Annual Report of Employee Stock Plans (11-k)

Date : 06/27/2018 @ 3:34PM
Source : Edgar (US Regulatory)
Stock : Union Pacific Corp. (UNP)
Quote : 138.26  -0.63 (-0.45%) @ 7:59PM

Annual Report of Employee Stock Plans (11-k)







UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON ,   D.C.   20549





FORM 11-K





(Mark One)



[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 2017



- OR -



[   ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from ___________________ to ________________



Commission file number 1-6075



A. Full title of the plan and the address of the plan, if different from that of the issuer named below:  



UNION PACIFIC CORPORATION

THRIFT PLAN



B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:





UNION PACIFIC CORPORATION

 1400 DOUGLAS STREET

 OMAHA ,   NEBRASKA     68179




 













Union Pacific Corporation

Thrift Plan



Employer ID No: 13-2626465

Plan Number: 004



Financial Statements as of and for the

Years Ended   December 31, 2017   and   2016 ,  

Supplemental Schedule s as of

December 31, 2017 , and Report of

Independent Registered Public Accounting Firm


 

UNION PACIFIC CORPORATION THRIFT PLAN



TABLE OF CONTENTS





 



Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2017 AND 2016

 

Statements of Net Assets Available for Benefits

Statements of Changes in Net Assets Available for Benefits

Notes to the Financial Statements

SUPPLEMENTAL SCHEDULE S AS OF DECEMBER 31, 2017 :

13 

Form 5500, Schedule H, Part IV, Question 4a – Schedule of Delinquent Participant Contributions

14 

Form 5500, Schedule H, Part IV, Line 4(i) — Schedule of Assets (Held at End of Year)

15 

Exhibit Index

16 

Signature

17 



Note: Additional supplemental schedules required by the Employee Retirement Income Security Act of 1974, as amended, are disclosed separately in Master Trust reports filed with the Department of Labor or are omitted because of the absence of the conditions under which they are required.



 


 

REPORT   OF   INDEPENDENT   REGISTERED   PUBLIC   ACCOUNTING   FIRM





To the Plan Participants and Plan Administrator of

Union Pacific Corporation Thrift Plan  



Opinion on the Financial Statements



We have audited the accompanying statements of net assets available for benefits of Union Pacific Corporation Thrift Plan (the "Plan") as of December 31, 2017 and 2016, and the related statements of changes in net assets available for benefits for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2017 and 2016, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.



Basis for Opinion



These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



Report on Supplemental Schedules



The supplemental schedules listed in the table of contents, have been subjected to audit procedures performed in conjunction with the audit of the Plan's financial statements. The supplemental schedules are the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental schedules reconcile to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, such schedules are fairly stated, in all material respects, in relation to the financial statements as a whole.



/s/ Deloitte & Touche LLP



Omaha, Nebraska

June 27 , 2018



We have served as the auditor of the Plan since 1974.


 

UNION PACIFIC CORPORATION THRIFT PLAN



 

 

 

 



 

 

 

 

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

 

 

 

 

AS OF DECEMBER 31, 2017 AND 2016

 

 

 

 



 

 

 

 



 

2017

 

2016

ASSETS:

 

 

 

 

Investments at fair value (Note 3)

$

1,751,110,907 

$

1,489,950,960 

Investments at contract value (Note 4)

 

213,019,594 

 

234,918,810 

Plan interest in Master Trust

 

1,964,130,501 

 

1,724,869,770 



 

 

 

 

Receivables:

 

 

 

 

Notes receivable from participants

 

16,716,610 

 

17,480,690 

Total receivables

 

16,716,610 

 

17,480,690 



 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS

$

1,980,847,111 

$

1,742,350,460 



See notes to the financial statements.

