UPS Pension Lump Sum vs. Annuity: A Guide for UPS Employees (2026)

United Parcel Service maintains two largely separate pension worlds under one employer umbrella. Non-union management and salaried employees participate in the UPS Retirement Plan — a traditional defined-benefit plan that was frozen effective January 1, 2023 and that offers a lump-sum option at retirement, calculated using IRS §417(e) segment rates. Teamster hourly employees — drivers, package handlers, and sorters — participate in one of several IBT-affiliated pension plans that provide a monthly lifetime annuity with no lump-sum option. The Teamster pension landscape was fundamentally reshaped in 2007 when UPS paid $6.1 billion to withdraw from the Central States, Southeast and Southwest Areas Pension Fund, creating a new jointly trusteed plan for approximately 44,000 affected hourly employees. The 2023 five-year Teamsters contract brought record pension increases — including up to $1,000/month more for eligible retirees — but the structural decision for Teamsters remains which annuity form to elect, not whether to roll over a lump sum. This guide covers both populations: how the non-union lump sum is calculated, what PBGC protection applies to each group, the Rule of 55 interaction with the UPS Savings Plan, and how to evaluate the lump-sum vs. annuity decision in 2026.

UPS's pension plan structure: which plan applies to you?

Your pension situation depends on whether you are classified as a non-union employee or as a member of the International Brotherhood of Teamsters (IBT) — and, if a Teamster, which of the several IBT-affiliated plans covered your employment years.¹

Non-union employees: UPS Retirement Plan

UPS's management, supervisory, professional, and other non-union employees participate in the UPS Retirement Plan, a single-employer defined-benefit plan maintained by UPS. Key facts as of July 2026:

• Benefit accruals frozen January 1, 2023. No pension credits have accumulated since December 31, 2022. The benefit you have earned through that date is preserved and will be payable at retirement. Employees who continued past that date receive enhanced 401(k) contributions in lieu of further accruals.
• Lump-sum option available at retirement. Eligible participants may elect their benefit as a lifetime monthly annuity or as a single lump sum, subject to plan terms. The lump sum is calculated using IRS §417(e) minimum present value segment rates — the same rate-based methodology that governs most large corporate pension lump sums.
• PBGC single-employer coverage applies. The UPS Retirement Plan is a PBGC-covered single-employer plan. The 2026 maximum monthly PBGC guarantee for a 65-year-old straight-life annuitant is $7,789.77/month ($93,477/year). UPS has not completed a pension risk transfer to an insurance company for the non-union plan, so participants who have not yet commenced benefits retain PBGC coverage.
• Administered through UPS Benefits Center. Non-union employees can access plan information, run benefit estimates, and initiate elections through the UPS My Benefits portal (mybenefits.ups.com) or by calling the UPS Benefits Center (1-800-UPS-1UPS / 1-800-877-1877).

Teamster (IBT) hourly employees: multiple plans

UPS Teamster employees are covered by one of several IBT-affiliated pension plans depending on their geographic region and the years they worked. The most significant plans are:²

• IBT-UPS Full Time Employee Pension Plan: Created in 2008 after UPS withdrew from the Central States pension fund. Covers approximately 44,000 full-time UPS Teamsters primarily in the Central, South, and Carolinas regions — the employees who had been in Central States. This is a jointly trusteed plan with UPS and IBT trustees. Under the 2023 five-year contract, this plan delivered the largest pension increases in its history: retirees and future retirees in the Central Region, South, and Carolinas received increases of up to $1,000/month above prior benefit levels. Benefits are paid as a monthly lifetime annuity; no lump-sum option is available.
• Western Conference of Teamsters Pension Trust (WCTP): Covers UPS Teamsters in the western United States. The WCTP is one of the better-funded large multiemployer plans and has not been subject to benefit cuts or rehabilitation plans. Benefits are paid as a monthly annuity with multiple payout forms (single life, 50% J&S, 100% J&S, 10-year certain and life); no lump-sum option.
• New England Teamsters and Trucking Industry Pension Fund: Covers UPS Teamsters in the New England region. Monthly annuity only.
• Other regional IBT plans: Some UPS Teamsters may be covered by other IBT-affiliated funds depending on their specific terminal, shift classification, and years of service. Part-time employees may have their own UPS/IBT part-time pension plan provisions.

