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Fundamentals of Private Pensions

Ninth Edition

Dan McGill, Kyle N. Brown, John J. Haley, Sylvester Schieber, and Mark J. Warshawsky

Publication Date - 09 February 2010

ISBN: 9780199544516

848 pages
7 1/2 x 9 3/4 inches

The most authoritative reference on private pensions in the world, now in its ninth edition, has been updated to include recent developments in the field such as the Pension Protection Act of 2006


For more than five decades, Fundamentals of Private Pensions has been the most authoritative text and reference book on retirement plans in the United States. The ninth edition is completely updated and reflects recent developments in retirement plans including the passage of the US Pension Protection Act of 2006 (PPA), the widespread shift toward hybrid and defined contribution plans, and a burgeoning economics and finance research literature on retirement and retirement plans. The volume is organized into eight main sections so the reader may use the volume as a text, a research tool, or a general reference.

Section I (Chapter 1) introduces the historical evolution of the pension movement and the underlying forces that shaped its progress. Section II (Chapters 2 and 3) explains how employer-provided pensions fit into the patchwork of the U.S. retirement income security system, especially Social Security. The section also includes a discussion of the economics of tax incentives and their effect on retirement plan offerings and the structure of the benefits provided. Section III (Chapters 4 through 9) lays out the economic role of retirement plans--their design, workforce incentives, plan finances, production of adequate retirement income, possibilities for phased retirement, and the risk of outliving pension assets. Section IV (Chapters 10 through 13) examines the various forms of defined benefit and defined contribution plans, including hybrid plans, in terms of their structure, requirements, and operations. Section V (Chapters 14 through 20) lays out the regulatory environment in which plans operate; this extensive material has been especially updated to reflect PPA, and the reams of associated guidance and implementing regulations. Section VI (Chapters 21 through 25) explores the funding and accounting rules under which private defined benefit plans operate; this section also reflects the new PPA rules. The penultimate section (Chapters 26 through 28) includes a complete revamping of chapters on risk management and investments applicable to retirement plans. The section describes modern portfolio theory and its broad implications for retirement investing, and in two separate chapters, specific implications for defined benefit and defined contribution plans. The final section (Chapter 29) concludes the text with a discussion of the future of retirement plans in the United States and around the world--a particularly timely subject in light of the extreme financial volatility experienced in 2008 and the pending retirement of the baby boom generation.


  • The authoritative text and reference book on private pensions in the US for professionals and academics
  • Written by leading players in pensions practice and legislation whose experience and insight gives this edition a unique insight into US pensions today
  • The 9th edition is fully revised and updated to take account of legislative, regulatory, practitioner, and academic developments in the field
  • Combines theory and practice, law and literature

About the Author(s)

Dan McGill is Professor Emeritus of Insurance at the University of Pennsylvania's Wharton School, during which time he chaired the Department of Insurance, directed the Pension Research Council, and directed the Huebner Foundation. Previously, he held academic positions at the University of Tennessee, University of North Carolina, and Stanford University. Dr. McGill's research focused on the areas of insurance, pensions, employee benefits, automobile insurance, and social security. He served on several corporate boards, and as consultant to the International Monetary Fund and the World Bank, the US Treasury, the Federal Reserve System, the US Army, and the US Congress. Dr. McGill received the Ph.D. from the University of Pennsylvania and the MA from Vanderbilt.

Kyle N. Brown is an attorney with the Towers Watson Worldwide Research and Innovation Center in Arlington, VA specializing in employee benefits where he works in the Research and Innovation Center. He is a member of the North Carolina and District of Columbia Bar and is admitted to the United States Supreme Court and Tax Court Bar. Mr. Brown is a co-author of the 7th and 8th editions of Fundamentals of Private Pensions. Mr. Brown also wrote the Tax Management Portfolios General Nondiscrimination Testing and Permitted Disparity in Qualified Plans, and Specialized Qualified Plans--Cash Balance, Target Benefit, Age-weighted and Hybrids, and co-authored the Tax Management Portfolio Employee Benefits for Tax-Exempt Organizations. In addition to numerous periodical articles, Mr. Brown currently is an Editorial Advisor for the Journal of Pension Planning and Compliance and the BNA Compensation and Benefits Guide.