2

 


 

UNION PACIFIC CORPORATION THRIFT PLAN



 

 

 

 



 

 

 

 

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

 

 

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

 

 

 



 

 

 

 



 

2017

 

2016

ADDITIONS TO NET ASSETS ATTRIBUTED TO:

Investment income:

 

 

 

 

Plan interest in Master Trust investment income (Note 4):

 

 

 

 

Net appreciation in fair value of investments

$

288,425,850 

$

158,606,254 

Interest and dividends

 

39,345,009 

 

37,559,681 

Net investment income

 

327,770,859 

 

196,165,935 



 

 

 

 

Interest income on notes receivable from participants

 

609,835 

 

566,995 



 

 

 

 

Contributions:

 

 

 

 

Participant contributions

 

54,405,857 

 

53,985,799 

Employer contributions

 

16,141,401 

 

16,528,426 

Total contributions

 

70,547,258 

 

70,514,225 



 

 

 

 

Other additions

 

106,112 

 

174 

Total additions

 

399,034,064 

 

267,247,329 



 

 

 

 

DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:

 

 

 

 

Distributions to participants

 

159,601,167 

 

120,424,394 

Other

 

936,246 

 

835,057 

Total deductions

 

160,537,413 

 

121,259,451 



 

 

 

 

NET INCREASE IN NET ASSETS

 

238,496,651 

 

145,987,878 



 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS:

 

 

 

 

Beginning of year

 

1,742,350,460 

 

1,596,362,582 

End of year

$

1,980,847,111 

$

1,742,350,460 



See notes to the financial statements.

3

 


 

UNION PACIFIC CORPORATION THRIFT PLAN

NOTES TO THE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31,   2017 and 2016

1.

DESCRIPTION OF PLAN

The following description of the Union Pacific Corporation Thrift Plan (the “Plan”) is provided for general information only. Participants should refer to the Plan document for more complete information.

General  — The Plan is a defined contribution plan sponsored by Union Pacific Corporation (the “Corporation”) covering nonagreement employees of the Corporation and its subsidiaries. Vanguard Fiduciary Trust Company (“VFTC”) serves as the trustee of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 , as amended (ERISA).

Contributions  — Each year, participants may contribute 2% to 75% of their eligible compensation on a salary deferral basis subject to limitations specified in the Internal Revenue Code (the “Code”). A participant may designate all or a portion of his/her pre-tax contribution as a Roth contribution. Participants may also contribute 2% to 75%, of their eligible compensation on an after-tax basis. Combined after-tax, Roth , and pre-tax contributions may not exceed 75% of eligible compensation. Employees who are hired or rehired on or after October 1, 2008, and who are eligible to participate in the Plan will automatically become Participants. These employees are treated as having elected to contribute 6% of their eligible compensation on a salary deferral basis subject to limitations specified in the Code, unless they affirmatively elect otherwise. Participants who have attained age 50 before the end of the plan year are eligible to make catch-up contributions. Prior to 1987, the Plan provided for payroll-based and tax reduction act employee stock ownership plan contributions (PAYSOP/TRASOP). Except with respect to Post-2017 Covered Employees (as described below), the Corporation contributes to the Plan an amount equal to 50% of the participant’s pre-tax, Roth, and after-tax contributions that are not in excess of 6% of the participant’s eligible compensation for the payroll period.  Effective January 1, 2018, for each participant who on or after January 1, 2018 is (i) hired or re-hired into covered nonagreement service or (ii) transferred to covered nonagreement service (“Post-2017 Covered Employees”) the amount the Corporation contributes to the Plan is an amount equal to 100% of the participant’s pre-tax, Roth and after-tax contributions that are not in excess of 6% of the participant’s eligible compensation for the payroll period. In addition, effective January 1, 2018, the Corporation will contribute to the Plan, on behalf of each Post-2017 Covered Employee, an amount equal to 3% of such participant’s annual base salary, regardless of whether the participant elects to contribute any amount of his or her own compensation to the Plan.  The 3% contribution amount will be contributed annually following the end of the applicable Plan year and is conditioned on the Post-2017 Covered Employee being in covered nonagreement service on the last day of the applicable Plan year, unless covered nonagreement service ends before the last day of the Plan year as a result of the participant’s death or retirement during such Plan year. 

Notes Receivable from Participants  — Participants are eligible to take a loan from their fund accounts, subject to the following limits. Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of (a) one-half of their account balance (excluding PAYSOP/TRASOP balances) or (b) $50,000, taking into consideration additional loan balances under the Plan and any other qualified plan maintained by the Corporation or its subsidiaries. As the loan is repaid, all principal and interest payments will be credited to the participant’s fund accounts, excluding PAYSOP/TRASOP balances, in the same proportions as the contributions then being made on behalf of the participant. If no contributions are then being made, the loan repayments will be invested in accordance with the participant’s applicable investment election. Participant loans, which are secured by the participant’s individual account

4

 


 

balance, bear a fixed rate of interest set by the Plan Administrator based on interest rates then being charged on similar loans, and are repayable over periods not exceeding 59 consecutive calendar months , except loans relating to a principal residence, in which case the term of the loan shall not exceed 15 years. As of December 31, 2017 and 2016 , participant l oans ha d maturities through 203 2 and 2031 , respectively, and at interest rates ranging from 3.25% to 9.5 0 % .

