EMPLOYEE BENEFIT PLANS |
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| Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EMPLOYEE BENEFIT PLANS |
EMPLOYEE BENEFIT PLANS
Company-Sponsored Benefit Plans
Information about net periodic benefit cost for our company-sponsored pension and postretirement benefit plans is as follows for the three and six months ended June 30, 2016 and 2015 (in millions):
During the first six months of 2016, we contributed $44 and $45 million to our company-sponsored pension and postretirement medical benefit plans, respectively. We also expect to contribute $1.192 billion and $56 million over the remainder of the year to the pension and U.S. postretirement medical benefit plans, respectively.
The UPS Retirement Plan (a single-employer defined benefit pension plan sponsored by UPS) was closed to new non-union participants effective July 1, 2016. The Company amended the UPS 401(k) Savings Plan so that employees who previously would have been eligible for participation in the UPS Retirement Plan will, in addition to current benefits under the UPS 401(k) Savings Plan, begin receiving a UPS Retirement Contribution. For employees eligible to receive the Retirement Contribution, UPS will contribute 3% to 8% of eligible pay to the UPS 401(k) Savings Plan based on years of vesting service and business unit. Contributions will be made annually in cash to the accounts of participants who are employed on December 31 of each calendar year and become vested after the employee reaches three complete years of service.
Multiemployer Benefit Plans
We contribute to a number of multiemployer defined benefit and health and welfare plans under terms of collective bargaining agreements that cover our union-represented employees. Our current collective bargaining agreements set forth the annual contribution increases allotted to the plans that we participate in, and we are in compliance with these contribution rates. These limitations on annual contribution rates will remain in effect throughout the terms of the existing collective bargaining agreements.
As of June 30, 2016 and December 31, 2015 we had $869 and $872 million, respectively, recognized in "other non-current liabilities" on our consolidated balance sheets associated with our previous withdrawal from a multiemployer pension plan. This liability is payable in equal monthly installments over a remaining term of approximately 46 years. Based on the borrowing rates currently available to the Company for long-term financing of a similar maturity, the fair value of this withdrawal liability as of June 30, 2016 and December 31, 2015 was $942 and $841 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.
In December 2014, Congress passed the Multiemployer Pension Reform Act (“MPRA”), which for the first time ever allowed multi-employer pension plans to reduce benefit payments to retirees, subject to specific guidelines in the statute and government oversight. On September 25, 2015, the Central States Pension Fund ("CSPF") submitted a proposed pension benefit reduction plan to the U.S. Department of Treasury under the MPRA. The CSPF plan proposed to make retirement benefit reductions to CSPF participants, including to the benefits of UPS employee participants retiring on or after January 1, 2008. In 2007, UPS fully funded its allocable share of the unfunded vested benefits in CSPF when it was agreed that UPS could withdraw from CSPF in consideration of a $6.1 billion withdrawal liability. Under a collective bargaining agreement with the International Brotherhood of Teamsters, UPS also agreed to provide coordinating benefits under the UPS/IBT Full-Time Employee Pension Plan (the “UPS/IBT Pension Plan”) to offset the effect of certain benefit reductions by CSPF applicable to UPS participants retiring on or after January 1, 2008, which resulted in the recognition of a $1.7 billion pension liability in 2007. Additionally, UPS agreed to provide coordinating benefits under the UPS/IBT Pension Plan to offset certain benefit reductions in the event that benefits were lawfully reduced in the future by CSPF.
We vigorously challenged the proposed benefit reduction plan because we believed that it did not comply with the law and that certain actions by CSPF were invalid. In April 2016, we estimated that we would be required to record a 2016 charge of approximately $3.2 billion to $3.8 billion, if the CSPF pension benefit reduction plan was approved and implemented as proposed. On May 6, 2016, the U.S. Department of Treasury rejected the proposed plan submitted by CSPF, stating that it had determined that the CSPF plan failed to satisfy a number of requirements set forth in the MPRA.
The CSPF has asserted that it will become insolvent within ten years which could lead to the reduction of retirement benefits. As a result, it is possible that the CSPF will continue to explore options for making retirement benefit reductions to plan participants to forestall insolvency. If the CSPF reduces benefits to plan participants, UPS may be required to provide coordinating benefits under the UPS/IBT Pension Plan, thereby increasing the projected benefit obligation for the UPS/IBT Pension Plan. The potential for benefit reductions to CSPF plan participants is subject to a number of uncertainties, including actions that may be taken by CSPF, the federal government or others. These actions include whether the CSPF will submit a revised benefit reduction plan, the effect of discount rates and various other actuarial assumptions and the extent to which benefits are guaranteed by the Pension Benefit Guaranty Corporation. Due to the numerous uncertainties that could affect whether, and the extent to which, benefits to CSPF plan participants are reduced, we are not currently able to estimate a range of additional obligations, if any, that could arise to UPS. We will continue to assess the impact of these uncertainties on the projected benefit obligation of the UPS/IBT Pension Plan in accordance with Accounting Standards Codification Topic 715 - Compensation - Retirement Benefits. We have not recognized any liability for additional coordinating benefits at this time, but the current projected benefit obligation for the UPS/IBT Pension Plan could significantly increase as a result of these matters.
Collective Bargaining Agreements
As of December 31, 2015, we had approximately 266,000 employees employed under a national master agreement and various supplemental agreements with local unions affiliated with the Teamsters. In addition, our airline pilots, airline mechanics, ground mechanics and certain other employees are employed under other collective bargaining agreements. In 2014, the Teamsters ratified a new national master agreement (“NMA”) with UPS that will expire on July 31, 2018. The economic provisions in the NMA included wage rate increases, as well as increased contribution rates for healthcare and pension benefits. Most of these economic provisions were retroactive to August 1, 2013, which was the effective date of the NMA. During the first quarter of 2015, we remitted $53 million for these retroactive economic benefits.
We have approximately 2,600 pilots who are employed under a collective bargaining agreement with the Independent Pilots Association ("IPA"), which became amendable at the end of 2011. On June 30, 2016, the IPA and the Company announced a tentative agreement on a new five-year labor contract. The contract must be ratified by a majority of UPS's 2,600 pilots. The vote by the pilots will be completed on August 31. If ratified, the new contract will become effective on September 1, 2016, and become amendable on 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 for a new agreement. 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.
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