Being that I wasn't working for UPS during the thrift plan days I cannot say this for sure, but I do prepare taxes for a living so here is my advice. The 10 percent penalty is only applied to early withdrawals of retirement savings before age 59.5. If you were collecting the earnings and or dividends from the plan while you let the money sit in stock then taking the money out will not hit you with a 10% tax penalty, you will only owe taxes on growth of the holdings while you held them. Basically its what you sold the stock for minus your basis, or what you paid for it.
As far as withdrawing the money from the 401k, I believe you will be hit with a 10% tax penalty on that if the money was deposited pre-tax and you are not age 59.5. There may be a special rule about retiring and withdrawing the money early, but considering I do about 200+ tax returns per year I have not run into a situation where the penalty does not apply unless you are taking the money out to buy a house or fund an education.