Participant Accounts  — Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contributions, employer-matching contributions, and an allocation of the Plan’s earnings (or losses) based upon the type of investments selected and their performance. Allocations are based on each participant’s account balance by investment type. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

Vesting  — Participants at all times have a 100% vested interest in their accounts.

Distributions to Participants  — Following a participant’s termination of employment, a distribution of benefits will be made upon request in a single sum payment. Distributions from the PAYSOP/TRASOP account and the portion of their account invested in the Union Pacific Common Stock Fund are distributed in cash unless shares of stock are elected at the time of distribution. In-kind distributions are lump sum and any fractional shares are distributed in cash. A terminated participant may defer distribution until the earlier of the participant’s required beginning date, as defined in the Plan, or the participant’s death. I f distribution is deferred until the participant’s required beginning date, the participant may elect distribution either in a single sum or in the form of monthly, quarterly, semi-annual or annual installments. Such single sum distribution must be made (or installments begin) no later than the participant’s required beginning date. If the participant remains employed with the Corporation after attaining age 70 1/2, the participant must either take a single sum distribution or begin installment payments no later than the April 1st of the year following the year in which the participant terminates employment.

In-service withdrawals, including withdrawals of rollover contributions, hardship withdrawals, and withdrawals on and after age 59 1/2 may be made by a participant from his or her account in accordance with the Plan’s provisions.

Plan Administration  — From November 1, 2014, through March 31, 2016, the Plan was administered by the Assistant Vice President, Compensation & Benefits, Union Pacific Railroad Company. Effective April 1, 2016, the Plan is administered by the Senior Vice Presiden t and Chief Human Resource Officer of Union Pacific Railroad Company. Investment management fees for the Plan’s investment options are netted against investment earnings. Expenses incurred administering the Plan, including participant recordkeeping expense s, are payable from Plan assets . The C orporation has the option, but not the obligation, to pay Plan administrative expenses.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting  — The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Use of Estimates  — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Risks and Uncertainties  — The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the

5

 


 

level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the value of the participants’ account balances and amounts reported in the financial statements.

Investment Valuation and Income Recognition  — Investments are reported at fair value with the exception of fully benefit-responsive investment contracts. Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 3 for discussion of fair value measurements.

Dividend income is recorded as of the ex-dividend date. Dividends are reinvested in a related participant fund. Interest income is recorded on the accrual basis. Purchases and sales of securities are recorded as of the trade date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

For fully benefit-responsive contracts held by a defined contribution plan, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The statements of net assets available for benefits present the fully benefit-responsive investment contracts at contract value. The statements of changes in net assets available for benefits are also prepared on a contract value basis.

Notes Receivable from Participants  — Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions based on the terms of the Plan document.

Administrative Expenses  — Administrative expenses of the Plan are paid as described in the section “Plan Administration” in Note 1. All investment management and transaction fees directly related to the Plan investments are paid by the Plan. Management fees and operating expenses charged to the Plan for investments are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of investment return for such investments. Plan administrative expenses of $929,988 and $ 834,676 were paid in   2017 and 2016 , respectively .

Distributions to Participants  — Distributions are recorded when paid. There were no amounts allocated to accounts of persons who have elected to withdraw from the Plan but have not yet been paid at December 31, 2017 and 2016 .

New Accounting Standards —   In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. The ASU clarifies the presentation and disclosure requirements for an employee benefit plan’s interest in a master trust. This standard is effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the financial statements.

6

 


 

3.

FAIR VALUE MEASUREMENTS

Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, established a single authoritative definition of fair value, set a framework for measuring fair value, and requires additional disclosures about fair value measurements. In accordance with ASC 820, the Plan classifies its investments into a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1  — Quoted market prices in active markets for identical assets or liabilities.

