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CASH AND INVESTMENTS | 12 Months Ended
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Dec. 31, 2016
Investments and Cash [Abstract] |
CASH AND INVESTMENTS | CASH AND INVESTMENTS The following is a summary of marketable securities classified as trading and available-for-sale at December 31, 2016 and 2015 (in millions):
| Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
2016 |  |  |  |  |  |  |
Current trading marketable securities: |  |  |  |  |  |  |
Corporate debt securities | $ | 427 |  |  | $ | — |  |  | $ | — |  |  | $ | 427 |
Carbon credit investments(1) | 80 |  |  | 10 |  |  | — |  |  | 90 |
Total trading marketable securities | 507 |  |  | 10 |  |  | — |  |  | 517 |
Current available-for-sale marketable securities: |  |  |  |  |  |  |
U.S. government and agency debt securities | $ | 314 |  |  | $ | — |  |  | $ | (2 | ) |  | $ | 312 |
Mortgage and asset-backed debt securities | 90 |  |  | 1 |  |  | — |  |  | 91 |
Corporate debt securities | 167 |  |  | — |  |  | (1 | ) |  | 166 |
Equity securities | 2 |  |  | — |  |  | — |  |  | 2 |
Non-U.S. government debt securities | 3 |  |  | — |  |  | — |  |  | 3 |
Total available-for-sale marketable securities | 576 |  |  | 1 |  |  | (3 | ) |  | 574 |
Total current marketable securities | $ | 1,083 |  |  | $ | 11 |  |  | $ | (3 | ) |  | $ | 1,091 |
| Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
2015 |  |  |  |  |  |  |
Current trading marketable securities: |  |  |  |  |  |  |
Corporate debt securities | $ | 715 |  |  | $ | — |  |  | $ | — |  |  | $ | 715 |
Non-U.S. government debt securities(1) | 363 |  |  | — |  |  | — |  |  | 363 |
Carbon credit investments(1) | 347 |  |  | 9 |  |  | (5 | ) |  | 351 |
Total trading marketable securities | 1,425 |  |  | 9 |  |  | (5 | ) |  | 1,429 |
Current available-for-sale marketable securities: |  |  |  |  |  |  |
U.S. government and agency debt securities | $ | 341 |  |  | $ | — |  |  | $ | (1 | ) |  | $ | 340 |
Mortgage and asset-backed debt securities | 74 |  |  | 1 |  |  | (1 | ) |  | 74 |
Corporate debt securities | 147 |  |  | — |  |  | (1 | ) |  | 146 |
U.S. state and local municipal debt securities | 2 |  |  | — |  |  | — |  |  | 2 |
Equity securities | 2 |  |  | — |  |  | — |  |  | 2 |
Non-U.S. government debt securities | 3 |  |  | — |  |  | — |  |  | 3 |
Total available-for-sale marketable securities | 569 |  |  | 1 |  |  | (3 | ) |  | 567 |
Total current marketable securities | $ | 1,994 |  |  | $ | 10 |  |  | $ | (8 | ) |  | $ | 1,996 |
(1) These investments are hedged with forward contracts that are not designated in hedging relationships. See Note 15 for offsetting statement of consolidated income impact.
Total current marketable securities that were pledged as collateral for our self-insurance requirements had an estimated fair value of $572 and $564 million at December 31, 2016 and 2015, respectively. The gross realized gains on sales of available-for-sale securities totaled $1, $1 and $1 million in 2016, 2015, and 2014, respectively. The gross realized losses on sales of available-for-sale securities totaled $1, $1 and $0 million in 2016, 2015, and 2014, respectively. There were no material impairment losses recognized on marketable securities during 2016, 2015 or 2014. Investment Other-Than-Temporary Impairments We have concluded that no material other-than-temporary impairment losses existed as of December 31, 2016. In making this determination, we considered the financial condition and prospects of the issuer, the magnitude of the losses compared with the investments’ cost, the probability that we will be unable to collect all amounts due according to the contractual terms of the security, the credit rating of the security and our ability and intent to hold these investments until the anticipated recovery in market value occurs. Unrealized Losses The following table presents the age of gross unrealized losses and fair value by investment category for all securities in a loss position as of December 31, 2016 (in millions):
| Less Than 12 Months |  | 12 Months or More |  | Total
| Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
U.S. government and agency debt securities | $ | 206 |  |  | $ | (2 | ) |  | $ | — |  |  | $ | — |  |  | $ | 206 |  |  | $ | (2 | )
Mortgage and asset-backed debt securities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities | 68 |  |  | (1 | ) |  | — |  |  | — |  |  | 68 |  |  | (1 | )
Equity securities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Non-U.S. government debt securities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total marketable securities | $ | 274 |  |  | $ | (3 | ) |  | $ | — |  |  | $ | — |  |  | $ | 274 |  |  | $ | (3 | )
The unrealized losses for the U.S. government and agency debt securities are primarily due to changes in market interest rates. We have both the intent and ability to hold the securities contained in the previous table for a time necessary to recover the cost basis. Maturity Information The amortized cost and estimated fair value of marketable securities at December 31, 2016, by contractual maturity, are shown below (in millions). Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
| Cost |  | Estimated Fair Value
Due in one year or less | $ | 463 |  |  | $ | 462 |
Due after one year through three years | 450 |  |  | 449 |
Due after three years through five years | 16 |  |  | 16 |
Due after five years | 72 |  |  | 72 |
| 1,001 |  |  | 999 |
Equity and carbon credit investment securities | 82 |  |  | 92 |
| $ | 1,083 |  |  | $ | 1,091 |
