April 24 (Bloomberg) — United Parcel Service Inc. will record a pretax cost of about $1.05 billion this quarter for changes to health-care benefits for union workers under a five-year contract approved by the International Brotherhood of Teamsters.
Under the agreement, Atlanta-based UPS also will make a pretax cash payment of $2.27 billion to multi-employer funds assuming administration of active and post-retirement health- care benefits for Teamster-represented mployees, the company said in a filing today.
UPS is moving its health-care plans from a defined-benefit plan to a defined-contribution plan, with contributions set for the term of the contract. As a result of the change, it will also remove $1.2 billion in post-retirement health obligations from its balance sheet. Future retirees will be the responsibility of the multiemployer plan.
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The approval removes uncertainty about whether the contract, covering 253,000 workers would be allowed to take effect. The existing agreement was extended indefinitely after it expired in July as local supplemental contracts were renegotiated and voted on.
The contract takes effect tomorrow. While it won initial approval on a national basis in June 2013, the local contracts failed at that time.
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