Level 2  — Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3  — Unobservable inputs that are not corroborated by market data.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Asset Valuation Methodologies  — Valuation methodologies maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used to determine the fair value for each investment category and the fair value hierarchy tier to which each investment category has been assigned.

Company Stock Funds  — These funds are invested exclusively in common stock issued by the Corporation along with a small amount of cash held for liquidity purposes. The unit price (value) for shares of these funds is computed daily based on the closing price of Union Pacific common stock on the New York Stock Exchange, the number of shares of stock held by the funds, and the amount of cash held in the funds. Employer stock funds are classified as Level 2 investments.

Mutual Funds (Including the Domestic and International Stock Fund s , Balanced Fund, Money Market Fund, and Bond Fund s )  — The shares of mutual funds are actively traded in a public exchange and the quoted prices at which these securities trade in the exchange are readily available. These quoted prices are used to determine the net asset values of mutual fund shares held by the Union Pacific Corporation Master Trust (“Master Trust”) at year-end .

Common/Collective Trusts — The Target Retirement Trusts invest in Vanguard mutual funds. While the trust units are not actively traded in a public exchange, the underlying mutual fund investments held by the trusts are actively traded in a public exchange. The readily observable quoted share prices for the underlying mutual fund investments are used to determine the net asset value of the trusts at year- end .

7

 


 

A summary of the Master Trust assets measured at fair value on a recurring basis set forth by level within the fair value hierarchy as of December 31, 2017 and 2016 , is presented in the following tables:



 

 

 

 

 

 

 

 



 

December 31, 2017



 

Quoted Prices in Active Markets for Identical Assets
(Level 1)

 

Significant Other Observable Inputs
(Level 2)

 

Significant Unobservable Inputs
(Level 3)

 

Total Fair
Value

Investments at fair value:

 

 

 

 

 

 

 

 

Company Stock Funds

 

 -

$

766,657,504 

 

 -

$

766,657,504 

Total investments in the fair value hierarchy

 

 -

$

766,657,504 

 

 -

 

766,657,504 



 

 

 

 

 

 

 

 

Investments measured at net asset value*

 

 

 

 

 

 

 

 

Mutual Funds

 

 

 

 

 

 

 

1,523,588,307 

Common/Collective Trusts

 

 

 

 

 

 

 

1,227,789,336 

Total investments at net asset value

 

 

 

 

 

 

 

2,751,377,643 



 

 

 

 

 

 

 

 

Total investments at fair value

 

 

 

 

 

 

$

3,518,035,147 



 

 

 

 

 

 

 

 





 

 

 

 

 

 

 

 



 

December 31, 2016



 

Quoted Prices in Active Markets for Identical Assets
(Level 1)

 

Significant Other Observable Inputs
(Level 2)

 

Significant Unobservable Inputs
(Level 3)

 

Total Fair
Value

Investments at fair value:

 

 

 

 

 

 

 

 

Company Stock Funds

 

 -

$

665,022,759 

 

 -

$

665,022,759 

Total investments in the fair value hierarchy

 -

$

665,022,759 

 

 -

 

665,022,759 



 

 

 

 

 

 

 

 

Investments measured at net asset value*

 

 

 

 

 

 

 

 

Mutual Funds

 

 

 

 

 

 

 

1,917,064,681 

Common/Collective Trusts

 

 

 

 

 

 

 

427,030,869 

Total investments at net asset value

 

 

 

 

 

 

 

2,344,095,550 



 

 

 

 

 

 

 

 

Total investments at fair value

 

 

 

 

 

 

$

3,009,118,309 



 

 

 

 

 

 

 

 



*   In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in th ese table s are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.

Transfers between Levels  — The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. The Plan’s policy is to recognize transfers between the levels at the actual date of the event.

8

 


 

The Plan evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. For the years ended December 31, 2017 and 2016 , there were no transfers in or out of Levels 1, 2, or 3.

The following tables summarize investments for which fair value is measured at net asset value as of December 31, 2017 , and 2016 , respectively. There are no participant redemption restrictions for these investments; the redemption notice period is applicable only to the Plan.





