.
Fair value estimates for certain investments are based on unobservable inputs that are not corroborated by observable market data and are thus classified as Level 3.
Investments that do not have a readily determinable fair value, and which provide a net asset value ("NAV") or its equivalent developed consistent with FASB measurement principles, are valued using NAV as a practical expedient. These investments are not classified in Levels 1, 2, or 3 of the fair value hierarchy but instead included within the subtotals by asset category. Such investments include hedge funds, real estate investments, private debt and private equity funds. Investments in hedge funds are valued using the reported NAV as of December 31. Real estate investments, private debt and private equity funds are valued at NAV per the most recent partnership audited financial reports, and adjusted, as appropriate, for investment activity between the date of the financial reports and December 31. Due to the inherent limitations in obtaining a readily determinable fair value measurement for alternative investments, the fair values reported may differ from the values that would have been used had readily available market information for the alternative investments existed. These investments are described further below:
•Hedge Funds: Plan assets are invested in hedge funds that pursue multiple strategies to diversify risk and reduce volatility. Most of these hedge funds allow redemptions either quarterly or semi-annually after a two- to three-month notice period, while others allow for redemption after only a brief notification period with no restriction on redemption frequency. No unfunded commitments existed with respect to hedge funds as of December 31, 2023.
•Real Estate, Private Debt and Private Equity Funds: Plan assets are invested in limited partnership interests in various private equity, private debt and real estate funds. Limited provisions exist for the redemption of these interests by the limited partners that invest in these funds until the end of the term of the partnerships, typically ranging between 10 and 15 years from the date of inception. An active secondary market exists for similar partnership interests, although no particular value (discount or premium) can be guaranteed. As of December 31, 2023, unfunded commitments to such limited partnerships totaling approximately $3.3 billion are expected to be contributed over the remaining investment period, typically ranging between three and six years.
The fair values of U.S. and international pension and postretirement benefit plan assets by asset category as of December 31, 2023 and 2022 are presented below (in millions), as well as the percentage that each category comprises of our total plan assets and the respective target allocations. The tables have been updated from prior year presentation to show derivative assets and liabilities separately from other asset categories, primarily U.S. Government Securities, by type of underlying risk.
December 31, 2023
Total
Assets(1)
Level 1 Level 2 Level 3 Percentage of Plan Assets
Percentage Target
Allocation
Asset Category (U.S. Plans):
Cash and Cash Equivalents
 $ 1,018  $ 894  $ 124  $ —  2.3  %
1-7%
Equity Securities:
U.S. Large Cap 5,732  1,457  4,275  — 
U.S. Small Cap 335  335  —  — 
Emerging Markets 970  733  237  — 
Global Equity 62  62  —  — 
International Equity 3,065  861  2,204  — 
Total Equity Securities 10,164  3,448  6,716  —  23.3 
15-45
Fixed Income Securities:
U.S. Government Securities
 18,024  17,236  788  — 
Corporate Bonds 7,041  62  6,979  — 
Global Bonds 602  1  601  — 
Municipal Bonds 6  —  6  — 
Total Fixed Income Securities 25,673  17,299  8,374  —  58.9 
30-70
Other Investments:
Hedge Funds 3,959  28  2,194  —  9.1 
3-13
Private Equity 5,071  —  —  —  11.6 
3-15
Private Debt 948  —  —  —  2.2 
2-15
Real Estate 2,575  393  77  —  5.9 
3-15
Structured Products(2)
169  —  169  —  0.4 
0-5
Total Other Investments 12,722  421  2,440  — 
Derivatives and Other Instruments:
Equity Risk (136) 29  (165) —  (0.3)
Interest Rate Risk (5,877) (20) (5,857) —  (13.5)
Other Risk(3)
25  (1) 26  —  0.1 
Total Derivatives and Other Instruments (5,988) 8  (5,996) — 
Total U.S. Plan Assets $ 43,589  $ 22,070  $ 11,658  $ —  100.0  %
Asset Category (International Plans):
Cash and Cash Equivalents
 $ 71  $ 77  $ (6) $ —  3.8  %
1-10
Equity Securities:
Local Markets Equity —  —  —  — 
U.S. Equity 89  —  89  — 
Emerging Markets —  —  —  — 
International / Global Equity 20  20  —  — 
Total Equity Securities 109  20  89  —  5.8 
1-10
Fixed Income Securities:
Local Government Bonds 827  175  652  — 
Corporate Bonds 424  —  424  — 
Global Bonds 141  137  4  — 
Total Fixed Income Securities 1,392  312  1,080  —  73.5 
50-75
Other Investments:
Real Estate(1)
66  —  18  25  3.5 
1-10
Other(1)
255  —  183  55  13.4 
10-35
Total International Plan Assets $ 1,893  $ 409  $ 1,364  $ 80  100.0  %
Total Plan Assets $ 45,482  $ 22,479  $ 13,022  $ 80 
(1)    Includes certain investments that are measured at NAV per share (or its equivalent).
(2)    Represents mortgage and asset-backed securities.
