Terry W. Conner, managing partner, Texas Bar Journal Guest Article: Evolution of Law Firm Retirement Policies

02/08/2013

Regardless of its entity structure,1 sooner or later almost every law firm confronts the myriad issues surrounding partner or shareholder agreement. Retirement may mean the lawyer’s full retirement from the practice of law, or a significant change in the partner’s status with the firm, such as moving from a position as equity partner to income partner2 or of counsel. In either case, the lawyer’s retirement can involve issues regarding maintenance and transition of clients for whom the retiring lawyer is responsible, transition of the lawyer’s leadership and administrative duties at the firm, financial security of the lawyer, structure and compensation for any continuing service relationship with the firm, and (last but certainly not least) friendship and fairness.

A number of recent trends have complicated the retirement drama. These include the swell of baby boomers approaching retirement, lengthening life expectancies for retiring lawyers, post-2008-meltdown concerns regarding the certainty of retirement income, flattened revenue and income growth at many law firms, rising healthcare costs, and increasing levels of contention and litigation regarding mandatory retirement policies.

This article addresses the current commentary and contention regarding partner mandatory retirement policies, and then offers insights into certain components of law firm retirement policies, which will be relevant whether or not retirement occurs as a result of a mandatory retirement policy. Given the wide range of law firm sizes, compositions, goals, and experiences, the article shoots for what to consider, rather than what to do.

Excerpted from the Texas Bar Journal, February 8, 2013. To view full article, click here.

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NOTES
1. In Texas, law firms are typically formed as limited liability or professional corporations but also may be sole proprietorships, general partnerships, or professional limited liabilities companies. to law firm governing documents, this article will refer partnership agreements.”
2. Typically, an income or non-equity partner does not profits and losses of a law firm or contribute equity capital The partnership agreement may describe other differences equity and income partners, including as to voting the partnership class, and expulsion from the class.

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