UPS 2005 Annual Report Download - page 75

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
provides for retirement benefits based on average compensation levels earned by employees prior to retirement.
Benefits payable under this Plan are subject to maximum compensation limits and the annual benefit limits for a
tax qualified defined benefit plan as prescribed by the Internal Revenue Service. Effective December 31, 2005,
the qualified defined benefit plans covering Overnite and Motor Cargo employees were merged with the UPS
Retirement Plan and UPS Pension Plan.
The UPS Excess Coordinating Benefit Plan is a non-qualified plan that provides benefits to participants in
the UPS Retirement Plan for amounts that exceed the benefit limits described above.
The UPS Pension Plan is noncontributory and includes certain eligible employees of participating domestic
subsidiaries and members of collective bargaining units that elect to participate in the plan. The Plan provides for
retirement benefits based on service credits earned by employees prior to retirement. Effective December 31,
2005, this plan includes those participants included in the Overnite acquisition who are covered by a collective
bargaining agreement.
We also sponsor postretirement medical plans in the U.S. that provide health care benefits to our retirees
who meet certain eligibility requirements and who are not otherwise covered by multi-employer plans. Generally,
this includes employees with at least 10 years of service who have reached age 55 and employees who are
eligible for postretirement medical benefits from a Company-sponsored plan pursuant to collective bargaining
agreements. We have the right to modify or terminate certain of these plans. These benefits have been provided
to certain retirees on a noncontributory basis; however, in many cases, retirees are required to contribute all or a
portion of the total cost of the coverage.
Net Periodic Benefit Cost
Information about net periodic benefit cost for the pension and postretirement benefit plans is as follows (in
millions):
Pension Benefits
Postretirement
Medical Benefits
2005 2004 2003 2005 2004 2003
Net Periodic Cost:
Servicecost ........................................... $388 $344 $282 $ 92 $ 91 $ 79
Interest cost ........................................... 628 533 465 170 164 148
Expected return on assets ................................ (935) (809) (669) (38) (34) (29)
Amortization of:
Transition obligation ................................368———
Prior service cost ................................... 38 37 37 (7) — 1
Actuarial (gain) loss ................................ 72 121 28 31 30 15
Net periodic benefit cost ................................. $194 $232 $151 $248 $251 $214
Actuarial Assumptions
The table below provides the weighted-average actuarial assumptions used to determine the net periodic
benefit cost.
Pension Benefits
Postretirement
Medical Benefits
2005 2004 2003 2005 2004 2003
Discount rate .............................. 6.09% 6.24% 6.75% 6.25% 6.25% 6.75%
Rate of compensation increase ................ 3.98% 3.97% 4.00% N/A N/A N/A
Expected return on assets .................... 8.94% 8.95% 9.21% 9.00% 9.00% 9.25%
F-19