United Parcel Service Inc. (UPS) has frozen its defined benefit pension plan for approximately 70,000 non-union employees, and is moving them into the company’s defined contribution plan, according to SEC filings.
UPS’ defined benefit pension plans will cease accruals of additional benefits for future service and compensation for non-union participants effective in 2023. The company also amended its 401(k) defined contribution savings plan to make previously ineligible non-union US employees eligible for UPS retirement contributions, which range from 5% to 8% of eligible compensation based on the employee’s length of employment.
As of Jan. 1, 2023, for employees with up to four years of UPS retirement contribution restoration credit service, the company will contribute 5% of their annual pay. Employees with five to nine years of eligibility will receive 6%; those with between 10 and 14 years eligibility will receive 7%, and employees with 15 years of eligibility or more will receive 8% from the company.
According to UPS’ most recent annual report, the shipping and logistics company’s pension plans recorded a $9.85 billion deficit at the end of last year, which translates to a funding level of approximately 76%.
Non-union retirees already collecting benefits, as well as former employees with a vested benefit, will not be affected by the defined benefit changes, while those who are affected will keep the benefits earned in their defined benefit plan through Jan. 1, 2023. UPS said that the impact to its financial statements will be announced when the company reports second-quarter results on July 27.
The move doesn’t affect the company’s drivers and delivery workers, who are part of the Teamsters Union, and have their own defined benefit plan. UPS joins other major companies such as AIG, DuPont, U.S. Steel, L.L. Bean, and the Boston Red Sox, which have frozen their pension funds, according to nonprofit consumer group the Pension Rights Center.