May 2014 Bar Bulletin
Skip Navigation Links
CLE / Education
For Lawyers
Legal Help
Special Programs
MyKCBA Login

May 2014 Bar Bulletin

What's New for 2014: Retirement Plan Q&A for Law Firm Employers

By Ellen Mondress


Q: We're thinking about adding a pension plan for employees. Why are they so unpopular these days?

A: Pension plans are generally designed to provide a regular, annual income to employees and their spouses during retirement. They also can prevent an employee from taking his or her retirement benefits in one lump sum and spending it all at once. So, for the paternalistic employer, pension plans are a good fit.

The 2007-08 market crash highlighted the risk of pension plans: funding. An actuary estimates the contributions needed to fund plan benefits based on assumptions, including assumptions regarding investment return and mortality age of plan participants and their spouses. If plan investments underperform the assumptions, the employer's contribution obligations increase.

Similarly, if employees and spouses live longer than mortality assumptions, the employer's contribution obligations increase. So, while pension plans provide a more certain retirement income for employees, under the traditional pension plan model employers may end up with higher funding obligations than originally anticipated.

However, if you are interested in starting a pension plan, but are not interested in the funding risk, certain insurance products are designed to eliminate all or a portion of that risk. These products often are based on conservative investment and mortality assumptions, and so may require higher initial contributions. An insurance broker specializing in retirement funds can advise you.

Alternatively, you may wish to consider variations on the traditional pension plan, such as a variable annuity plan, which shifts risk to employees. An actuary specializing in pension plans can advise you on these types of alternatives.

Q: Do we really have to buy the ERISA fidelity bond?

A: Yes, ERISA bonding is required by law. There are exceptions; however, none for law firms. The amount is generally 10 percent of plan assets handled and at least $1,000, but not more than $500,000 ($1 million if the plan holds employer securities).

...login to read the rest of this article.

Return to Bar Bulletin Home Page

KCBA Twitter Logo KCBA Facebook Logo KCBA LinkedIn Logo KCBA Email Logo

King County Bar Association
1200 5th Ave, Suite 700
Seattle, WA 98101
Main (206) 267-7100
Fax (206) 267-7099

King County Bar Foundation Home Page

Charitable Arm of the Bar

Jewels Page

Pillars of the Bar Page

All rights reserved. All the content of this web site is copyrighted and may be reproduced in any form including digital and print
for any non-commercial purpose so long as this notice remains visible and attached hereto. View full Disclaimer.