UPS 2011 Annual Report Download - page 96

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The increase in U.S. pension benefits amounts where the projected benefit obligation exceeds the fair value
of plan assets is due to the funded status for both the UPS Retirement Plan and UPS Pension Plan changing from
overfunded at December 31, 2010 to underfunded at December 31, 2011.
The accumulated postretirement benefit obligation exceeds plan assets for all of our U.S. postretirement
medical benefit plans.
Accumulated Other Comprehensive Income
The estimated amounts of prior service cost in AOCI expected to be amortized and recognized as a
component of net periodic benefit cost in 2012 are as follows (in millions):
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International Pension
Benefits
Prior service cost / (benefit) .................... $173 $5 $2
Pension and Postretirement Plan Assets
The applicable benefit plan committees establish investment guidelines and strategies, and regularly monitor
the performance of the funds and portfolio managers. Our investment guidelines address the following items:
governance, general investment beliefs and principles, investment objectives, specific investment goals, process
for determining/maintaining the asset allocation policy, long-term asset allocation, rebalancing, investment
restrictions/prohibited transactions, portfolio manager structure and diversification (which addresses limits on the
amount of investments held by any one manager to minimize risk), portfolio manager selection criteria, plan
evaluation, portfolio manager performance review and evaluation and risk management (including various
measures used to evaluate risk tolerance).
Our investment strategy with respect to pension assets is to invest the assets in accordance with applicable
laws and regulations. The long-term primary objectives for our pension assets are to: (1) provide for a reasonable
amount of long-term growth of capital, with prudent exposure to risk; and protect the assets from erosion of
purchasing power; (2) provide investment results that meet or exceed the plans’ expected long-term rate of
return; and (3) match the duration of the liabilities and assets of the plans to reduce the potential risk of large
employer contributions being necessary in the future. The plans strive to meet these objectives by employing
portfolio managers to actively manage assets within the guidelines and strategies set forth by the benefit plan
committees. These managers are evaluated by comparing their performance to applicable benchmarks.
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