 

 

 

 

 

 

 

 



 

December 31, 2017



 

Fair Value

 

Unfunded Commitments

 

Redemption Frequency (If Currently Eligible)

 

Redemption
Notice Period



 

 

 

 

 

 

 

 

Mutual Funds

$

1,523,588,307 

 

n/a

 

Daily

 

None

Common/Collective Trusts

 

1,227,789,336 

 

n/a

 

Daily

 

None







 

 

 

 

 

 

 

 



 

December 31, 2016



 

Fair Value

 

Unfunded Commitments

 

Redemption Frequency (If Currently Eligible)

 

Redemption
Notice Period



 

 

 

 

 

 

 

 

Mutual Funds

$

1,917,064,681 

 

n/a

 

Daily

 

None

Common/Collective Trusts

 

427,030,869 

 

n/a

 

Daily

 

None



4.

MASTER TRUST

At December 31, 2017 and 2016 , the Plan participated in a Master Trust with other retirement plans sponsored by the Corporation or its subsidiaries. The investment assets of the Master Trust are held at VFTC. Use of the Master Trust permits the commingling of the trust assets of a number of benefit plans of the Corporation and its subsidiaries for investment and administrative purposes. Although assets are commingled in the Master Trust, VFTC maintains supporting records for the purpose of allocating the net investment income (loss) of the investment accounts to the various participating plans. The investment valuation methods for investments held by the Master Trust are discussed in Note 3.

9

 


 

The Plan’s interest in the Master Trust, as a percentage of net assets held by the Master Trust, as of December 31, 2017 and 2016 , is presented in the following tables:



 

 

 

 



 

2017

 

2016

Master Trust

 

 

 

 

Investments at fair value

$

3,518,035,147 

$

3,009,118,309 

Investments at contract value

 

368,744,104 

 

403,568,842 

Total investments in Master Trust

$

3,886,779,251 

$

3,412,687,151 



 

 

 

 

Plan's portion of investments at fair value

$

1,751,110,907 

$

1,489,950,960 

Plan's portion of investments at contract value

 

213,019,594 

 

234,918,810 

Plan interest in Master Trust

$

1,964,130,501 

$

1,724,869,770 



 

 

 

 

Portion allocated to the Plan

 

50.53% 

 

50.54% 



 

 

 

 



Investment income for the Master Trust for the years ended December 31, 2017 and 2016 , is as follows:





 

 

 

 



 

2017

 

2016



 

 

 

 

Net appreciation in fair value

$

567,299,182 

$

301,759,663 

Interest and dividends

 

79,211,080 

 

75,681,422 

Total investment income of Master Trust

$

646,510,262 

$

377,441,085 



 

 

 

 

Plan's portion of Master Trust investment income

$

327,770,859 

$

196,165,935 



While the Plan participates in the Master Trust, each participant’s account is allocated earnings (or losses) consistent with the performance of the funds in which the participant’s account is invested. Therefore, the investment income (loss) of the Master Trust may not be allocated evenly among the plans participating in the Master Trust.

The Master Trust provides to participants a stable value investment option (the Union Pacific Fixed Income Fund) that includes traditional Guaranteed Investment Contracts (GICs) and synthetic GICs. These contracts meet the fully benefit-responsive investment contract criteria and therefore are reported at contract value. Contract value is the relevant measure for fully benefit-responsive investment contracts because this is the amount received by participants if they were to initiate permitted transactions under the terms of the Plan. Traditional GICs are maintained in a general account by VFTC, which is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. Synthetic GICs simulate the performance of a traditional GIC through an issuer’s guarantee of a specific interest rate (a benefit-responsive wrapper contract) and a portfolio of financial instruments that are owned by the Master Trust. The crediting interest rate is based on a formula agreed upon with the issuer, but may not be less than 0%. Such interest rates are reviewed on a quarterly basis for resetting. The crediting rate of these contracts will track current market yields on a trailing basis.

10

 


 

The following table represents the disaggregation of contract value between types of investment contracts held by the Plan:



 

 

 

 



 

2017

 

2016



 

 

 

 

Synthetic investment contracts

$

341,558,176 

$

366,191,984 

Traditional investment contracts

 

13,875,324 

 

15,788,176 

Money Market fund

 

14,129,489 

 

21,380,884 

Other

 

(818,885)

 

207,798 

Total investments at contract value

$

368,744,104 

$

403,568,842 



5.

