Pension Funds: Are They What They Seem to Be?

Published June 9, 2015

Complacency is not a good trait when it comes to retirement and pension funds. In other words, don’t presume that your firm’s pension plan is what it seems to be and what you expect it to be. To use a trite expression, don’t count your chickens before they’re hatched.

If you are a partner in a firm that has a pension fund program (albeit these seem increasingly rare), you will want to look closely into the details of the fund’s current status. In an analysis conducted by the American Lawyer, as reported in a March 2012 ABA Journal article (“Unfunded Pensions Are BigLaw ‘Elephant in the Room'”), American Lawyer looked at pension plans of large U.S. law firms. It appears that a number of the country’s largest firms have pension plans that are unfunded. In other words, these firms have pension plans, but those pension plans are without the money to pay the firm’s obligations as the firm’s lawyers retire.

This may or may not be true of your firm, but be aware that the profession will increasingly see firms with the bulk of their lawyers leaving the practice for retirement with only a hope and a prayer that the remaining partners will be willing to fund the firms’ obligations. We will also see situations where the younger lawyers in such firms will find it to their economic advantage to torpedo the existing firm’s pension obligations in exchange for creating a new firm with no pension obligations since doing so would give them the opportunity to take on more of the revenue that is produced by their efforts.

Thus, partners nearing retirement age are well advised to review the status of their pension plans—and use their partnership status to demand answers regarding what the plan’s funding and future payment prospects are.

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Audience type: Associates, Large Law Firms, Small Law Firms, Sole Practitioners