Recent news reports have brought attention to a problem faced by many law firms, satisfying the promises made to retired partners, present and future, through unfunded pension plans. It has been suggested that these obligations will be too large a burden for some of those firms. The problem could be made less severe if partners nearing or past retirement age would volunteer to give up their rights, but that idea doesn’t seem to have attracted much support. If law firms go out of business, those entitled to pension payments will be creditors, and their recovery of funds will be uncertain. There might be a less troublesome solution, involving the use of life insurance products, that could reduce or eliminate the problem if given enough time to carry it out.
How the Problem Began
For many years, self-employed individuals could not take advantage of the use of qualified retirement plans. It was not until 1962 that a modest level of contributions was permitted, and it took more years before parity was achieved with the contributions that could be made with respect to common law employees.
