Private Pension Plans: An Investigation

The purpose of this thesis is to review the whole subject of private pension plans in the United States. The central problem that plans’ sponsors are facing under this system is to decide which is the most suitable plan to adopt. This thesis begins with a discussion of defining the private pension system, the incentives behind adopting it, the history and growth of the system, the types of different plans under it, and the accounting procedures for the cost of those plans. The focus of the research then turns to a comparative analysis of the two major types of plans under this system, in order to show the differences between the two plans, regarding their nature and the law that distinguishes between them. These differences are what a plan's sponsor might use to differentiate between the two types when he intends to establish one. The primary criteria used in the comparative analysis are: bearing the risk under the plan, benefit accumulation and surrender manner, and the regulation differentiation between the two types. Finally, the conclusion reached indicates that trying to choose the most suitable plan is not an easy task, because each type offers specific advantages for the employer and the employees, and that the plan’s sponsor should build his choice of a plan on a very broad analysis that takes into account not only his current needs, but also his future needs.