Central States, Southeast and Southwest Areas Pension Plan

Item #13 

Does the application include a demonstration that the proposed suspension is equitably distributed, 

including 

• a list of the factors taken into account,

• an explanation of why none of the factors listed in § 432(e)(9)(D)(vi) were taken into 

account (if applicable), and 

• how any difference in treatment among categories or groups of individuals results from a 

reasonable application of the relevant factors.

See section 4.04. 

The demonstration is attached as document number 13.1. Document number 13.2 contains tables 

that demonstrate the impact of the benefit suspensions on the participant population of the Plan, 

broken into groups. 

13.0
4.04 Demonstration that the proposed benefit suspension is distributed equitably.

List of Factors Taken into Account 

In designing the benefit suspensions and determining that they represent an equitable distribution 

across the participant population, the Board of Trustees took into account the following factors 

from Internal Revenue Code (“Code”) section 432(e)(9)(D)(vi): 

432(e)(9)(D)(vi)(I): Age and life expectancy.

432(e)(9)(D)(vi)(II): Length of time in pay status. 

432(e)(9)(D)(vi)(III): Amount of benefit. 

432(e)(9)(D)(vi)(IV): Type of benefit: survivor, normal retirement, early retirement. 

432(e)(9)(D)(vi)(V): Extent to which participant or beneficiary is receiving a subsidized benefit. 

432(e)(9)(D)(vi)(VII): History of benefit increases and reductions. 

432(e)(9)(D)(vi)(VIII): Years to retirement for active employees. In addition, the Board of 

Trustees took into account years to retirement for terminated participants.

432(e)(9)(D)(vi)(IX): Any discrepancies between active and retiree benefits. 

432(e)(9)(D)(vi)(X): Extent to which active participants are reasonably likely to withdraw 

support for the plan, accelerating employer withdrawals from the plan and increasing the risk of 

additional benefit reductions for participants in and out of pay status. 

432(e)(9)(D)(vi)(XI): Extent to which benefits are attributed to service with an employer that 

failed to pay its full withdrawal liability.

The above list of factors taken into account by the Board of Trustees includes all but one of the 

statutory factors listed in Code section 432(e)(9)(D)(vi). The Board of Trustees did not take into 

account the extent to which participants or beneficiaries have received post-retirement benefit 

increases (see § 432(e)(9)(D)(vi)(VI)) because there are no Plan participants or beneficiaries who 

are receiving benefits that were increased by a Plan amendment subsequent to their retirement. 

The Plan is a plan described in Code section 432(e)(9)(D)(vii). The benefit suspension plan 

reflects this fact by applying different formulas and suspension caps to calculate the suspension 

for each of the categories of benefits or “tiers” described in subparts (I)-(III) of that statutory 

provision. 

Explanation of How Benefit Suspension Formula Results from a Reasonable Application of 

the Relevant Factors

Percentage of Contribution Formula 

The Board of Trustees decided to base the benefit suspensions on a ‘percentage of contributions’ 

formula. Subject to certain exceptions, the benefit suspension amount is equal to the excess of 

the current Plan benefit over a benefit based on 1.0% of the contributions that have been made on 

13.1.1
behalf of a participant. The Board of Trustees determined that this formula is appropriate and 

fundamentally fair because it allows each participant to benefit from the Plan in proportion to the 

contribution revenue that was brought into the Plan as a result of his or her employment. In 

addition, since 2004, all benefits earned by active participants have been equal to 1.0% of 

contributions made on their behalf. In view of this fact, the Board of Trustees determined that 

using this formula will cause the least disruption or frustration of participants’ expectations. 

Basing the benefit suspension on the percentage of contribution formula inherently takes into 

account many of the factors listed in the statute and in the proposed regulation, including the 

amount of benefits, type of benefits, extent to which a participant is receiving a subsidized 

benefit, history of benefit improvements, and substantial differences that exist between active 

and retiree benefits (see § 432(e)(9)(D)(vi)(III), (IV), (V), (VII), and (IX)). 