Action step: Confirm which plan covers your benefit by contacting your Local union hall, the UPS Benefits Center, or the specific fund's participant service line. The plan document and annual funding notice will tell you your benefit formula, vesting schedule, and the payout forms available to you.

Non-union: how UPS calculates your lump sum — the §417(e) mechanics

For non-union employees eligible for a lump sum under the UPS Retirement Plan, the offer is calculated using IRS §417(e)(3) minimum present value segment rates. Higher segment rates produce a smaller lump sum; lower rates produce a larger one. This inverse relationship means that today's elevated rate environment — compared to the near-zero environment of 2020–2021 — results in materially smaller lump-sum offers for the same accrued benefit.³

Large corporate plans like UPS's typically use the IRS segment rates published in a specific look-back month to set lump-sum values for an entire stability period (usually a calendar year). Many large plans use November of the prior calendar year as the look-back month. UPS non-union employees should confirm their plan's specific look-back month and stability period with the UPS Benefits Center — the plan document governs. If UPS uses a November look-back, your 2026 lump sum uses the same rates regardless of which month within 2026 you retire. If it uses a different look-back, earlier months in 2026 may capture rates from a different period.³

For reference, the November 2025 §417(e) stabilized segment rates — the most common look-back for calendar year 2026 corporate pension lump sums — are:³

For a non-union UPS employee with an accrued benefit of $3,600/month at age 62, these rates would produce a lump-sum offer in the range of $550,000–$620,000 (varying by age, sex-neutral mortality tables, and plan-specific provisions). The same benefit would have been worth $700,000–$800,000+ at the 2021 near-zero rate environment. The difference is roughly $150,000–$200,000 depending on the retiree's age — all driven by interest rates, not by the value of your accrued benefit.

See our interest rate timing guide for a detailed analysis of how §417(e) segment rate movements affect lump-sum offer sizes and when it makes sense to wait vs. act.

The Central States pension history: UPS's 2007 withdrawal and the ARPA rescue

Understanding the Central States background is important context for any current or former UPS Teamster employee who may have had service credited under the old Central States plan before 2008.⁴

For decades, UPS drivers and hourly workers in the Central, South, and Carolinas regions participated in the Central States, Southeast and Southwest Areas Pension Fund — the largest multiemployer Teamster pension plan in the United States. Central States accumulated severe funding problems through the 1980s and 1990s as trucking deregulation reduced the base of contributing employers. By the mid-2000s, the fund was paying out significantly more in benefits than it was receiving in contributions.

In 2007, UPS and the Teamsters negotiated a landmark agreement: UPS paid approximately $6.1 billion in a lump-sum withdrawal payment to exit the Central States fund entirely. In exchange, the approximately 44,000 UPS Teamsters who had been covered by Central States were moved to a new plan — the IBT-UPS Full Time Employee Pension Plan — with benefit protections funded by UPS contributions going forward. The 2007 UPS withdrawal was the largest lump-sum pension withdrawal in U.S. history at the time.⁴

After UPS left, Central States continued to deteriorate. By 2020, the fund was projected to exhaust its assets by 2025, which would have cut benefits by 50–60% for its approximately 380,000 remaining participants. The American Rescue Plan Act (ARPA) of 2021 established the Special Financial Assistance (SFA) program to rescue distressed multiemployer plans. In September 2022, the PBGC approved $35,764,910,109 (~$35.8 billion) in SFA for Central States — the largest single SFA award — projected to fund the plan through 2051 and restore all previously cut benefits retroactively.⁵

What this means for UPS employees and retirees:

• Current UPS Teamsters are not in Central States. If you began working at UPS after 2007, your pension is in the IBT-UPS Full Time Employee Pension Plan (Central Region/South) or another IBT plan — not Central States. You are unaffected by Central States's funding history.
• Former UPS employees with pre-2007 Central States service may have restored benefits. If you had service at UPS before the 2007 withdrawal and had benefits in Central States that were reduced under a rehabilitation plan, the ARPA SFA restore those cuts retroactively. Contact Central States directly (mycentralstatespension.org) to confirm your benefit status.
• Central States pays annuity only. Like other multiemployer plans, Central States provides a monthly lifetime annuity; there is no lump-sum option even for the deferred vested participants who remained.

