(Bloomberg) — United Parcel Service Inc. will freeze a pension plan for about 70,000 nonunion U.S. employees because of escalating costs and volatility in determining future payments, replacing it with a different retirement benefit.
UPS joins companies including DuPont Co. and Lockheed Martin Corp. in freezing pensions, which means that some or all participants may stop accumulating benefits. UPS’s retirement obligations are on top of a $1 billion jump in capital spending being planned for this year to handle a surge in e-commerce shipments.
“It’s not a red flag,” said Kevin Sterling, a Seaport Global Holdings analyst. “Combine how much money they are spending on automation and on planes, along with discount rates being low maybe forever, and they said ‘we have to cap this or we’ll continue to see funding shortfalls.’”
UPS’s pension plans in the U.S. had a $9.85 billion shortfall at the end of last year, meaning they were about 76% funded, according to regulatory filings.
The shift won’t occur until Jan. 1, 2023, giving affected workers more than five years to prepare, Atlanta-based UPS said Tuesday. Most of the employees, which account for about 16% of the workforce, are in administrative or management positions.