Significantly, using this formula results in greater benefit preservation for participants whose 

benefits do not include large early retirement “subsidies,” and greater suspensions for 

participants who have retired with highly subsidized early retirement benefits. The subsidized 

benefits available to participants who retired with early retirement pensions are typically much 

larger than the benefits paid to other similarly-situated participants. In applying the percentage 

of contribution formula, the Board of Trustees determined it is equitable to protect participants 

with smaller, unsubsidized benefits, as they started with smaller benefits and are likely to 

experience greater financial hardship from the benefit suspensions than participants with larger, 

heavily subsidized benefits (see § 432(e)(9)(D)(vi)(III), (IV) and (V)). 

The impact of the percentage of contribution formula on heavily subsidized early retirement 

benefits is appropriate for several other reasons. The retirees with these benefits are receiving 

pensions that have much greater actuarial value than the contributions that the Plan received on 

their behalf. Many of the highly subsidized early retirement benefits that the Plan is paying were 

the result of benefit improvements that immediately increased the value of active participant

benefits for all years of service, including years of service earned prior to the adoption of the 

improvements. By applying a larger suspension to these benefits, the percentage of contribution 

formula also takes into account the history of benefit improvements (see § 

432(e)(9)(D)(vi)(VII)). 

Moreover, while there are many retirees receiving subsidized early retirement benefits, these 

subsidized benefits have been largely phased out for active participants. In light of this 

differential treatment, the percentage of contributions suspension formula takes into account a 

substantial difference that exists between active and retiree benefits (see § 432(e)(9)(D)(vi)(IX)). 

In designing the benefit suspensions, the Board of Trustees also focused on two competing 

needs. First, it focused on the need to ensure that older participants and beneficiaries who are 

already in payment status are protected to the greatest extent possible, as they are least able to 

adapt to the benefit changes (see § 432(e)(9)(D)(vi)(I) and (II)). These participants typically 

have given up their jobs and been out of the workforce for many years and, therefore, are likely 

to be dependent on their Plan pension and unable to replace the income lost through benefit 

reductions. 

Second, the Board of Trustees focused on the need to ensure that the active participants maintain 

support for the Plan, as this support is vital to the continued participation of the contributing 

13.1.2
employers, which minimizes the risk of additional benefit reductions (see § 432(e)(9)(D)(vi)(X)). 

In doing so, the Board of Trustees determined that all of the Plan’s participants (actives, retired 

and terminated) and beneficiaries must rely upon the active participants to continue to support 

the Plan and negotiate collective bargaining agreements requiring contributions to the Plan. 

Further, the Board of Trustees considered the fact that roughly $0.50 of every dollar of 

contributions to the Plan currently generated by work performed by active participants pays for 

the pensions of retirees and terminated participants. 

In addition to the benefit suspensions applied to active participants’ accrued benefits, in order to 

protect the solvency of the Plan, the Board of Trustees approved a reduction in the rate of future 

benefit accrual for active participants from 1.0% of contributions to 0.75% of contributions. The 

Board of Trustees determined that this future benefit accrual reduction was necessary to avoid a

projected insolvency while lessening the benefit suspensions applied to all participant groups. In 

doing so, the Board of Trustees considered the fact that the reduction in the accrual rate from 

1.0% to 0.75% is somewhat offset by the contribution rate increases, including rate increases for 

employers whose rates are presently frozen, that are anticipated under the proposed suspension 

plan. The Trustees determined, with specific input from the Employee Trustees, that these 

accrual rates should be sufficient to continue the support of active participants for the Fund; 

however, the Trustees also determined that if the future accrual rate were to be lowered to any 

significant extent below 0.75% of contributions (e.g., to 0.5%), there would be a serious risk of 

erosion of support for the Plan by the active participants and employer withdrawals (see § 

432(e)(9)(D)(vi)(X)).

