United Parcel Service Inc. is going to use a pension plan as new funds to cover their budget holes. There will be 70,000 nonunion employees that will be affected by this decision. The company is currently dealing with escalating expenses that need immediate remedy. However, UPS intends to supplement this plan with other retirement advantages.
UPS Inc. Struggles to Remain Competitive in an Aggressive Industry
UPS Inc. is going to follow in the footsteps of other companies such as Lockheed Martin Corp or DuPont Co. that froze some of their retirement plans. This means that all workers who counted on these funds will stop gathering benefits. In turn, the company will have an additional budget of $1 billion in capital spending for this year. This financial support will help UPS overcome the surge in shipments coming from their online platform.
Analysts are already seeing how the company is struggling in these times. UPS invested large funds in automation and planes to keep up with the modern trends and remain relevant. There are also other unpredictable expenses regarding the upcoming winter season. On top of that, the company is still dealing with the aftermath of massive discount rates. Such low prices might become permanent to the clients’ satisfaction. Therefore, the financial status of the organization was already weak when it was impacted by expensive bills coming from to e-commerce.
The 70,000 Nonunion Employees Will Receive Benefits to Their 401(k) in Five Years
This decision affected approximately 70,000 workers. Most of them have management or administrative tasks, and they belong to no labor union. They have five years at their disposal to find solutions on their own as the changes will apply on January 1, 2023. However, after this date, these nonunion employees will benefit of 5 to 8% of a salary into their 401(k). A limited number of them will receive an additional benefit of transition.
According to a research paper from Willis Towers Watson Plc., 39% of Fortune 500 companies froze their pensions by 2015. Such retirement plans require too many financial resources for maintenance, and this strategy presents a cost-saving solution.
Image source: 1