Excitement for #TaxCutsAndJobsAct continues is a central theme for Erik Paulsen’s re-election … as he tweets about various companies who have made various announcements that the GOP wants voters to be believe would not have happened without their signature accomplishment.
As such, the MN Political Roundtable will be evaluating some of these claims and offering additional information for voters to consider.
Previously, McDonalds’s #ArchwaysToOpportunity program (which had started in 2015) was cited by Congressman Paulsen and evaluated in this commentary.
And, now let’s look at this claim about pensions and United Parcel Service as cited in this Paulsen tweet
What Can #TaxReform Do For You? @UPS announces how $12 billion investment thanks to #taxreform will help their employees (by increasing pension funding) as well as their customers (by improving facilities and boosting logistics network) https://t.co/pFH28QD2oQ
— Rep. Erik Paulsen (@RepErikPaulsen) February 1, 2018
Now the quick assumption might be that UPS is gonna spend $12 billion this year … but read what is stated in UPS’ press release
The company plans to raise future capital spending above its previously committed six-to-seven percent of annual revenue. UPS will invest an additional $7 billion over three years for the construction and renovation of facilities, to acquire new aircraft and ground fleet vehicles, and to enhance the information technology platforms required to support the network, manage the business and power new customer solutions.
UPS also recently made a $5 billion tax-qualified contribution to the company’s three UPS-sponsored U.S. pension plans. This represents about $13,000 per participant. The voluntary contribution raised the funding level to above 90-percent, securing retirement benefits on behalf of union-represented and union-free employees eligible for UPS-funded pensions.
$7 billion more over three years … a lot of money, but let us remember that in 2017, UPS spent over $5 billion … and that during UPS’s Q4 earnings call on February 1st, CEO David Abney committed to a capital expenditure in 2018 totaling between $6.5B to $7.0B.
So, the bump could be only $1.5 billion over 2017 … and over course, there is no guarantee … as #TrumpTariffs could slow the number of parcels being processed and delay those future year plans out even further.
Was the increase due to Excitement for #TaxCutsAndJobsAct … or the need to respond to market complaints ?
The capital investments follow backlogs that choked UPS’ network during last year’s holiday shopping surge, which led to shipping delays and forced UPS to spend $125 million on leasing additional planes and trucks, cutting into the company’s fourth quarter profits.
And will this result in more jobs ????
UPS has been gradually automating more tasks in more of its facilities over the last several years. It has already automated sorting and distribution at a number of its busiest facilities — which the company said has improved labor productivity by 20% — and plans to fully automate all work at its 30 largest US hubs by 2020. And then there are driverless trucks to consider.
Yet, it is definitely good news.
But the $5 Billion investment in its pension plan will be done immediately.
And if you are a #MathGuy, you understand why.
By making the contribution in 2017, UPS cut its 2017 tax bill — when the corporate tax rate was 35 percent not 21 percent. As a result of the tax legislation, the expense was worth more by taking it at the end of 2017. (Maybe you read that some taxpayers were making 2018 property tax payments in December, so they could claim the deduction before it was changed by the Paulsen tax plan.)
Also, by putting in more money into its pension plan will save the company on its PBGC premiums. The Pension Benefit Guarantee Corporation is a government agency that insures pension plans so beneficiaries can be assured of getting their money. PBGC’s single-employer program is funded through employer premiums of $74 per worker. But on top of that, companies must pay an extra $38 for every $1,000 of unfunded benefits for each employee, capped at $523 per beneficiary, and these can go up each year. Ideally, a company would want to have 90% covered to avoid the penalty … and UPS was at 76% the previous year … and the company’s press release says they are above 90% now. By avoiding those high premiums, a company can save millions.
Interestingly, UPS had planed to only contribute $2.3 billion to its U.S. defined benefit plans in 2017, but because of the fact that pensions are a deductible cost for tax purposes, the company will get a tax savings by including it in the 2017 filing rather than the 2018 payment. For reference, UPS had contributed $2.5 billion to the plans in 2016 and $1 billion in 2015.
Another factor that could impact UPS thinking is whether they wish to terminate their existing pension program.
Companies can end their pension plans by turning all the obligations over to an insurance company who assume the risk, or by offering a lump sum to workers and retirees … and in what was a healthy stock market in February may have contributed to that thinking.
But insurers won’t accept employers plans unless the pension plan is fully funded and that’s where funding ratios actually matter. Hence the incentive for companies to increase their funding ratios now.
Once again, it is definitely good news that UPS is investing in its employees pension programs … but ya gotta understand why they are doing it … yet as a responsible business, shouldn’t the company be “paying” all its bills ?
It is pretty easy for any #MathGuy to understand why UPS is doing what it is doing (yet candidate Paulsen does want you to know why they are doing it, just that UPS is part of the Excitement for #TaxCutsAndJobsAct.
For UPS, its Simple Math … they save money now
For Erik Paulsen, it’s Simple Manipulation … he tells voters in vague terms the “the Good News story of the day” … all the while knowing that he satisfied another #PaulsenDonor (yep, the United Parcel Service PAC has already donated $5,000 to his ICEpac Leadership PAC and even more to his Paulsen For Congress reelection campaign.)
And a side note, the subject of protecting pensions is important for all workers. Thus it is very disappointing that Congressman Paulsen has not sponsored the bipartisan HR4444 – Rehabilitation for Multiemployer Pensions Act ( the bill has five sponsors from Minnesota delegation … missing MN02 Representative Jason Lewis, and MN06 Representative Tom Emmer in addition to Paulsen.)