Consistent with the need to protect retired participants and beneficiaries in payment status and 

maintain the support of active participants, the benefit suspension plan uses a 1.0% of 

contribution formula for active participants, retirees, and beneficiaries. In order to maintain this 

benefit level for these populations while ensuring that the Plan is projected to avoid insolvency, 

it was necessary to establish a lower, 0.5% of contributions formula for certain terminated

participants. During the process of developing the benefit suspensions, the Board of Trustees 

considered applying the same percentage of contributions formula to all participants. The Plan 

actuary determined that any such percentage would have to be lower than 1.0% for the Plan to 

avoid insolvency, even if no caps were placed on the maximum suspension that could apply to 

any participant. Further, the Plan actuary determined that if the 0.5% of contribution formula 

that applies to certain terminated participants were any higher, other participant groups would 

need to have their percentage of contributions formula reduced below 1.0% of contributions or 

their suspension cap raised, which would undermine the goal of protecting retired participants in 

pay status and maintaining the support of the active participants.

That said, the Board of Trustees determined that participants who have earned many years of 

service in the Plan depend on it for retirement income more heavily than participants with fewer 

years of service. In recognition of this fact, the Plan has historically provided enhanced benefits 

to participants who earn 20 or more years of contributory service1

. The Board of Trustees has 

maintained this approach in the benefit suspension provisions by providing for lesser suspensions 

1 For example, the twenty-year service pension and the contributory pension both require a 

minimum of 20 years of service, and the contribution-based pension includes enhanced early 

retirement provisions for participants with 20 or more years of service. 

13.1.3
for terminated participants with 20 or more years of service. Specifically, terminated

participants with 20 or more years of service will have their suspensions based on a 1.0% of 

contributions formula, instead of the 0.5% formula that applies to terminated participants with 

fewer than 20 years of service. This difference recognizes that these participants depend more 

heavily on the Plan than do other terminated participants, as they tend to be older with fewer

years before they reach retirement (see § 432(e)(9)(D)(vi)(I) and (VIII)) 2,3. In contrast, 

terminated participants with fewer than 20 years of service tend to be younger, and are more 

likely to be currently employed and less dependent on benefits from the Plan. 

Maximum Suspension Caps 

In addition to determining which percentage of contributions formula applies to a terminated 

participant, whether a participant has earned 20 or more years of service affects the benefit 

suspensions in another way. In reviewing how the benefit suspensions impact different 

participant groups, the Board of Trustees decided that it was appropriate to mitigate the 

exceptionally large burden that would otherwise be felt by certain participants by placing caps on 

the amounts of suspensions that can apply to participants with 20 or more years of service. 

For a participant with 20 or more years of service with a benefit attributable to Tier 2 

contributions, the benefit suspension amount cannot exceed 50% of the pre-suspension benefit 

amount. In the case of Tier 3 benefits, the benefit suspension amount cannot exceed 40% of the 

pre-suspension benefit amount for a participant with 20 or more years of service. Note that no 

cap applies to benefits attributable to Tier 1, as the statute requires that these benefits be 

suspended to the maximum extent permissible. 

The most significant impact of these suspension caps is on participants with highly subsidized 

early retirement benefits, some of whom would otherwise have lost a larger portion of their 

benefits under the percentage of contributions formula (see § 432(e)(9)(D)(vi)(IV) and (V)). 

While the Board of Trustees concluded that it is appropriate for participants with large early 

retirement subsidies to have larger suspensions, they also determined that it is appropriate to 

partially mitigate this effect in view of the fact that these participants have developed an 

expectation that they would be able to rely on these benefits for the remainder of their lives. 

Another issue that the Board of Trustees considered when deciding to adopt these caps is that in 

their absence, the suspensions would have impacted a portion of the retiree population far more 

dramatically than any comparable segment of the active participant population (see § 

432(e)(9)(D)(vi)(IX)). 

Finally, the Board of Trustees determined that suspension caps should only apply to participants 

with 20 or more years of service. Among retired participants, those with 20 or more years of 

service generally have relatively large benefits from the Plan that are likely to represent a 

2 The average terminated participant with 20 or more years of service is currently 57.5 years old, 

having last earned service in the Plan at age 49.6. In comparison, the average terminated 

participant with less than 20 years of service is 51.4 years old, having last earned service in the 

Plan at age 39.2. 