Non-Current Investments and Restricted Cash Investments and Restricted Cash is primarily associated with our self-insurance requirements. We entered into an escrow agreement with an insurance carrier to guarantee our self-insurance obligations. This agreement requires us to provide collateral to the insurance carrier, which is invested in money market funds and corporate and municipal bonds. Collateral provided is reflected in "other investing activities" in the statements of consolidated cash flows. At December 31, 2016 and 2015, we had $445 and $442 million in self-insurance investments and restricted cash, respectively. We held an $18 and $19 million investment in a variable life insurance policy to fund benefits for the UPS Excess Coordinating Benefit Plan at December 31, 2016 and 2015, respectively. The quarterly change in investment fair value is recognized in "investment income and other" on the statements of consolidated income. Additionally, we held escrowed cash related to the acquisition and disposition of certain assets, primarily real estate, of $13 and $12 million at December 31, 2016 and 2015, respectively. The amounts described above are classified as “investments and restricted cash” in the consolidated balance sheets. Fair Value Measurements Marketable securities utilizing Level 1 inputs include active exchange-traded equity securities and equity index funds, and most U.S. Government debt securities, as these securities all have quoted prices in active markets. Marketable securities utilizing Level 2 inputs include asset-backed securities, corporate bonds and municipal bonds. These securities are valued using market corroborated pricing, matrix pricing or other models that utilize observable inputs such as yield curves. We maintain holdings in certain investment partnerships that are measured at fair value utilizing Level 3 inputs (classified as “other non-current investments” in the tables below, and as “other non-current assets” in the consolidated balance sheets). These partnership holdings do not have quoted prices, nor can they be valued using inputs based on observable market data. These investments are valued internally using a discounted cash flow model with two significant inputs: (1) the after-tax cash flow projections for each partnership, and (2) a risk-adjusted discount rate consistent with the duration of the expected cash flows for each partnership. The weighted-average discount rates used to value these investments were 8.06% and 8.22% as of December 31, 2016 and 2015, respectively. These inputs and the resulting fair values are updated on a quarterly basis. The following table presents information about our investments measured at fair value on a recurring basis as of December 31, 2016 and 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in millions):
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
2016 |  |  |  |  |  |  |
Marketable securities: |  |  |  |  |  |  |
U.S. government and agency debt securities | $ | 312 |  |  | $ | — |  |  | $ | — |  |  | $ | 312 |
Mortgage and asset-backed debt securities | — |  |  | 91 |  |  | — |  |  | 91 |
Corporate debt securities | — |  |  | 593 |  |  | — |  |  | 593 |
Equity securities | — |  |  | 2 |  |  | — |  |  | 2 |
Non-U.S. government debt securities | — |  |  | 3 |  |  | — |  |  | 3 |
Carbon credit investments | 90 |  |  | — |  |  | — |  |  | 90 |
Total marketable securities | 402 |  |  | 689 |  |  | — |  |  | 1,091 |
Other non-current investments | 18 |  |  | — |  |  | 13 |  |  | 31 |
Total | $ | 420 |  |  | $ | 689 |  |  | $ | 13 |  |  | $ | 1,122 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
2015 |  |  |  |  |  |  |
Marketable securities: |  |  |  |  |  |  |
U.S. government and agency debt securities | $ | 340 |  |  | $ | — |  |  | $ | — |  |  | $ | 340 |
Mortgage and asset-backed debt securities | — |  |  | 74 |  |  | — |  |  | 74 |
Corporate debt securities | — |  |  | 861 |  |  | — |  |  | 861 |
U.S. state and local municipal debt securities | — |  |  | 2 |  |  | — |  |  | 2 |
Equity securities | — |  |  | 2 |  |  | — |  |  | 2 |
Non-U.S. government debt securities | — |  |  | 366 |  |  | — |  |  | 366 |
Carbon credit investments | 351 |  |  | — |  |  | — |  |  | 351 |
Total marketable securities | 691 |  |  | 1,305 |  |  | — |  |  | 1,996 |
Other non-current investments | 19 |  |  | — |  |  | 32 |  |  | 51 |
Total | $ | 710 |  |  | $ | 1,305 |  |  | $ | 32 |  |  | $ | 2,047 |
The following table presents the changes in the above Level 3 instruments measured on a recurring basis for the years ended December 31, 2016 and 2015 (in millions).
| Marketable Securities |  | Other Investments |  | Total
Balance on January 1, 2015 | $ | — |  |  | $ | 64 |  |  | $ | 64 |
Transfers into (out of) Level 3 | — |  |  | — |  |  | — |
Net realized and unrealized gains (losses): |  |  |  |  |
Included in earnings (in investment income) | — |  |  | (32 | ) |  | (32 | )
Included in accumulated other comprehensive income (pre-tax) | — |  |  | — |  |  | — |
Purchases | — |  |  | — |  |  | — |
Settlements | — |  |  | — |  |  | — |
Balance on December 31, 2015 | $ | — |  |  | $ | 32 |  |  | $ | 32 |
Transfers into (out of) Level 3 | — |  |  | — |  |  | — |
Net realized and unrealized gains (losses): |  |  |  |  |
Included in earnings (in investment income) | — |  |  | (19 | ) |  | (19 | )
Included in accumulated other comprehensive income (pre-tax) | — |  |  | — |  |  | — |
Purchases | — |  |  | — |  |  | — |
Settlements | — |  |  | — |  |  | — |
Balance on December 31, 2016 | $ | — |  |  | $ | 13 |  |  | $ | 13 |

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