2024 Status of Union Pacific Corporation 401k Plan

(Status as of December 31^st, 2023), 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!

Key Takeaways

1. Plan Overview: The Union Pacific Corporation Thrift Plan is a defined contribution plan designed for nonagreement employees of Union Pacific Corporation and its subsidiaries. It allows participants to contribute a portion of their eligible compensation on a pre-tax, Roth, or after-tax basis.
2. Financial Performance: As of December 31, 2023, the net assets available for benefits increased to approximately $2.27 billion, up from about $2.03 billion in 2022. This growth was attributed to significant investment income and contributions from participants like you.
3. Investment Income: The plan reported a net investment income of approximately $341.9 million for 2023, a substantial recovery from a loss of $408 million in the previous year. This included net appreciation in the fair value of investments.
4. Contributions: Participants can contribute between 1% to 75% of their eligible compensation, with Union Pacific matching contributions up to 50% of the first 6% of participant contributions for certain employees. Newer employees hired after January 1, 2018, receive a more generous matching contribution.
5. Loan Provisions: Participants are allowed to take loans from their accounts, with specific limits on the amount they can borrow. As of December 31, 2023, participant loans had maturities extending through 2038, with interest rates ranging from 3.25% to 8.50%.
6. Investment Options: Participants have the flexibility to direct their investments among various options, including a common stock fund, mutual funds, and collective trusts. However, there are restrictions on the percentage of contributions that can be allocated to the Union Pacific Common Stock Fund.
7. Vesting and Distributions: Participants are 100% vested in their accounts at all times. Distributions can be made upon separation from service, and there are provisions for in-service withdrawals under certain conditions.
8. Tax Compliance: The plan has received a favorable tax determination letter from the IRS, confirming its compliance with applicable tax laws. The plan’s management believes it continues to operate within these requirements.
9. Plan Administration: The plan is administered by the Named Fiduciary, with the President of Union Pacific Railroad Company currently serving in this role. The plan’s administrative expenses are paid from plan assets.
10. Future Outlook: The plan’s management is optimistic about its financial health and the ability to continue providing benefits to participants, despite the inherent risks associated with investing in securities.

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 Railroad), 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.
• 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: $4.2 Billion as of Dec. 31^st, 2023. Balance was $3.6 Billion as of Dec. 31^st 2022. The increased plan balance was ultimately due to overall stock market performance. In 2023 compared to the market lows of 2022.
• Total Contributions:
  • Contributions by employees, $54 Million for 2023
  • Contributions by Union Pacific, $25 Million for 2023
• Total Distributions:
  • Distributions, $186 Million for 2023
• Net decrease in Assets from 2022 to 2023 is $236 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. $978,482 in 2023 compared to $938,003 Million for 2022. This increase in admin expense is expected with the higher overall asset amount for 2023 compared to 2022.

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!