Edited post from March 5:
The American Lawyer has a fascinating and timely in-depth article written by Julie Triedman called "A Heavy Burden" (dated March 1) that takes a long look at the pension issues faced by law firms. Triedman calls these extremely generous and unfunded plans "the elephant in the room" at large firms falling under the Am Law 200 and 100 categories.
The financial obligation for large firms is eye-opening. Take the article's estimation of the future pension burden faced by Simpson Thacher (which did not comment on these figures):
Our hypothetical, back-of-the-envelope calculation of Simpson's future liability—which we believe can stand in for at least a dozen similarly situated firms—indicates that it will be paying out of its annual income a minimum of roughly $65 million a year by 2022, double the estimated current annual payout.
The article analyzed 21 Am Law 100 pension plans, which may make American Lawyer editorial staffers more knowledgable about these plans than many lawyers -- who apparently are not very well informed. Triedman explains that one concern is the generational divide the pension costs will play into, with younger parnters subsidizing payouts that they may never enjoy themselves.
Our earlier post here (initally titled "Lawyers Face Pension Crunch Too") had incorreclty credited another of our favorite publications, The Wall Street Journal, with the scoop on this topic. We of course still encourage readers to check on the WSJ pice on unfunded pension plans at large firms.
Earlier post from March 5 below:
Lawyers Face Pension Crunch Too
Almost every day now we read apocalyptic stories of the coming pension fund crisis (click here, here, and here). The Wall Street Journal, however, has scooped everyone by shining a light on this little-discussed issue of law firm life: unfunded pension funds at some of the country's largest law firms.
The article notes:
In its own way, the future liabilities for some top law firms mirror similar problems across the U.S. Benefits promised in more stable economic times seem increasingly unsustainable today. From General Motors Co. and AT&T Inc. to cash-strapped local governments employing public workers, pension liability is becoming a growing concern as the retiree pool swells.
"It's the same thing you had with pensions in the private sector, where it was all defined benefits and companies were going bankrupt," says James Jones, a former managing partner at Arnold & Porter who is now a senior fellow at Georgetown University's Center for the Study of the Legal Profession."