UPS Pension Plan Changes May Take Time, but Ups Workers Have a Call to Action

Published December 7, 2017
UPS announced that it is freezing non-union employee pensions, contributing only a small percentage to their workers’ 401(k) plans. This, however, leaves more than 70,000 workers to independently decide how they should continue saving for retirement.
  • UPS is replacing their employee pension plans by contributing 5-8% of their workers’ salaries into a 401(k)
  • While a 401(k) is one way to accumulate assets, it fails to provide financial stability and guarantee during retirement
  • Employees can use their 401(k) savings to purchase a Personal Pension or income annuity to secure retirement income

UPS Pension Plan Changes – The Issue

UPS announced mid-2017 that the company planned to freeze non-union employee pensions, joining the ranks of other large employers that are moving away from the defined benefit plans.

More than 70,000 nonunion workers will be affected in a change will take place in five years as part of a move to reduce expenses and help curb a long-term funding shortfall. The affected workers will stop accruing pension benefits on Jan. 1, 2023. After then, they will only be able to receive the pension benefits they have earned up until that point. UPS will switch to contributing between 5 percent and 8 percent of workers’ salaries into a 401(k) savings account, where workers will be responsible for deciding how the money is invested.

UPS is not alone. Companies are struggling to afford pension plans as people live longer, which increases the amount of benefits they receive. Funding those benefits has also become more difficult in an era of low bond yields and volatile stock market returns. Because of this, more companies are focusing to defined contribution plans, such as 401(k) accounts, where costs to companies can be more predictable as there are no guarantees or protections from the market or your own longevity.

UPS’ 401(k): UPS’s Pension Plan Changes Results in a Poor Replacement

But, while pensions as structured by UPS and other corporates stopped being the appropriate retirement solution from the employer perspective, their replacement was never meant to be the 401(k). 401(k)s were created for senior executives, who already had maxed out their pensions, to accumulate more wealth to support their retirement lifestyles. And that’s what the 401(k) — and IRA — should be: a source of supplemental income once your fundamental living expenses have been covered. Since they don’t offer any guarantees or protection from the market or your own longevity, 401(k)s just cannot provide financial stability in retirement.

The Opportunity Afforded by UPS’ Pension Plan Changes

The good news is UPS’ action gives affected workers five years to plan for changes to their retirement benefits. That said, we believe there is urgency and although they have several years, they need to diversify and build a broader pension portfolio now in order to fully mitigate their potential shortfall in retirement income.

UPS Pension Plan Changes: Option 1 – The Personal Pension

We believe this is the best option for affected UPS employees. The Personal Pension is the next best thing to an employer pension and is a way to generate pension-like income in retirement without your employer. Instead of being provided by employers, it’s backed by insurers, like an annuity.  But, unlike the average annuity, you can purchase it in small amounts over time.  Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check. 

Here you can see what contributing to a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

From there, you can fill out the information to have one of our specialists follow up with you, or continue with the enrollment process on your own. To do that, start with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

UPS Pension Plan Changes: Option 2 – Buy an Income Annuity

An alternative to fill the income gap of the UPS Pension is to buy an income annuity. Income annuities generally come in two types — longevity annuities and immediate annuities. Immediate annuities (as the name implies) have income starting within the next 12 months, whereas longevity annuities start income (at a predetermined level two year or more into the future). Both of these types of income annuities provide the financial security that you get from a guaranteed lifetime income stream that comes each month for as long as you’re alive. They’re ways to increase your pension check.

At Blueprint Income, we offer income annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes, where you can compare options offered from different insurers on an apples-to-apples basis.

UPS Pension Plan Changes

From there, you’ll get access to our annuity guides, team of specialists to help you analyze your retirement finances and walk you through the application process.

So, in short, if you’re looking to increase your pension check and mitigate UPS’s pension plan changes by getting more guaranteed lifetime income, you have some options for how to get it. (Please note that these options are available to all Americans, not just UPS employees.)

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Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.