UPS 2009 Annual Report Download - page 81

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The impaired airframes, engines, and parts had a net carrying value of $192 million, and were written down
to an aggregate fair value of $11 million. The fair values for the impaired airframes, engines, and parts were
determined using unobservable inputs (Level 3).
As a result of business changes that occurred in the first quarter of 2007, including capacity-optimization
programs in our domestic and international air freight forwarding business as well as changes to our aircraft
orders and planned delivery dates, we began a review process of our aircraft fleet types to ensure that we
maintain the optimum mix of aircraft types to service our international and domestic package businesses. The
review was completed in March 2007, and based on the results of our evaluation, we accelerated the planned
retirement of certain Boeing 727 and 747 aircraft, and recognized an impairment and obsolescence charge of
$221 million for the aircraft and related engines and parts in 2007. This charge is included in the caption “Other
expenses” in the Statement of Consolidated Income, of which $159 million impacted our U.S. Domestic Package
segment and $62 million impacted our International Package segment.
NOTE 5. EMPLOYEE BENEFIT PLANS
We sponsor various retirement and pension plans, including defined benefit and defined contribution plans
which cover our employees worldwide.
U.S. Pension Benefits
In the U.S. we maintain the following single-employer defined benefit pension plans: UPS Retirement Plan,
UPS Pension Plan, UPS IBT Pension Plan, and the UPS Excess Coordinating Benefit Plan, a non-qualified plan.
The UPS Retirement Plan is noncontributory and includes substantially all eligible employees of
participating domestic subsidiaries who are not members of a collective bargaining unit, as well as certain
employees covered by a collective bargaining agreement. This plan generally 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.
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. This plan provides for
retirement benefits based on service credits earned by employees prior to retirement.
The UPS IBT Pension Plan is noncontributory and includes employees that were previously members of the
Central States, Southeast and Southwest Areas Pension Fund (“Central States Pension Fund”), a multi-employer
pension plan, in addition to other eligible employees who are covered under certain collective bargaining
agreements.
Our national master agreement with the International Brotherhood of Teamsters (“Teamsters”) allowed us,
upon ratification, to withdraw employees from the Central States Pension Fund and establish this jointly trusteed
single-employer plan for this group of employees. We recorded a pre-tax charge of $6.1 billion to establish our
withdrawal liability upon ratification of the national master agreement, and made a $6.1 billion payment to the
Central States Pension Fund in December 2007. In connection with the national master agreement and upon
establishment of the UPS IBT Pension Plan, we restored certain benefit levels to our employee group within the
new plan, which resulted in the initial recognition of a $1.701 billion pension liability and a corresponding
$1.062 billion reduction of AOCI and $639 million reduction of deferred tax liabilities.
69