2024 Status of Union Pacific Agreement (Union) Employee 401(k) Retirement Plan

(Status as of December 31^st, 2023)

In this comprehensive guide, we’ll explore the vital topic of the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan. As a railroad employee or retiree, understanding the ins and outs of this plan is crucial.

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!

Key Takeaways

1. Plan Overview:
   • The Union Pacific Agreement Employee 401(k) Retirement Thrift Plan is a defined contribution plan designed for employees of the Union Pacific Railroad Company and its affiliates.
   • It covers employees who have completed one year of service or were employed as of the effective date of the Plan, July 1, 1990.
2. Financial Performance:
   • As of December 31, 2023, the net assets available for benefits totaled approximately $2.26 billion, an increase from $1.97 billion in 2022.
   • The Plan experienced a net increase in assets of $289.68 million for the year ended December 31, 2023.
3. Contributions:
   • Participants can contribute between 1% to 75% of their eligible compensation, with options for pre-tax, Roth, and after-tax contributions.
   • The Company matches 50% of the participant’s contributions up to 6% of their eligible compensation.
4. Investment Options:
   • Participants can direct their investments into various options, including a common stock fund, mutual funds, and collective trusts.
   • A significant change occurred on December 1, 2023, when the Union Pacific Common Stock Fund was converted to an employee stock ownership plan.
5. Vesting and Distributions:
   • Participants have a 100% vested interest in their accounts at all times.
   • Distributions can be made upon separation from service, and participants can choose between cash or stock distributions.
6. Plan Administration:
   • The Plan is administered by the Named Fiduciary – Plan Administration, with the President of Union Pacific Railroad Company currently serving in this role.
   • The Plan is subject to the Employee Retirement Income Security Act of 1974.
7. Tax Status:
   • The Plan has received a tax determination letter from the IRS confirming its compliance with applicable requirements.
8. Master Trust Participation:
   • The Plan participates in a Master Trust with other retirement plans, allowing for the commingling of trust assets for investment purposes.

These takeaways provide a comprehensive overview of the Union Pacific Agreement Employee 401(k) Retirement Thrift Plan, highlighting its structure, financial performance, and key features.

Unveiling the Union Pacific 401(k) Retirement Thrift Plan – Agreement employees

Union Pacific provides their agreement 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).

UP Agreement employees are eligible to participate after one year of service, and beginning the first day of the month following the one year of service requirement.

The Blueprint of the Union Pacific 401(k) Retirement Plan

The Union Pacific Agreement Employee 401(k) Retirement Thrift Plan is a cornerstone of retirement planning. Here’s a snapshot of how it operates:

Facts about UP agreement 401(K):

• 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 if you are represented by a rail union that has negotiated a matching contribution with the company. UP will match 50% of your combined pre-tax, Roth contributions, and after-tax contributions up to 6% of the participant’s eligible compensation per payroll period.  
• 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 agreement employees does not offer you the option to take a loans.
• 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 for agreement employees, you also have access to Employee Stock Purchase Plan. The Stock purchase plan allows you to purchase UNP (Union Pacific stock) and receive a 40% company match of up to 5% of your base compensation.

For example, if you contributed $100 to the stock purchase plan, UP would contribute $40 on your behalf and you would own the equivalent of $140 of UNP stock. Now, fast forward 10, 20, 30 years to retirement and you have not only saved in your 401k, accumulated benefits in RR Retirement, but also have company stock that you can sell if needed or keep the stock and collect UNP’s healthy dividend.

Let’s dive into the status of the Union Pacific Agreement Employee 401(k) Retirement Thrift 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: $2.2 Billion as of Dec. 31^st, 2023. Balance was $1.9 Billion as of Dec. 31^st 2022. 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, $113 Million for 2023
  • Contributions by Union Pacific, $1.6 Million for 2023
• Total Distributions:
  • Distributions, $162 Million for 2023
• Net increase in Assets from 2022 to 2023 is $289 Million
• Total assets available for benefits (payable to employees 401K participants): $2.2 Billion as of Dec. 31^st, 2023
• Administrative Expenses:  Admin fees are for investment management and transaction fees related to the assets in the 401K Plan. $1.5 Million in 2023 compared to $1.4 Million for 2022. This increase in admin expense is expected with the higher overall asset amount for 2023 compared to 2022.
  • Admin / management fees are in portion to the assets balance; therefore, as assets increase or decrease the Admin / management fees increase or decrease as well.

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 years 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.

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.

When’s the best time to plant a pomegranate tree? 20 years ago, when’s the 2^nd best time to plant a pomegranate tree…. today. Why delay saving today throws money to the future, and todays savings earn and those earnings accumulate year over year.

Conclusion

The Union Pacific Agreement Employee 401(k) Retirement Thrift 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.

Todo List:

• before tying up check the extra board,
• and how many more days to Federal Rest?

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!