(3)    Includes credit risk, foreign currency exchange risk and commodity risk.
December 31, 2022
Total
Assets(1)
Level 1 Level 2 Level 3 Percentage of
Plan Assets
Percentage Target
Allocation
Asset Category (U.S. Plans):
Cash and Cash Equivalents
 $ 1,235  $ 870  $ 365  $ —  2.9  %
1-7%
Equity Securities:
U.S. Large Cap 6,599  2,517  4,082  — 
U.S. Small Cap 698  698  —  — 
Emerging Markets 1,597  1,171  426  — 
Global Equity 1,168  1,168  —  — 
International Equity 3,555  1,663  1,892  — 
Total Equity Securities 13,617  7,217  6,400  —  32.2 
20-45
Fixed Income Securities:
U.S. Government Securities
 15,165  14,633  532  — 
Corporate Bonds 6,129  7  6,122  — 
Global Bonds 670  —  670  — 
Municipal Bonds 9  —  9  — 
Total Fixed Income Securities 21,973  14,640  7,333  —  52.0 
30-70
Other Investments:
Hedge Funds 4,364  —  2,713  —  10.3 
3-13
Private Equity 5,012  —  —  —  11.9 
3-15
Private Debt 829  —  —  —  2.0 
1-15
Real Estate 2,415  267  69  —  5.7 
3-15
Structured Products(2)
170  —  170  —  0.4 
0-5
Total Other Investments 12,790  267  2,952  — 
Derivative and Other Instruments:
Equity Risk Contracts (87) (6) (81) —  (0.2)
Interest Rate Risk Contracts (7,280) (4) (7,276) —  (17.2)
Other Risk(3)
25  (1) 26  —  — 
Total Derivative and Other Instruments (7,342) (11) (7,331) — 
Total U.S. Plan Assets $ 42,273  $ 22,983  $ 9,719  $ —  100.0  %
Asset Category (International Plans):
Cash and Cash Equivalents
 $ 147  $ 70  $ 77  $ —  8.9  %
1-10
Equity Securities:
Local Markets Equity 138  —  138  — 
U.S. Equity (3) —  (3) — 
Emerging Markets —  —  —  — 
International / Global Equity 298  36  262  — 
Total Equity Securities 433  36  397  —  26.4 
20-50
Fixed Income Securities:
Local Government Bonds 91  59  32  — 
Corporate Bonds 494  —  494  — 
Global Bonds 119  98  21  — 
Total Fixed Income Securities 704  157  547  —  42.8 
35-55
Other Investments:
Real Estate(1)
95  —  48  25  5.8 
1-10
Other(1)
264  —  190  52  16.1 
1-30
Total International Plan Assets $ 1,643  $ 263  $ 1,259  $ 77  100.0  %
Total Plan Assets $ 43,916  $ 23,246  $ 10,978  $ 77 
(1)    Includes certain investments that are measured at NAV per share (or its equivalent).
(2)    Represents mortgage and asset-backed securities.
(3)    Includes credit risk, foreign currency exchange risk and commodity risk.
The following table presents the changes in the Level 3 instruments measured on a recurring basis for the years ended December 31, 2023 and 2022 (in millions):
Corporate Bonds Other Total
Balance as of January 1, 2022 $ 14  $ 74  $ 88 
Actual Return on Assets:
Assets Held at End of Year —  (2) (2)
Assets Sold During the Year (35) —  (35)
Purchases 482  9  491 
Sales (460) (4) (464)
Transfers Into (Out of) Level 3 (1) —  (1)
Balance as of December 31, 2022 $ —  $ 77  $ 77 
Actual Return on Assets:
Assets Held at End of Year —  4  4 
Assets Sold During the Year 2  —  2 
Purchases 450  2  452 
Sales (452) (3) (455)
Transfers Into (Out of) Level 3 —  —  — 
Balance as of December 31, 2023 $ —  $ 80  $ 80 
There were no shares of UPS class A or class B common stock directly held in plan assets as of December 31, 2023 or 2022.
Expected Cash Flows
Information about expected cash flows for our pension and postretirement medical benefit plans is as follows (in millions):
U.S.
Pension Benefits		 U.S. Postretirement
Medical Benefits		 International Pension Benefits
Expected Employer Contributions:
2024 to plan trust $ 1,200  $ 74  $ 37 
2024 to plan participants 27  92  7 
Expected Benefit Payments:
2024 $ 2,238  $ 216  $ 50 
2025 2,371  206  55 
2026 2,506  196  62 
2027 2,643  187  69 
2028 2,777  177  77 
2029 - 2033 15,637  760  473 
    
Our funding policy guideline for U.S. plans is to contribute amounts annually that are at least equal to the amounts required by applicable laws and regulations. International plans will be funded in accordance with local regulations. Additional discretionary contributions may be made when deemed appropriate to meet the long-term obligations of the plans. Expected benefit payments for pensions will be paid primarily from plan trusts. Expected benefit payments for postretirement medical benefits will be paid from plan trusts and corporate assets.