(Status as of December 31st, 2022), For Non Agreement Employees.
In the continuation of the comprehensive guides to Railroad company’s 401K plan. We will discuss the topic of the Union Pacific Corporation (non agreement) Employee 401(k) Retirement Thrift Plan. As a railroad employee or retiree, understanding the ins and outs of this plan is crucial.
This guide is similar to the agreement employee 401K plan with a few key differences described as follows.
Let’s break down the details, shed light on the plan’s current status, and empower you with actionable insights. Your retirement security is our priority!
Unveiling the Union Pacific 401K Retirement Thrift Plan
Union Pacific provides their non agreement (not union) employees with an additional way to save for retirement, outside of Railroad retirement income (tier 1 and Teir 2 benefits).
What is 401(K)? 401(K) allows employees the ability to save for retirement through pre-tax contributions from their pay to the 401(K). The pretax saving accumulated tax deferred and allows continue savings throughout the employees’ working years.
The Blueprint of the 401k Plan
The Union Pacific Corp 401K Plan is a cornerstone of retirement planning. Here’s a snapshot of how it operates:
Facts about UP 401K:
- Your contributions to the 401K are 100% vested. Meaning every dollar, you contribute are yours and if you decide to leave UP you can take your 401K account balance with you to your new job (or leave at Union Pacific), cash out, or rollover to an individual IRA/Roth.
- Union Pacific contribution, you can receive a matching contribution of 50% not in excess of 6% of your contributions. For example, with your 7% contribution, UP will add a matching contribution of 3%; for a total of 10% of eligible compensation per payroll period. Also, covered employees can receive a non-elective contribution in an amount equal to 3% of annual base salary.
- Investment risk is on you as the employee; meaning, you pick the investments and if those investments underperform the 401K/Union Pacific is not responsible. However, UP and the investment company (Vanguard) that manages the investments does have the responsibility to offers suitable investments for the greater employee base. This may be more conservative and at times more aggressive than your individual goals and needs, but you have options.
- Loans, the UP 401K plan for non-agreement employees does offer the option to take a loan.
- In service withdrawals, are permitted according to the plan provisions for
- Withdrawals of rollover contributions or after-tax contributions
- Withdrawals for qualified birth or adoption distributions
- Hardship withdrawals
- And withdrawals on or after ag 59 ½
Quick side note although separate from the UP 401K, you also have access to Employee Stock Purchase Plan. The Stock purchase plan allows you to purchase up to 20% of our account in UNP (Union Pacific stock fund).
Let’s dive into the status of the Union Pacific Corp 401k Plan and what it means for you.
A Closer Look at the Plan’s Status
To provide you with the most accurate insights, we’ve explored the official source: the Securities and Exchange Commission (SEC) filing for Union Pacific. As of the filing date, the plan remains active and operational, serving as a vehicle to help you prepare for retirement.
- Total 401K Plan Assets: $3.6 Billion as of Dec. 31st, 2022. Balance was $4.6 Billion as of Dec. 31st 2021. Reduced plan balance was ultimately due to overall stock market performance. In 2022 compared to the market highs of 2021.
- Total Contributions:
- Contributions by employees, $51 Million for 2022
- Contributions by Union Pacific, $22 Million for 2022
- Total Distributions:
- Distributions, $540 Million for 2022
- Net decrease in Assets from 2021 to 2022 is $860 Million
- Total assets available for benefits (payable to employees 401K participants): $3.6 Billion as of Dec. 31st, 2022
- Administrative Expenses: Admin fees are for investment management and transaction fees related to the assets in the 401K Plan. $938,003 in 2022 compared to $1.04 Million for 2021. This decrease in admin expense is expected with the lower overall asset amount for 2022 compared to 2021.
Embracing Your Union Pacific Retirement 401K Plan
Now that you’re aware of the Union Pacific 401(k) Retirement Plan’s significance, let’s explore how you can make the most of it.
1. Understand Your Benefits
Information about the company benefits can be accessed on the UP website. Also, when determining your retirement need the rule of thumb is 4% withdrawal from a 401K over a retiree retirement year will suffice to provide for the desired retirement including Railroad Retirement Benefits.
And I actually learned the following technic while working at the Railroad. Each year increase your saving rate for the amount of increase you received over last year. For example, if your base is $70K and this year base rate was increased to $72,500. Save the additional $2,500 either in your 401K or outside savings.
Also, you maybe eligible for bonuses that would include cash and/or UNP stock. These bonuses not only help accelerate savings, but also helps to diversify in alternative investments similar to real estate.
2. Leverage Employer Match
Union Pacific’s contribution match is an excellent opportunity. Contribute enough to maximize this match—it’s like free money towards your retirement. For example, using the $70K base pay and you contribute 6% to the 401K; UP will match 50%. Meaning $70K * 6% = $4,200 for your contribution and $2,100 for the company match on your behalf from UP, HIGHBALL!
3. Diversify Your Portfolio
While investing can seem daunting, diversification is key. Spread your investments across various assets to mitigate risk and optimize returns.
For example, UP offers the ability to invest in the UP common stock fund (where you purchase UNP equivalent share), a Cash alternative, and various mutual funds. Depending on your risk tolerance you may prefer a more aggressive option of investing more in the stock fund and the aggressive mutual fund options.
Or if you prefer a more conservative option, you can purchase cash solution and the conservative mutual fund option.
4. Monitor and Adjust
Your financial goals and risk tolerance may change over time. Regularly review and adjust your investment choices to align with your evolving needs.
Furthermore, Vanguard offers target date mutual funds that targets a year in the future typically related to your potential retirement year. And the investments in the mutual fund adjust to more conservative as the investment portfolio gets closer to the target year.
Quick tip, if you are a more aggressive investor and your retirement year is 2030 then you could select a target date fund of 2035 or any time after 2030 to have a slightly more aggressive allocation and we still suggest reducing the allocation as you get closer to retirement.
5. Plan Ahead
Don’t delay! The earlier you start contributing to your 401(k), the more time your money has to grow through compound interest.
We’ve used the pomegranate tree illustration before; however, simply put saving for retirement allocations money for the future, over use for immediate needs or making purchases on debt, which is similar to allocating money to the past.
Also, historically stock investments in general have out paced inflation in any 10-year time horizon. Therefore, investing today is a great hedge against future inflation concerns.
Conclusion
The Union Pacific Corp 401k Plan is your “train order” to a secure retirement. By understanding its mechanics and staying informed about its status, you’re equipping yourself for financial success.
Have you reviewed your 401K investments and how you are tracking to your retirement goal? Reach out to us today for personalized guidance.
Let’s ensure your Union Pacific 401(k) Retirement Thrift Plan is a powerful tool in securing your future. Your retirement dreams await—let’s start planning now!