Teamster pensions: annuity-only structure and PBGC multiemployer coverage

Unlike the non-union UPS Retirement Plan, the IBT-affiliated plans covering UPS Teamsters do not offer a lump-sum option at retirement. Benefits are paid as a monthly lifetime annuity, typically with several payout forms available:²

• Single life annuity: Highest monthly payment; ends at your death with no survivor benefit.
• 50% joint-and-survivor (QJSA): ERISA §205 default for married participants; reduced monthly payment to you, with 50% continuing to your surviving spouse.
• 75% or 100% J&S: Available in some plans; further reduced monthly payment for more robust survivor coverage.
• Period-certain and life: Some plans offer a 5- or 10-year certain period, guaranteeing payments for at least that long even if you die early.

The election is irrevocable once benefits commence. Use our J&S election calculator and comprehensive J&S guide to model the household lifetime NPV of each option for your age and health situation.

PBGC multiemployer coverage: The IBT multiemployer plans covering UPS Teamsters (WCTP, New England Teamsters, and others) are covered by PBGC's multiemployer insurance program. The 2026 PBGC multiemployer guarantee formula is $35.75 per month per year of credited service, up to a maximum of $1,072.50/month for 30 years of service — substantially lower than the $7,789.77/month single-employer guarantee.⁶ For a 30-year UPS Teamster with a $3,000/month benefit, the PBGC backstop covers only $1,072.50 of that $3,000 in the event of plan insolvency. However, well-funded plans like the WCTP and the IBT-UPS plan (now backed by strong UPS contributions) are not currently in distress.

PBGC coverage for non-union UPS Retirement Plan participants

For non-union participants in the UPS Retirement Plan who have not yet commenced benefits, PBGC single-employer coverage remains in place. The 2026 maximum PBGC guarantee for a 65-year-old straight-life annuitant is $7,789.77/month ($93,477/year).⁶

Two scenarios where this cap becomes relevant for UPS management employees:

1. Long-service senior employees. A UPS management employee with 30+ years of service and a high final salary could have an accrued benefit of $7,000–$10,000+/month. For those with benefits materially above the $7,789.77 cap, electing the lump sum captures the full actuarial present value — including the portion above the PBGC cap — and places it in a portable IRA outside employer risk. The monthly annuity above the cap depends entirely on UPS's pension plan remaining solvent and fully funded, with no federal backstop.
2. Plan funding status. Unlike several of its peers (IBM, Verizon, AT&T, GE), UPS has not completed a pension risk transfer to an insurance company for the non-union plan. Plan participants retain PBGC protection, but also remain subject to UPS's ongoing maintenance of the plan. Reviewing the plan's annual funding notice (required under ERISA §101(f)) tells you whether the plan is fully funded or has a funding shortfall.

UPS Savings Plan and the Rule of 55

UPS non-union employees participate in the UPS Savings Plan — the company's 401(k) plan. Beginning January 1, 2023 (coinciding with the pension freeze), UPS significantly enhanced its Savings Plan contributions for non-union employees: the company contributes 5% to 8% of eligible compensation (depending on years of service) to each employee's Savings Plan account, in addition to a company match of up to 3% on employee contributions.⁷

The UPS Savings Plan carries an important interaction with the pension rollover decision under IRC §72(t)(2)(A)(v) — the Rule of 55:

• If you separate from UPS at age 55 or older, you can access your UPS Savings Plan balance without the 10% early distribution penalty while the funds remain in the Savings Plan. This exception applies only to the qualified plan at the employer from which you separated.
• Rolling the Savings Plan to an IRA destroys the Rule of 55 exception permanently. Once Savings Plan funds move to an IRA, the 10% penalty applies to any distribution before age 59½ — unless you qualify for another exception or set up a §72(t) SEPP arrangement.
• Rolling the pension lump sum to an IRA does not affect the Rule of 55 for your Savings Plan. The two decisions are independent: roll the pension to an IRA (no Rule of 55 was ever available on a pension lump sum), and keep the Savings Plan at UPS (or roll to a new employer's qualified plan) to preserve the age-55 access.
• If you are retiring from UPS before age 59½ and may need to draw from your Savings Plan, calculate carefully before initiating a Savings Plan rollover. For most UPS employees age 55–59, keeping the Savings Plan in place until 59½ (when the 10% penalty disappears regardless of where the funds are) is the simpler path unless your new employer has a superior plan.

See our 72(t) SEPP guide if you need access to an IRA before 59½ after completing a pension rollover.

RMD and IRMAA risk on a large UPS pension rollover

UPS non-union employees with long tenures — 20–35 years — can accumulate substantial pension benefits even with the freeze. A management employee who earned $120,000–$200,000/year may retire with a lump-sum offer in the $400,000–$900,000 range depending on years of service, benefit formula, and current §417(e) rates. Rolling that balance to a traditional IRA creates two long-run tax exposures worth modeling before making the pension election:

Required minimum distributions

Under SECURE 2.0, RMDs from a traditional IRA begin at age 73 for participants born 1951–1959, and at age 75 for participants born 1960 or later.⁸ A $700,000 pension rollover IRA growing at 6% annually from retirement at age 60 to RMD onset at 73 reaches approximately $1.49 million — producing a first-year RMD of roughly $54,000 and growing each year. When this RMD stacks on top of Social Security income, the combination can push a retiree into higher tax brackets and Medicare IRMAA surcharge tiers that persist for a decade or more.

IRMAA surcharges

Medicare's income-related monthly adjustment amounts (IRMAA) are assessed based on MAGI from two years prior. In 2026, IRMAA Tier 1 begins at $109,000 for single filers and $218,000 for married filing jointly — adding $74.90/month to Part B premiums per person at Tier 1 alone, with surcharges escalating through five additional tiers.⁸ A UPS retiree receiving $24,000/year in Social Security plus $54,000 in initial RMDs — a combined $78,000 — may stay under Tier 1 in early RMD years, but the RMD grows roughly 4–5% annually (balance growth minus distributions) and can breach IRMAA thresholds within a few years without proactive planning.

Strategies in the rollover-to-RMD window

The years between your UPS retirement date and RMD onset are the highest-value tax planning window for pension rollover IRA holders. Three approaches apply most directly:

• Roth conversions: In years before RMDs begin — particularly when UPS salary income has stopped and Social Security hasn't started yet, creating a low-income window — systematically convert a portion of the traditional IRA to a Roth IRA each year. Converted balances grow tax-free and are not subject to RMDs in your lifetime. Use our Roth Conversion Optimizer to find the annual conversion amount that fills your bracket just below IRMAA Tier 1 thresholds.
• QLAC: A Qualified Longevity Annuity Contract can shelter up to $210,000 (2026 IRS limit) inside the IRA from RMD calculations, deferring income to age 85 and reducing mandatory distributions in your 70s and early 80s.⁸
• QCDs after age 70½: If you are charitably inclined, Qualified Charitable Distributions satisfy RMDs tax-free up to $111,000 per year (2026).⁸

Electing the monthly annuity instead of the lump sum eliminates RMD complexity entirely — pension payments are taxable ordinary income each year, with no balance to manage. Whether that simplicity justifies the tradeoffs — inflexibility, potential loss of estate value, and removal of the Roth conversion option — depends on your other income, health outlook, estate goals, and how the annuity interacts with Social Security timing. See our pension rollover RMD guide and IRA RMD calculator for a detailed projection.