3 While the statute specifies ‘years to retirement for active employees’, this concept also applies 

to terminated participants in exactly the same manner as it applies to active employees.

13.1.4
substantial portion of their total retirement income (see § 432(e)(9)(D)(vi)(III)). Among 

participants who have not yet retired, those with 20 or more years of service tend to be older with 

fewer years before they reach retirement, whereas participants with fewer than 20 years of 

service tend to be younger, and are more likely to be currently employed and less dependent on 

benefits from the Plan (see § 432(e)(9)(D)(vi)(I) and (VIII)).

Contribution Tiers

Tier 1 contributions include amounts contributed by employers that withdrew from the Plan on 

or before July 1, 2016, but failed to pay (or are delinquent with respect to paying) the full amount 

of their withdrawal liability under law or an agreement with the Plan. In accordance with Code 

section 432(e)(9)(D)(vii)(I), the Board of Trustees has approved benefit suspensions that will 

reduce the benefits attributable to these contributions to the maximum extent permissible. This 

takes into account the extent to which benefits are attributed to service with an employer that 

failed to pay its full withdrawal liability (see § 432(e)(9)(D)(vi)(XI)). 

Pursuant to Code section 432(e)(9)(D)(vii)(III), participants are in Tier 3 to the extent their 

benefits are attributable to contributions made by an employer that (a) has withdrawn from the 

Plan in a complete withdrawal in which the employer paid the full amount of the employer’s 

withdrawal liability under law or an agreement with the Plan, and also (b) pursuant to a 

collective bargaining agreement, has agreed to provide benefits to participants and beneficiaries 

of the Plan under a separate, single-employer-sponsored plan, in an amount equal to any 

reduction in the amount of benefits for such participants and beneficiaries as a result of the 

financial status of the Plan. The only benefits assigned to Tier 3 are those attributable to 

contributions made by UPS for participants that are part of the Transfer Group under an 

agreement between UPS and the Plan dated September 29, 2007 (generally those participants 

who were active participants with UPS or whose last employer prior to becoming terminated 

vested was UPS as of that date).

Benefits that are allocated to Tier 3 under the Board of Trustees’ proposed suspension plan are 

guaranteed by UPS against reduction “as a result of the financial status of the plan.” Because 

benefits in Tier 2 that are suspended are not protected by an employer, and because, unlike Tier 

1, Tier 2 benefits are not required to be reduced “to the maximum extent permissible,” the Board 

of Trustees has determined that it would not be appropriate to reduce Tier 2 benefits to the 

maximum extent permitted (see § 432(e)(9)(D)(vii)). However, in light of the 3-Tiered 

sequential method of applying suspensions laid out in Code section 432(e)(9)(D)(vii), the Board 

of Trustees has determined that it would be appropriate to apply suspension rules to Tier 3 

benefits that are in one significant respect more favorable than those applied to Tier 2 benefits. 

In particular, for participants with 20 or more years of service, the maximum suspension that can 

apply to a benefit attributable to Tier 2 contributions is 50%, while the maximum suspension that 

can apply to a benefit attributable to Tier 3 contributions is 40%. There are 7,499 participants 

with Tier 3 benefits who would receive lesser benefit suspensions on account of the lower 

suspension cap that is applied to those benefits. This difference recognizes the fact that different 

statutory requirements apply to Tier 2 and Tier 3 benefits. 

13.1.5
Summary 

In developing the benefit suspension plan, the Board of Trustees took great care to ensure that 

retired participants and beneficiaries are treated at least as well as any other participant group. 

The benefit suspension formulas applicable to active participants and retired participants are 

identical. For participants in both groups, the post-suspension benefit is based on 1.0% of the 

contributions that have been made on their behalf. In addition, the caps on the maximum 

suspension amount have a larger, positive effect on retirees compared to other groups. Of the 

participants and beneficiaries who benefit from these caps, approximately 82.4% are retirees or 

beneficiaries in payment status, 17.5% are terminated, and 0.1% are active. These caps serve to 

partially preserve the generous early retirement subsidies that many retirees are currently 

receiving. The caps do not have nearly as large of an impact on active and terminated 

participants, largely due to the fact that those subsidies were frozen for many participants in 

those groups effective in 2004. 