FEDERAL INCOME TAX STATUS

The Plan obtained a tax determ ination letter dated September 20 , 201 6 , in which the Internal Revenue Service (IRS) stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. Although the Plan has been amended since receiving the determination letter, the Company and Plan management believe that the Plan and related Master Trust are currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.   Plan management made a Voluntary Compliance Program submission to the IRS on December 30, 2015.  The submission seeks to correct the failure to distribute the Plan accounts of 5 deceased Plan participants in accordance with the Plan’s terms intended to comply with the required minimum distribution rules of Section 401(a)(9) of the Code and the regula tions thereunder.  The Plan received a compliance statement from the IRS dated June 20, 2016, with respect to this submission.

GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes the Plan and related Master Trust are no longer subject to income tax examinations for years prior to 201 4 .

6.

PLAN TERMINATION

Although it has not expressed any intent to do so, the Corporation has the right under the Plan, at any time, to discontinue its contributions and to terminate the Plan subject to the provisions of ERISA. Regardless of such actions, the principal and income of the Plan remain for the exclusive benefit of the Plan’s participants and beneficiaries. The Corporation may direct VFTC either to distribute the Plan’s assets to the participants, or to continue the trust and distribute benefits as though the Plan had not been terminated.

7.

EXEMPT PARTY-IN-INTEREST TRANSACTIONS

The Master Trust investments include the Union Pacific Common Stock Fund which is invested in the common stock of the Corporation. The Corporation is the Plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. At December 31, 2017 and 2016 , the Plan’s interest in the Master Trust’s investment in the Union Pacific Common Stock Fund had a cost basis of $ 124,496,647 and $ 129,813,184 , respectively. During the years ended December 31, 2017 and 2016 , the Plan recorded dividend income of $8,206,442 and $ 8,273,355 , respectively.

The Master Trust also invests in various funds managed by VFTC. VFTC is the trustee and recordkeeper as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions.

11

 


 

8.

PROHIBITED TRANSACTIONS

In 2017, there was inadvertent use of Plan assets by Union Pacific Railroad Company (the “Railroad”), a related party, due to administrative error which violated IRC Section 4975(c)(1)(B). A participant loan repayment of $2.00 was not timely deposited with the Plan trustee. Therefore, the transaction constituted an extension of credit from the Plan to the Railroad. The Railroad deposited the loan repayment and lost earnings with the Plan trustee in 2017.



9.

  RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

A reconciliation of net assets available for benefits per the financial statements to the Form 5500 as of December 31, 2017 and 2016 , is as follows:



 

 

 

 



 

2017

 

2016



 

 

 

 

Net assets available for benefits per the financial statements

$

1,980,847,111 

$

1,742,350,460 

Deemed distributions of participant loans

 

(242,073)

 

(211,566)

Net assets available for benefits per the Form 5500 -- at fair value

$

1,980,605,038 

$

1,742,138,894 



A reconciliation of changes in net assets available for benefits per the financial statements to the Form 5500 as of December 31, 2017 and 2016 , is as follows:



 

 

 

 



 

2017

 

2016



 

 

 

 

Net increase in net assets at contract value

$

238,496,651 

$

145,987,878 

Change in adjustment from contract value to fair value for

 

 

 

 

benefit-responsive investment contracts

 

 -

 

(3,706,456)

Change in deemed distributions of participant loans

 

(30,507)

 

33,240 

Net increase in net assets per Form 5500 -- at fair value

$

238,466,144 

$

142,314,662 



******

12

 


 







































SUPPLEMENTAL SCHEDULE S

13

 


 

X



 

 

 

 

 

 

 

 

 

UNION PACIFIC CORPORATION THRIFT PLAN

 

 

 

 

Employer ID No: 13-2626465

 

 

 

 

 

 

 

 

 

Plan No: 004

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

FORM 550, SCHEDULE H, PART IV, QUESTION 4a --

SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

Participant Contributions Transferred Late to the Plan

 

 

Contributions Not Corrected

 

Contributions Corrected Outside VFCP

 

Contributions Pending Correction in VFCP

 

Total Fully Corrected under VFCP and PTE 2002-51



 

 

 

 

 

 

 

 

 

Check here if late participant loan contributions are included:

$

                  -

$

2.00 

$

                  -

$

                  -



 

 

 

 

 

 

