UPS 2014 Annual Report Download - page 63

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Collective Bargaining Agreements
Status of Collective Bargaining Agreements
As of December 31, 2014, we had approximately 270,000 employees employed under a national master agreement and
various supplemental agreements with local unions affiliated with the International Brotherhood of Teamsters (“Teamsters”).
During 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. In the second quarter of 2014, we remitted $278 million for these retroactive economic benefits; this payment had an
immaterial impact on net income, as these retroactive economic benefits had been accrued since the July 31, 2013 expiration of
the prior agreement.
In addition to the retroactive economic provisions of the NMA, there were certain changes to the delivery of healthcare
benefits that were effective at various dates. These changes impact approximately 36,000 full-time and 73,000 part-time active
employees covered by the NMA and the UPS Freight collective bargaining agreement (collectively referred to as the “NMA
Group”), as well as approximately 16,000 employees covered by other collective bargaining agreements (the “Non-NMA
Group”). These provisions are discussed further below in the "Changes to the Delivery of Active and Postretirement
Healthcare Benefits" section.
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. In February 2014, UPS and the IPA requested and
received mediation by the National Mediation Board for the ongoing contract negotiations.
Our airline mechanics are covered by a collective bargaining agreement with Teamsters Local 2727, which became
amendable November 1, 2013. 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”). In 2014, the IAM ratified new collective bargaining agreements
that will expire on July 31, 2019.
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 will remain in effect throughout the terms of the existing collective bargaining agreements.
Changes to the Delivery of Active and Postretirement Healthcare Benefits
Prior to ratification, the NMA Group and Non-NMA Group employees received their healthcare benefits through UPS-
sponsored active and postretirement health and welfare benefit plans. Effective June 1, 2014, we ceased providing healthcare
benefits to active NMA Group employees through these UPS-sponsored benefit plans, and the responsibility for providing
healthcare benefits for active employees was assumed by three separate multiemployer healthcare funds (the “Funds”). The
responsibility for providing healthcare benefits for the active Non-NMA Group employees was also assumed by the Funds on
various dates up to January 1, 2015, depending on the ratification date of the applicable collective bargaining agreement. We
will make contributions to the Funds based on negotiated fixed hourly or monthly contribution rates for the duration of the
NMA and other applicable collective bargaining agreements.
Additionally, the Funds assumed the obligation to provide postretirement healthcare benefits to the employees in the
NMA Group who retire on or after January 1, 2014. The postretirement healthcare benefit obligation for the employees in the
Non-NMA Group was assumed by the Funds for employees retiring on or after January 1, 2014 or January 1, 2015, depending
on the applicable collective bargaining agreement. In exchange for the assumption of the obligation to provide postretirement
healthcare benefits to the NMA Group and Non-NMA Group, we transferred cash totaling $2.271 billion to the Funds in the
second quarter of 2014. UPS-sponsored health and welfare benefit plans retained responsibility for providing postretirement
healthcare coverage for employees in the NMA Group who retired from UPS prior to January 1, 2014, and for employees in the
Non-NMA Group who retire from UPS prior to the January 1, 2014 or January 1, 2015 effective date in the applicable
collective bargaining agreement.