The benefit suspension formula that applies to terminated participants with 20 or more years of 

service is identical to the formula applicable to retired participants and active participants. 

However, terminated participants with less than 20 years of service have a less generous benefit 

suspension formula that is based on 0.5% of contributions received on their behalf. These 

participants earned an average of only 10.0 years of service in the Plan, indicating that the 

majority of their careers were spent with employers who did not provide retirement benefits 

through the Plan. It is likely, therefore, that in addition to being currently in the workforce, these 

terminated participants have access to retirement income outside of the Plan from sources 

provided by these employers. This is especially true for terminated participants with Tier 3 

benefits, as the definition of Tier 3 makes it clear that they participate in a single-employer 

retirement plan that will provide them with retirement benefits that offset any benefits they lose 

as part of the benefit suspensions in the Plan. There are approximately 34,000 terminated 

participants with less than 20 years of service who will be fully protected from the benefit 

suspensions by such a plan. 

13.1.6
Data Tables Demonstrating the Impact of Benefit Suspensions on Different Groups of 

Participants

The formulas used to determine amounts of benefit suspensions apply differently to different 

participant groups based on the following criteria: 

• Whether the participant is (a) an active employee, retiree or beneficiary in payment status,

or (b) a terminated participant.

• Whether the participant’s benefit is attributable to contributions from Tier 1, Tier 2, or Tier 3,

as defined in Code section 432(e)(9)(D)(vii).

• Whether the participant’s years of Contributory Service Credit is at least 20, or is less than

20.

Document number 13.2 contains tables that demonstrate the impact of the benefit suspensions on 

the participant population of the Plan, broken into groups according to the preceding criteria. 

The first table contains the number of participants in each group, the average monthly benefit 

before suspension, the average monthly benefit after suspension, and the aggregate present value 

of the reduction in benefits. The second table illustrates the average increase in monthly 

benefits that Tier 3 participants will receive from the UPS single employer retirement plan to 

offset the reduction in benefits from the Plan. The third table shows for each group, the number 

of participants in that group broken into bands according to the percentage reduction in their presuspension benefits. 

13.1.7
Discussion of How the Benefit Suspension Formula Impacts Different Groups of 

Individuals and How These Differences Result from a Reasonable Application of the 

Relevant Factors

Participants with Tier 1 Contributions

The Board of Trustees does not have flexibility in designing the suspensions for benefits 

attributable to Tier 1 contributions, since Code section 432(e)(9)(D)(vii) requires suspensions “to 

the maximum extent permissible” for these benefits. While mandatory, these suspensions are 

also consistent with Code section 432(e)(9)(D)(vi)(XI), which provides that service with an 

employer that withdrew and did not pay its full withdrawal liability is a factor that may be 

considered in determining whether the distribution of suspensions is equitable. 

Active Participants, Retired Participants and Beneficiaries with Tier 2 Contributions and Less 

Than 20 Years of Service 

The benefit suspension formula reduces benefits attributable to Tier 2 contributions made on 

behalf of active participants with less than 20 years of service to 1.0% of contributions. The 

Board of Trustees determined that a larger suspension for these participants would lessen their 

support for the Plan to a level where further employer withdrawals would be likely, placing plan 

benefits of all participants and beneficiaries in greater jeopardy. The Board of Trustees also 

decided that it was inappropriate to adopt a cap on the maximum suspension that can apply to 

active participants with less than 20 years of service, since, compared to other groups, these

participants are typically younger with more years until they reach retirement age4. Because

active participants have been earning benefits at a rate of 1.0% of contributions since 2004, these 

individuals effectively already had their benefit accruals reduced to the same level that the 

benefit suspension plan is now applying to all active participants, retirees, beneficiaries, and 

terminated participants with 20 or more years of service. In addition, under the suspension plan 

active participants will earn future monthly benefit accruals at a reduced rate of 0.75% of 

contributions. 