John J. Haley is President, Chief Executive Officer and Chairman of the Board of Towers Watson Worldwide, a global human resources and financial management consulting firm headquartered in Washington, D.C. Mr. Haley started career as consulting actuary to several of Towers Watson's largest clients; subsequently he was named to the Board of Directors and became CEO of the firm. Mr. Haley is a Fellow of the Society of Actuaries and a Fellow of the Conference of Consulting Actuaries. He is a Trustee of The Actuarial Foundation. He holds an A.B. in mathematics from Rutgers College, and received a Fellowship for two years of study at the Graduate School of Mathematics at Yale University. Mr. Haley also serves on the Board of Directors of the U.S.-China Business Council, MAXIMUS and Hudson Highland.

Sylvester J. Schieber, a private consultant, has been a member of the US Social Security Advisory Board and became Chairman in 2006; he served previously on the Social Security Advisory Council. For more than 20 years he worked in Towers Watson Worldwide's benefit practice where he set up and managed Towers Watson's Research and Information Center; thereafter he served as Director of North American Benefits Consulting and Towers Watson's Board of Directors and retired in September 2006. Previously he was the first research director at the Employee Benefits Research Institute in Washington, DC and worked at the Social Security Administration where he was deputy director of the Office of Policy Analysis. He holds a Ph.D. in Economics from the University of Notre Dame. Dr. Schieber has authored or edited 10 books on changing demographics, retirement security, and health issues, and he has also written numerous journal articles and policy analysis papers on retirement and health benefits issues.

Mark J. Warshawsky is Director of Retirement Research at Towers Watson Worldwide, a global human capital consulting firm. He serves on the Social Security Advisory Board and on the Advisory Board of the Pension Research Council of the Wharton School. Previously he served as assistant secretary for economic policy at the U.S. Treasury Department. During his tenure, he played a key role in the development of the Administration's pension reform proposals, particularly pertaining to the funding of single-employer defined benefit plans which formed the basis of the Pension Protection Act (PPA) of 2006. Dr. Warshawsky's research led directly to the regulatory reform of minimum distribution requirements for qualified retirement plans. He is the inventor of the life care annuity, a product innovation integrating the immediate life annuity and long-term care insurance; for that research, Dr. Warshawsky won a prize from the British Institute of Actuaries.


"Fundamentals of Private Pensions is one of the few classics in the field, a work that no pension library should be without. Accordingly, it is a pleasure to welcome the 9th edition, published under the auspices of the Pension Research council of the Wharton School, and featuring a dream team of authors."--Journal of Pension Economics and Finance

Table of Contents

    Section I: Introduction
    1. Underlying Forces
    Section II: Broad Public Policy Environment for Retirement Plans
    2. Social Insurance
    3. The Politics and Economics of Tax Preferences
    Section III: The Role of Pension Plans
    4. Overall Objectives in Designing a Retirement Program
    5. Human Resource Incentives in Employer-Sponsored Retirement Plans
    6. Financing of Employer-Sponsored Retirement Plans
    7. Total Retirement Income: Setting Goals and Meeting Them
    8. Changing the End of Work: Phased Retirement
    9. Dealing with Risks of Outliving Resources in Retirement
    Section IV: Structure of Retirement Plans
    10. The Design of DB Plans
    11. The Design of DC Plans
    12. The Design of Hybrid Plans
    13. Individual Plans
    Section V: Regulatory Environment for Retirement Plans
    14. Historical Review of Pension Regulations
    15. Basic Regulatory Environment and Plan Qualification Requirements
    16. Coverage, Nondiscrimination, and Integration with Social Security
    17. Tax Consequences: Distributions and Contributions
    18. Form of Doing Business and Transactional Consideration
    19. Fiduciary Responsibility with Participant Rights
    20. Plan Termination and Participant Rights
    Section VI: Actuarial Requirements and Practices and Accounting for Pensions
    21. Actuarial Cost Factors
    22. Funding Requirements for Single Employer DB Plans
    23. Funding Requirements for Multiemployer Plans
    24. Cost Illustrations and Scope of Employer Choice/Strategy
    25. Financial Accounting and Disclosures for Retirement Plans
    Section VII: Pension Risk Management and Investments
    26. The Basics of Investments for Retirement Plans
    27. Investing for Defined Benefit Plans
    28. Investing and Defined Contribution Plans
    Section VIII: The Future of Pensions
    29. The Future of Pensions