The "Social Security Crisis" Comes to Law Firms

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Pension Obligations in Firms

For years we have heard the warnings about impending doom for the Social Security system, as the number of retirees receiving benefits continues to increase and the number of workers available to pay for those benefits continues to decrease. Now the inexorable logic of this situation has come to the world of law firms - specifically the large national and international firms that modeled themselves after their multinational corporate clients. In essence the problem is simple: too many promises have been made for pension obligations in these firms, and the number of lawyers available to cover them is shrinking, reflecting the general estimate that by the year 2020, 400,000 lawyers of the Baby Boom generation will be poised to retire.

Pension Obligations on Younger Lawyers in a Firm

In a recent issue of a major legal publication, as reported by the American Bar Association, the magazine looked at pension plans of law firms. It appears that a number of the country's largest law firms have pension plans that are unfunded. In other words, these are firms with pension plans, but without money to pay the obligations of those pension plans as their lawyers retire. What we will increasingly see are law firms with the bulk of their lawyers leaving the practice for retirement with the hope and prayer that the fewer remaining, younger partners will be willing to fund the firms' obligations. We will also see many situations where these younger lawyers will find it to their economic advantage to torpedo the existing law firm and its pension obligations in exchange for creating a new firm with no pension obligations. Doing so will give them the opportunity to take on more of the revenue that is produced by their efforts. They will earn more and pay less.

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Published In: Professional Practice Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ed Poll, LawBiz | Attorney Advertising

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Ed Poll
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