The benefit suspension formula also reduces benefits attributable to Tier 2 contributions made on 

behalf of retired participants and beneficiaries with less than 20 years of service to 1.0% of 

contributions. Since participants in payment status are relatively older than other participants 

and likely to no longer be in the workforce, the Board of Trustees determined that their 

suspension formula should not result in post-suspension benefits that are any lower than those 

applicable to similarly situated active participants.

Because participants in this group generally did not have enough years of service in the Plan to 

qualify for subsidized early retirement benefits, basing post-suspension benefits on the 1.0% of 

contribution formula typically results in relatively smaller suspensions when compared to 

retirees who earned at least 20 years of service in the Plan. Retired participants in this group 

have an average of 11.9 years of service, with an average pre-suspension benefit of $595 per 

month, indicating that they are likely to have retirement income available from other sources. 

4 Tier 2 active participants with less than 20 years of service have an average of 8.1 years of 

service, and an average age of 44.9. In comparison, Tier 2 active participants with 20 or more 

years of service have an average of 27.2 years of service, and an average age of 55.7. 

13.1.8
For this reason, the Board of Trustees also decided that it was inappropriate to adopt a cap on the 

maximum suspensions that can apply to retired participants and beneficiaries with Tier 2 

contributions and less than 20 years of service. 

Active Participants, Retired Participants and Beneficiaries with Tier 2 Contributions and 20 or 

More Years of Service

The benefit suspensions and rate of future benefit accrual for active participants, retired 

participants and beneficiaries with Tier 2 contributions and 20 or more years of service are 

identical to those that apply to active participants, retired participants and beneficiaries with less 

than 20 years of service, except that the maximum amount of suspension that can apply to any

such participant is 50% of the pre-suspension benefit. This means that if application of the 1.0% 

of contribution formula to those participants would result in a suspension of more than 50% of 

their pre-suspension benefits, the suspension amount is decreased so that it does not exceed 50% 

of the benefit payable prior to suspension. 

The Plan has historically provided subsidized early retirement benefits to participants who have 

20 or more years of service. The Board of Trustees concluded that it was equitable for the 

suspensions to emphasize protecting unsubsidized normal retirement benefits, which is reflected 

in the percentage of contribution formulas. Accordingly, participants and beneficiaries with Tier 

2 contributions and 20 or more years of service (who tend to have greater subsidized early 

retirement benefits) typically have larger suspension amounts than similar participants with less 

than 20 years of service. 

The Board of Trustees determined that basing the suspensions on a formula that does not include 

protection for early retirement subsidies is equitable for additional reasons. These subsidized 

benefits were added to the Plan over many years through benefit increases, and in many cases 

participants received the full value of these benefit increases despite only working for a short 

time after they were adopted. Further, these subsidized benefits have largely been phased out for 

active participants, but they remain a major component of retiree benefits, which creates a 

significant discrepancy between active and retiree benefits.

The Board of Trustees also considered the fact that the exclusion of protection for early 

retirement subsidies from the benefit suspension formula results in some participants who have 

earned early retirement subsidies having exceptionally large suspension amounts. While the 

Board of Trustees concluded that it is appropriate for participants with large early retirement 

subsidies to have larger suspensions, they also determined that it is appropriate to partially 

mitigate this effect in view of the fact that these participants have developed an expectation that 

they would be able to rely on these benefits for the remainder of their lives. The Board of 

Trustees therefore determined that it was appropriate to place a 50% cap on the maximum 

suspension amount that can apply to any participant or beneficiary with 20 or more years of 

service. Among retired participants and beneficiaries who are not exempted from the benefit 

suspensions as a result of the statutory age and disability protections, approximately half benefit 

from this maximum suspension cap.

In evaluating the suspension cap provision, the Board of Trustees also considered the fact that 

compared to Tier 2 active participants with less than 20 years of service, active participants with 

20 or more years of service are an average of 10.8 years closer to their normal retirement age, 

13.1.9
and have an average of 19.1 more years of service in the Plan. They are therefore likely to be 

more dependent on the Plan for retirement income, and less able to adjust to the reduced benefit 

payments. The Board of Trustees determined that the cap should only be applied to active

participants with 20 or more years of service because these individuals tend to be older with 

fewer years before they reach retirement, whereas participants with fewer than 20 years of 

service tend to be significantly younger, and are more likely to be currently employed and less 

dependent on benefits from the Plan. 

