UPS 2007 Annual Report Download - page 79

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The UPS Retirement Plan is noncontributory and includes substantially all eligible employees of
participating domestic subsidiaries who are not members of a collective bargaining unit. This plan generally
provides for retirement benefits based on average compensation levels 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.
The UPS Excess Coordinating Benefit Plan is a non-qualified plan that provides benefits to participants in
the UPS Retirement Plan for amounts that exceed the benefit limits described above.
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 provides for
retirement benefits based on service credits earned by employees prior to retirement.
We also sponsor postretirement medical plans in the U.S. that provide health care benefits to our retirees
who meet certain eligibility requirements and who are not otherwise covered by multi-employer 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.
Our national master agreement with the International Brotherhood of Teamsters (“Teamsters”) allowed us,
upon ratification, to withdraw employees from the Central States, Southeast and Southwest Areas Pension Fund
(“Central States Pension Fund”), a multi-employer pension plan, and to establish a jointly trusteed single-
employer plan (“UPS IBT Pension Plan”) for this group of employees. We recorded a pre-tax charge of $6.100
billion to establish our withdrawal liability upon ratification of the national master agreement, and made a $6.100
billion payment to the Central States Pension Fund in December 2007. In connection with the national master
agreement and upon establishment of the UPS IBT Pension Plan, we restored certain benefit levels to our
employee group within the new plan, which resulted in the initial recognition of a $1.701 billion pension liability
and a corresponding $1.062 billion reduction of AOCI and $639 million reduction of deferred tax liabilities.
Net Periodic Benefit Cost
Information about net periodic benefit cost for the pension and postretirement benefit plans is as follows (in
millions):
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International
Pension Benefits
2007 2006 2005 2007 2006 2005 2007 2006 2005
Net Periodic Cost:
Service cost ...................... $ 520 $ 474 $374 $101 $102 $ 92 $ 31 $ 24 $ 14
Interest cost ...................... 835 726 612 182 170 170 31 26 16
Expected return on assets ........... (1,302) (1,106) (922) (46) (43) (38) (31) (22) (13)
Amortization of:
Transition obligation ........... 3 3 3 ——————
Prior service cost .............. 57 36 37 (8) (8) (7) 1 1 1
Actuarial (gain) loss ........... 109 148 68 22 29 31574
Settlements / curtailments ........... — — — 3 — — — 1 —
Net periodic benefit cost ............ $ 222 $ 281 $172 $254 $250 $248 $ 37 $ 37 $ 22
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