Joint-and-survivor election for non-union UPS employees

If you are married and elect the monthly annuity from the UPS Retirement Plan, ERISA §205 requires the default form to be a qualified joint-and-survivor annuity (QJSA) providing at least 50% of the monthly payment to your surviving spouse after your death. Waiving the J&S requires your spouse's written consent, witnessed by a notary or plan representative, within the election window.⁹

Most corporate DB plans including UPS's offer multiple J&S levels: life-only (no survivor benefit, highest monthly payment), 50% J&S, 75% J&S, and 100% J&S. The actuarial cost of the survivor benefit — the reduction in your monthly payment — depends primarily on the age gap between you and your spouse. A 5-year age gap is modestly expensive; a 15-year gap is substantially more so.

Use our J&S election calculator to model the household NPV of each election across different life expectancy scenarios. Also review the Social Security survivor benefit interaction — if your spouse's Social Security benefit at their full retirement age substantially replaces the J&S pension benefit, the cost of the survivor election may not be worth paying. See our J&S guide for the full framework, including the pension max strategy and its substantial execution risks.

Lump sum vs. annuity: the UPS-specific decision framework

For non-union UPS Retirement Plan participants, five questions frame the decision:

1. How does your benefit compare to the PBGC cap ($7,789.77/month at 65)? Long-service senior UPS management employees may have benefits that approach or exceed this cap. For benefits materially above the cap, the lump sum captures the full actuarial present value — including the portion above the PBGC guarantee — and converts it to a portable IRA. The monthly annuity above the cap is an unsecured claim against the plan's funded status.
2. What do you need the money for between ages 55 and 59½? If you are retiring from UPS between 55 and 59½ and expect to need liquidity, keeping the Savings Plan in the plan (Rule of 55) and rolling the pension separately to an IRA is generally better than rolling everything to an IRA and losing the penalty-free access to the Savings Plan balance.
3. What does the break-even analysis show? Use our pension break-even calculator to find the age at which cumulative annuity payments match the projected value of the lump sum invested at your expected return. If break-even is age 88 at a 5% return and your health history suggests a shorter horizon, the lump sum has better expected value. If you expect to live into your late 80s and early 90s, the annuity's longevity insurance function becomes more valuable.
4. Do you have other guaranteed income? A UPS retiree with Social Security covering baseline expenses can treat the pension lump sum as growth and estate capital. A retiree with no other guaranteed income — especially one retiring significantly before Social Security eligibility — may value the annuity's guaranteed monthly check more highly than investment flexibility.
5. What is the RMD and IRMAA trajectory? Use our IRA RMD calculator to project the mandatory distribution schedule from your rollover balance. If projected RMDs at age 73–80 push you into higher brackets or IRMAA tiers even without additional spending needs, factor that lifetime tax cost into the annuity comparison. The annuity's payments are bounded and predictable; the RMD spiral is not.

For Teamster UPS employees with an annuity-only pension, the decision is simpler in structure but still consequential: which payout form to elect, when to commence benefits, and how to integrate the pension with Social Security timing and any 401(k) assets. A fee-only advisor can model these interactions using your actual benefit statement numbers — without the commission incentive that wirehouse and insurance-based advisors have when they recommend the lump sum solely to generate AUM fees on a large IRA rollover.