Terminated Participants with Tier 2 Contributions and Less Than 20 Years of Service 

To prevent Plan insolvency while protecting the benefits payable to retired participants and 

beneficiaries in payment status, and also to maintain support for the Plan among active 

participants, the Board of Trustees decided that it was necessary to base the suspension formula

for terminated participants with Tier 2 contributions and less than 20 years of service on 0.5% of 

contributions received on their behalf. In doing so, the Board of Trustees considered the fact that 

terminated participants in this group have an average age of 52.2 years and therefore are more

likely to still be in the workforce earning wages and accruing retirement benefits in other plans. 

Further, participants in this group have, on average, relatively few (10.0) years of service in the 

Plan, resulting in relatively smaller benefits and lesser dependence on the Plan for retirement 

income due to the fact that the majorities of their careers were likely spent in employment 

outside of the Plan. 

During the process of developing the benefit suspensions, the Board of Trustees considered 

applying the same percentage of contributions formula to all participants. The Plan actuary 

determined that any such percentage would have to be lower than 1.0% for the Plan to avoid 

insolvency, even if no caps were placed on the maximum suspension that could apply to any 

participant. Further, the Plan actuary determined that if the 0.5% of contribution formula that 

applies to certain terminated participants were any higher, other participant groups would need to 

have their percentage of contributions formula reduced below 1.0% of contributions or their 

suspension cap raised, which would undermine the goal of protecting retired participants in pay 

status and maintaining the support of the active participants. The Board of Trustees determined 

that applying a formula below 1.0% of contributions or adopting higher suspension caps would 

be unreasonably harmful to retired participants and would create a substantial risk that active 

participants would withdraw their support for the Plan. Based on these conclusions, the Board of 

Trustees concluded that the 0.5% formula for terminated participants with less than 20 years of 

service is equitable.

Terminated Participants with Tier 2 Contributions and 20 or More Years of Service 

For terminated participants with Tier 2 contributions and 20 or more years of service, the benefit 

suspension formula reduces benefits attributable to Tier 2 contributions to 1.0% of the 

contributions received on their behalf, and the maximum amount of suspension that can apply to 

any such participant is 50% of the pre-suspension benefit. On average, these participants have 

14.4 more years of service in the Plan, and are 4.8 years closer to normal retirement, as 

compared to terminated participants with less than 20 years of service. In developing the benefit 

suspensions plan, the Board of Trustees determined that participants with 20 or more years of 

service tend to have comparatively large benefits from the Plan, as compared to participants with 

fewer years of service. 

13.1.10
In designing the percentage of contribution formula and cap for this group, the Board of Trustees 

determined that compared to terminated participants with less than 20 years of service, 

participants in this group are likely to be more dependent on the Plan for their retirement income

as they tend to be older with fewer years before they reach retirement. For these reasons, the 

Board of Trustees also determined that it was equitable to protect terminated participants with 20 

or more years of service by basing their suspensions on a formula that is identical to the one that 

applies to both active participants and retirees and beneficiaries in payment status. 

Participants with Tier 3 Contributions

For the reasons discussed above, the benefit suspension provisions that apply to benefits 

attributable to Tier 3 contributions are identical to those that apply to benefits attributable to Tier 

2 contributions, with one exception. For participants with 20 or more years of service, the 

maximum suspension that can apply to a benefit attributable to Tier 2 contributions is 50% of the 

pre-suspension benefit, while the maximum suspension that can apply to a benefit attributable to 

Tier 3 contributions is 40%. This difference between the maximum suspension cap for Tier 2 

and Tier 3 benefits reflects the different statutory requirements applicable to these benefit tiers.

