United Parcel Service Inc., Atlanta, will freeze two defined benefit plans — the UPS Retirement Plan and the UPS Excess Coordinating Benefit Plan — for non-union employees, effective in 2023, the company said in an 8-K filed Tuesday.
As of Jan. 1, 2023, active non-union employees will no longer accrue additional benefits under those plans. The plans were closed to new employees in June 2016.
A UPS spokesman said in an emailed statement that the company is freezing the plans because of the "continued escalation of future pension obligations and the volatility in the amount of those future obligations, both of which are impacting the company's ability to plan for future costs."
"The volatility in financial obligations is caused by shifting demographics, unpredictable discount rates and investment returns, as well as regulatory factors," he added.
The spokesman declined to provide information on the financial impact of the plan changes. Some 70,000 participants in the UPS Retirement Plan are expected to be affected. In the Excess Plan — a subset of the UPS Retirement Plan — a "few hundred" employees are expected to be affected, the spokesman said.
Concurrent with the DB freeze, UPS will amend the UPS 401(k) Savings Plan on Jan. 1, 2023, to make previously ineligible non-union employees eligible for UPS retirement contributions, which range from 5% to 8% of an employee's salary based on their length of employment. The amendment also provides for "transition contributions" to certain participants beginning Jan. 1, 2023, the 8-K said. Participants who receive this benefit are expected to be certain "longer seniority employees, generally those hired before 2008," the spokesman said.
UPS administers two other U.S. DB plans for union-represented employees that are not affected by the changes — the UPS Pension Plan and the UPS/IBT Full-Time Employee Pension Plan.
As of Dec. 31, the UPS Retirement Plan had $18.6 billion in assets and $25.3 billion in benefit obligations for a funded status of 73.5%.
As of the same date, the UPS Pension Plan had $6.4 billion and $8.1 billion in benefit obligations for a funded status of 79%, and the UPS/IBT Full-Time Employee Pension Plan had $6.3 billion in assets and $7.3 billion in benefit obligations for a funded status of 86%.
Assets for the UPS Excess Coordinating Benefit Plan, which is a non-qualified plan, could not immediately be learned.
As of Dec. 31, 2015, the UPS 401(k) Savings plan had $6.8 billion in assets, according to UPS' most recent 11-K filing.