1. UPS Benefits Center (mybenefits.ups.com or 1-800-877-1877); UPS, Inc., SEC Form 10-K annual filings describing the UPS Retirement Plan (non-union defined-benefit plan) and the pension freeze effective January 1, 2023. UPS disclosed the freeze in its 2022 annual report, citing enhanced 401(k) contributions replacing future pension accruals for non-union employees. Values verified July 2026.
2. UPS Teamsters United, IBT-UPS Pension Information; Teamsters for a Democratic Union, Comparison of Pension Benefits for UPS Teamsters. The IBT-UPS Full Time Employee Pension Plan, the Western Conference of Teamsters Pension Trust (teamsterfunds.com), and the New England Teamsters and Trucking Industry Pension Fund (nettipf.com) each provide monthly annuity benefits to UPS Teamsters by region; no lump-sum option is available in any of these plans. UPS Teamsters United, New Contract Delivers Record Pension Increase in IBT-UPS Plan: 2023 contract delivered pension increases up to $1,000/month for eligible retirees in the Central Region, South, and Carolinas. Values verified July 2026.
3. IRS, Minimum Present Value Segment Rates. November 2025 §417(e) stabilized segment rates: Segment 1 (years 1–5): 4.07%; Segment 2 (years 6–20): 5.15%; Segment 3 (year 21+): 6.01%. Applicable to UPS Retirement Plan lump-sum calculations if UPS uses a November look-back period — confirm with UPS Benefits Center. The Retirement Group, Considering a Lump-Sum Pension Payout for UPS Employees; J. Martin Wealth Management, UPS Pension and 401(k) Retirement FAQ. Values verified July 2026.
4. Teamsters Local 705 and Teamsters National archives documenting the 2007 UPS-IBT agreement; reporting from the period on UPS's $6.1B payment to exit the Central States, Southeast and Southwest Areas Pension Fund. The withdrawal created the IBT-UPS Full Time Employee Pension Plan to cover the approximately 44,000 UPS Teamsters who had been under Central States. The $6.1B payment was structured as a complete withdrawal under ERISA §4201, releasing UPS from all future Central States funding obligations. Values verified July 2026.
5. PBGC, PBGC Approves SFA Application for Central States Plan (September 2022). Central States, Southeast and Southwest Areas Pension Fund received $35,764,910,109.99 (~$35.8 billion) in Special Financial Assistance under ARPA. The SFA is projected to enable the plan to pay all benefits through 2051. Benefit cuts imposed under prior rehabilitation plans were restored retroactively. Approximately 380,000 participants covered. Current UPS Teamsters are not in Central States (UPS withdrew in 2007); former UPS employees with pre-2007 Central States service may have restored benefits. Values verified July 2026.
6. PBGC, Maximum Monthly Guarantee Tables. 2026 maximum monthly guarantee for a 65-year-old straight-life annuitant (single-employer plan): $7,789.77/month ($93,477/year). Multiemployer guarantee formula: $35.75/month × years of credited service, maximum $1,072.50/month at 30 years. Applies to PBGC-covered multiemployer plans (WCTP, New England Teamsters, etc.) in the event of plan insolvency. Values verified July 2026.
7. UPS, Inc., Summary Plan Description — UPS Savings Plan (upssavings.voya.com; plan administered by Voya Financial). Beginning January 1, 2023, UPS contributes 5–8% of eligible compensation (based on years of service) to non-union employees' Savings Plan accounts, in addition to a company match of up to 3%. These enhanced contributions replaced pension accruals that ended on December 31, 2022. Values verified July 2026.
8. IRS, IRA Required Minimum Distributions. SECURE 2.0: RMD start age 73 (born 1951–1959), 75 (born 1960+). IRS Notice 2025-67: 2026 QLAC limit $210,000. QCD annual limit $111,000 (2026). CMS, Medicare Costs at a Glance: 2026 IRMAA Tier 1 begins at $109,000 single / $218,000 MFJ (+$74.90/month Part B per person). Values verified July 2026.
9. DOL, ERISA §205; IRC §417. Qualified joint-and-survivor annuity (QJSA) is the default benefit form for married participants in defined-benefit plans. Surviving spouse must receive at least 50% of the annuity payable to the participant. Waiver of QJSA requires written spousal consent witnessed by a notary or plan representative, obtained within the election window specified in the plan document. See our joint-and-survivor election guide and J&S calculator.

Content verified July 2026. UPS pension plan rules depend on whether you are a non-union or Teamster (IBT) employee, your specific plan and geographic region, your years of service, and your hire and termination dates. Non-union employees: confirm your specific UPS Retirement Plan benefit, lump-sum availability, and current offer with the UPS Benefits Center (1-800-877-1877 / mybenefits.ups.com). Teamster employees: contact your Local union hall or the specific fund administrator. This page is informational and does not constitute financial, tax, or investment advice.