13.1.11
Central States, Southeast and Southwest Areas Pension Plan

Revenue Procedure 2015-34 Section 4.04(3)

Demonstration that Proposed Benefit Suspension is Distributed EquitablyEffects of Proposed Benefit Suspension By Category

Status as of December 31, 2014: 

Contributory Service Credits: <20 Years >= 20 Years <20 Years 

Number of Participants 27,077 52,635 18,094 Average Monthly Benefit

Before Suspension $304 $851 $553 After Suspension $220 $556 $276 

Aggregate Present Value of Reduction in Benefits $168,949,834 $1,446,803,439 $204,002,068 Number of Participants 111,734 136,410 66,567 Average Monthly Benefit

Before Suspension $568 $1,494 $558 After Suspension $483 $1,047 $317 

Aggregate Present Value of Reduction in Benefits $515,007,616 $5,868,819,842 $558,236,949 Number of Participants 864 1,448 34,414 Average Monthly Benefit

Before Suspension $610 $2,406 $1,185 After Suspension $422 $1,471 $418 

Aggregate Present Value of Reduction in Benefits $17,054,533 $140,448,189 $1,044,054,287 

Notes:

Tier 3

Active, Retired, or Beneficiary Terminated 

Tier 1Tier 2

The exhibit shows the number of participants in each category. Since participants can have benefits in more than one tierexhibit add up to 471,186 instead of the 397,492 total participants as of December 31, 2014.Status, benefits (except projected to July 1, 2016 for actives), and actuarial assumptions and methods are based on the Jactuarial valuation.

09/17/2015 

13.2.1
Central States, Southeast and Southwest Areas Pension Plan 

Total Effects of Proposed Benefit Suspension on Tier 3 Participants

Status as of December 31, 2014: Actives, Retired or Beneficiary Term

Contributory Service Credits: < 20 Years >= 20 Years < 20 YearNumber of Participants Average Monthly Benefit 

Before Suspension After Suspension Increase in UPS Plan Benefit to Offset Suspension Total From Both Plans After Suspension 

864 

$610 $422 $188 $610 

1,448 

$2,406 $1,471 

$935 

$2,406 

34.414 $1.185 

$418 $767 

$1,185 

13.2.2
Central States, Southeast and Southwest Areas Pension Plan

Revenue Procedure 2015-34 Section 4.04(4)

Demonstration that Proposed Benefit Suspension is Distributed EquitablyDistribution of Benefit Suspension Within Each Different Category

Status as of December 31, 2014: 

Contributory Service Credits: <20 Years >= 20 Years <20 Years 

Reduction Percentage

0% 14,051 16,369 815 

>0% but <= 10% 6,081 7,080 3,105 

>10% but <= 20% 1,014 2,663 1,263 

>20% but <= 30% 678 1,923 1,026 

>30% but <= 40% 720 2,330 1,559 

>40% but <= 50% 876 3,918 1,898 

>50% but <= 60% 1,408 12,146 3,075 

>60% but <= 70% 1,213 5,963 4,886 

>70% 1,036 243 467 

0% 72,204 40,486 6,827 

>0% but <= 10% 18,164 19,496 15,169 

>10% but <= 20% 9,073 7,504 5,353 

>20% but <= 30% 6,967 15,106 4,139 

>30% but <= 40% 3,351 17,706 6,057 

>40% but <= 50% 1,739 36,112 9,220 

>50% but <= 60% 225 - 8,561 

>60% but <= 70% 5 - 10,565 

>70% 6 - 676 

0% 237 5 1,801 

>0% but <= 10% 265 29 1,458 

>10% but <= 20% 80 11 369 

>20% but <= 30% 48 30 369 

>30% but <= 40% 84 1,373 801 

>40% but <= 50% 126 - 1,935 

>50% but <= 60% 23 - 8,729 

>60% but <= 70% 1 - 18,942 

>70% - - 10 

Notes:

Tier 1Tier 2Tier 3

Active, Retired, or Beneficiary Terminated Ve

The exhibit shows the number of participants in each category. Since participants can have benefits in more than one tier, thexhibit add up to 471,186 instead of the 397,492 total participants as of December 31, 2014.Status, benefits (except projected to July 1, 2016 for actives), and actuarial assumptions and methods are based on the Janactuarial valuation.

09/17/2015 

13.2.3