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UPS’s 401(k) Plan

UPS is one of the largest employees in the United States. The delivery service has more than half a million employees worldwide, with hundreds of thousands of those right here in the U.S. If you’re considering working for UPS, you’re probably wondering about some of their employee benefits, including its 401(k) plan.

In this article, we’ll walk you through how UPS helps its employees to save for retirement and a few things you may want to know about its 401(k) plan.

What is UPS’s 401(k) Plan?

UPS offers a 401(k) plan that allows employees to set aside tax-deferred money for retirement. In fact, UPS has two different 401(k) plans available. One is for employees who are a part of the union (primarily hourly employees), while the other is for those not represented by the union (primarily salaried employees and management). The majority of UPS employees are a part of the union, meaning they will be eligible for the first 401(k) plan we’ll talk about.

Teamster-UPS National 401(k) Tax-Deferred Savings Plan

Because UPS employees are a part of the Teamsters union, the retirement plan is available to all employees represented by the union. All employees are automatically enrolled in the UPS 401(k) 90 days after their date of hire. Per IRS rules, employees can contribute up to $20,500 per year. However, UPS automatically enrolls its employees at a 3% tax-deferred contribution rate.

In addition to the tax-deferred contributions, UPS also allows its employees to make after-tax (aka Roth) contributions.

Finally, UPS has an optional contribution accelerator available to its employees. This tool is built into the 401(k) plan and automatically increases an employee’s pre-tax contributions by 1% per year, up to a maximum of 10%. Of course, you can contribute more than 10% of your pay to the 401(k) plan. The automatic contributions simply won’t go higher than that.

Participants of this 401(k) plan can choose from the following investments:

  • Government Short-Term Investment Fund
  • Stable Value Fund
  • Bond Market Index Fund
  • Balanced Fund (Equity and Fixed Income)
  • S&P 500 Equity Index Fund
  • S&P 400 Midcap Index Fund
  • Russell 2000 Index Fund
  • International Index Fund
  • REIT Index Fund
  • Bright Horizon Target-Date Funds
  • Bright Horizon Retirement Income Fund

This plan also offers a self-managed option for employees who want to manage their own investments and choose from those outside of the plan menu.

UPS 401(k) Savings Plan

UPS also offers a separate 401(k) plan for employees who are not represented by the union. Like the union plan, employees eligible for this plan are automatically enrolled, but with a higher deferral rate of 6% of compensation. Participants of this plan also have the option of making Roth contributions. Employees also have access to an automatic contribution accelerator up to 10% of their compensation.

This plan includes the following investments:

  • State Street Bank & Trust Short-Term Investment Fund
  • BlackRock Government Short-Term Investment Fund
  • BlackRock U.S. Debt Index Fund
  • BlackRock Emerging Markets Non-US Equity Fund
  • BlackRock Extended Equity Index Fund
  • BlackRock World ex US Index Fund
  • BlackRock Equity Index Fund
  • BlackRock Short-term Bond Index Fund
  • BlackRock UPS Strategic Completion Fund
  • State Street Bank Target-Date Funds

This plan also offers a self-managed option.

UPS’s 401(k) Contribution Matching

As we mentioned, UPS has two different 401(k) plans: one for union employees and one for non-union employees. And the most important difference between the two comes down to their contribution matching arrangements.

At this time, participants in the union 401(k) plan don’t receive a matching contribution from their employer. Participants in the UPS 401(k) Savings Plan — meaning the non-union plan — will get an employee match on their contributions.

Employees hired before December 31, 2007 will get 50% of their contributions up to 5% of compensation. Employees hired between January 1, 2008 and July 1, 2016 will get 100% of their contributions up to 3.5% of compensation. Finally, employees hired after July 1, 2016 will get 50% of contributions up to 6% of compensation.

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How Much Should You Contribute?