 

 

 

See accompanying Report of Independent Registered Public Accounting Firm

 

 

 

14

 


 



 

 

 

UNION PACIFIC CORPORATION THRIFT PLAN

Employer ID No: 13-2626465

Plan No: 004



 

 

 

FORM 5500, SCHEDULE H, PART IV, LINE 4(i) -- SCHEDULE OF ASSETS (HELD AT END OF YEAR)

AS OF DECEMBER 31, 2017



 

 

 



Column B

Column C

Column E



Identity of Issue or Borrower, Lessor,
or Similar Party

Description of Investment Including Collateral, Rate of Interest, Maturity Date, Par, or Maturity Value

Current
Value



 

 

 

*

Vanguard Federal Money Market Fund

Registered Investment Company

$         18,887,165 

*

Vanguard Growth Index Fund Institutional Shares

Registered Investment Company

79,491,183 

*

Vanguard International Growth Fund Admiral Shares

Registered Investment Company

121,425,063 

*

Vanguard Mid-Cap Index Fund Institutional Plus Shares

Registered Investment Company

85,626,517 

*

Vanguard Morgan Growth Fund Admiral Shares

Registered Investment Company

25,674,541 

*

Vanguard REIT Index Fund Institutional Shares

Registered Investment Company

5,049,169 

*

Vanguard Small-Cap Index Institutional Plus Shares

Registered Investment Company

70,185,609 

*

Vanguard Strategic Small-Cap Equity Fund

Registered Investment Company

4,407,563 

*

Vanguard Total International Bond Index Fund Inst Shares

Registered Investment Company

5,549,200 

*

Vanguard Total International Stock Index Fund Inst Shares

Registered Investment Company

41,782,721 

*

Vanguard Total Stock Market Index Fund Inst Shares

Registered Investment Company

65,697,475 

*

Vanguard Wellington Fund Admiral Shares

Registered Investment Company

157,525,498 

*

Vanguard Windsor II Fund Admiral Shares

Registered Investment Company

56,085,991 

*

Vanguard Institutional 500 Index Trust

Common / Collective Trust

213,485,685 

*

Vanguard Institutional Total Bond Market Index Trust

Common / Collective Trust

110,931,561 

*

Vanguard Target Retirement 2015 Trust I

Common / Collective Trust

16,225,927 

*

Vanguard Target Retirement 2020 Trust I

Common / Collective Trust

33,592,283 

*

Vanguard Target Retirement 2025 Trust I

Common / Collective Trust

37,044,081 

*

Vanguard Target Retirement 2030 Trust I

Common / Collective Trust

30,975,188 

*

Vanguard Target Retirement 2035 Trust I

Common / Collective Trust

34,080,781 

*

Vanguard Target Retirement 2040 Trust I

Common / Collective Trust

29,159,057 

*

Vanguard Target Retirement 2045 Trust I

Common / Collective Trust

30,922,988 

*

Vanguard Target Retirement 2050 Trust I

Common / Collective Trust

26,341,322 

*

Vanguard Target Retirement 2055 Trust I

Common / Collective Trust

16,483,076 

*

Vanguard Target Retirement 2060 Trust I

Common / Collective Trust

2,783,227 

*

Vanguard Target Retirement 2065 Trust I

Common / Collective Trust

23,451 

*

Vanguard Target Retirement Income Trust I

Common / Collective Trust

14,465,809 

*

Union Pacific Common Stock Fund

Company Stock Fund

371,187,761 

*

Union Pacific TRASOP Stock Fund

Company Stock Fund

46,021,015 

*

Participant Loans

Maturing 2018-2032 at interest rates of
3.25% to 9.50%

16,716,610 

*

Union Pacific Fixed Income Fund

Unallocated Insurance Contract

213,019,594 



 

 

$    1,980,847,111 

*

Represents a party in interest

 

 



See accompanying Report of Independent Registered Public Accounting Firm







15

 


 

EXHIBIT INDEX





16

 


 

SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.



UNION PACIFIC CORPORATION THRIFT PLAN









 

 

 

Dated:

June 27 , 201 8

By:

/s/ Sherrye Hutcherson



 

 

Sherrye Hutcherson,

Senior Vice President and

Chief Human Resource Officer ,  

Union Pacific Railroad





17

 


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