In 2022, the IRS allows workers to contribute up to $20,500 to their 401(k) plan, with an additional $6,500 allowed as a catch-up contribution for workers age 50 and older.

That being said, such a large contribution may not be feasible for all workers. Additionally, even those who could invest $20,500 per year may choose not to, especially if they have another retirement account.

The first thing to consider is whether you’re eligible for an employer match on your 401(k) contributions. While a match isn’t available for union employees, there is one available for non-union employees. And if you’re eligible for a match, you should invest at least enough to receive your full match. It’s essentially free money that you don’t want to pass up.

After you account for the employer match, things get a bit more complicated. After all, everyone will have different retirement income needs. A great way to figure out how much you should save is by using the Personal Capital Retirement Planner, which can tell you how much you should save per month based on your current retirement savings and your retirement goals.

But remember that you don’t only have a 401(k) available to you. Many workers choose to contribute up to the employer match in the 401(k) plan but then turn to a traditional or Roth IRA for additional retirement savings.

UPS Pension Plan

In addition to its 401(k) plan, UPS also offers a pension plan for its employees. Previously, the pension plan had been available to both union and non-union employees. In 2016, UPS stopped allowing new non-union employees to join the pension plan. And in 2017, UPS announced it would be freezing the pension program for existing non-union employees and replacing it with only a 401(k) plan, as is becoming more common in the private sector.

The good news is that union employees will continue to have access to a pension plan. The amount of income that employees will be eligible for depends on their years of service and whether they are part-time or full-time employees.

It’s important to note that union employees have a collective bargaining agreement with UPS that states their agreed-upon pension benefits. As a result, these benefits could change any time the union renegotiates its contract with the company.

How Should You Invest

Choosing how to invest their 401(k) balance is one of the most difficult decisions for many workers, especially those without experience investing. When you’re choosing your investments, it’s important to consider your time horizon and risk tolerance. Because both 401(k) plans offer a variety of funds to choose from, it is easy to build a diversified portfolio.

For employees who aren’t comfortable choosing their own investments, both 401(k) plans offer target-date funds, which are essentially a fully-diversified portfolio in a single investment. Target-date funds hold a variety of stocks and bonds, and they automatically adjust their holdings and risk level as you near retirement.

What Happens to Your Old 401(k) If You Quit?

When you leave your job at UPS, you can take your full 401(k) balance with you. At that point, you’ll have several options. First, you may be able to leave your funds in the UPS 401(k) plan. The downside of this option is you may lose track of the money, especially if you have multiple 401(k) plans at multiple companies.

Another option is to roll over your 401(k) balance. You can choose to either roll it over into an individual retirement account (IRA) or into the 401(k) plan at your next employer.

Can You Roll Over an Old 401(k)?

If you’re moving to UPS from another company, you can roll your old 401(k) balance into your new UPS 401(k). UPS allows you to roll over your old 401(k) funds at any time while you’re with the company. To set it up, you should contact your 401(k) plan administrator, who can facilitate the transaction. The other option is to take a distribution from your old 401(k) and deposit those funds into your new 401(k) plan within 60 days.

Want a better way to manage your investments? Millions of people use Personal Capital’s free and secure online financial tools to see all of their accounts in one place, analyze their investments, and plan for long-term goals, like buying a house or saving for retirement.

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Author is not a client of Personal Capital Advisors Corporation and is compensated as a freelance writer.

Personal Capital compensates Erin Gobler (“Author”) for providing the content contained in this blog post. Author is not an advisory client. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. Compensation not to exceed $500. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Third party data is obtained from sources believed to be reliable; however, Personal Capital Corporation (“PCC”) cannot guarantee the accuracy, timeliness, completeness or fitness of this data for any particular purpose. Third party links are provided solely as a convenience and do not imply an affiliation, endorsement or approval by Personal Capital of the contents on such third party websites.
Erin Gobler is a money coach who helps people pay off debt and reach their big financial goals without giving up spending on the things they love.
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