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When Law Firms Say It's Time to Retire

  Legal Business  -   POSTED: 2007/10/18 10:31

The American Bar Association doesn't want them. Most lawyers apparently don't like them. But many law firms have them. Retirement policies exist in several forms, but the 65-and-older crowd isn't looking to hang up its hat as early as it once was. Only 38 percent of lawyers agree with mandatory retirement policies, while 50 percent of firms have them, according to a recent survey of nationwide law firms by Altman Weil.

Aside from the 38 percent who agreed with mandatory retirement provisions, 46 percent disagreed and 16 percent were not sure.

At its annual meeting in August, the American Bar Association adopted a recommendation proposed by the New York State Bar Association that calls for firms to eliminate mandatory retirement policies and evaluate older partners on individual performance.

Opponents of the recommendation said firms shouldn't be told how to run their internal policies, particularly ones that are a matter of private contracts.

"The profession's position on this seems to be moving towards getting rid of those things," James D. Cotterman, an Altman Weil principal who handled the survey, said of mandatory retirement policies.

Aside from any question of legality, Cotterman said it makes good business sense to do away with retirement policies.

People are living longer, are healthier, have wisdom to share and have a "tremendous" prominence in the community, he said.

"There's really no downside to that," Cotterman said.

Firms should be planning for the next generation regardless of age, Cotterman said.

"If you have mandatory retirement, it's easy because you can say, 'Well, you've reached the age and you're out,'" he said.

It's the job of a managing partner or executive committee, however, to make the tough decisions, Cotterman said. That's what evaluations are for, he said.

According to the survey, the majority of respondents (61 percent) plan to continue working in some capacity after retirement. Of those who continue to work, 48 percent will continue to practice law and 35 percent will pursue another line of work. Seventy five percent will work part time, according to the survey.

If any of the respondents are Pennsylvania attorneys, their future career plans may depend on where they work.

At Stradley Ronon Stevens & Young, for example, partners are required to retire at age 65, 66 or 67, depending on their date of birth and how that coordinates with Social Security payments, managing partner Jeffrey A. Lutsky said.

On its face, the policy doesn't provide for retirement-age attorneys to simply leave the equity partnership tier; they must leave the firm.

Lutsky said that from time to time, partners ask for exceptions and they are granted on an individual basis. If extensions are granted, they are generally done on a one-year to two-year term. Extensions are based on the partner's current contributions to the firm, but not necessarily just his or her book of business, Lutsky said.

There have been occasions when the firm has transitioned partners into a senior counsel role when they plan on working part time, he said.

"This is an issue that's obviously being framed by demographics," Lutsky said.

Issues surrounding retirement, he said, aren't things the firm talks to partners about on their 65th birthday. That planning starts a couple of years out.

Despite the increasing talk about the morality and legality of firm retirement policies, Lutsky said he thinks the firm's policy works for the firm.

It allows Stradley Ronon to transition both client matters and leadership roles to a younger generation, he said.

"We're creating opportunities for younger people," he said.

That doesn't mean the firm has left it's older attorneys empty-handed. Stradley Ronon pays "significant" retirement benefits to its partners that are firm-funded, which is something many large firms no longer do, Lutsky said.

That pool is partially funded by the firm from year to year, and the rest is paid out of partner profits, he said.

Thorp Reed & Armstrong has what its managing partner Jeffery Conn calls a "flexible" policy. The firm requires that partners retire -- but not necessarily leave the practice -- at age 67.

Conn said partners can either request to stay on longer as an equity member or they can take another role as of counsel or senior counsel, for example. He said pretty close to all of those attorneys at retirement age stay on in another role.

Having a policy in place allows a firm to address the issue of retirement at a set, and known, time.

Mark Alderman said he wasn't quite sure he'd call his firm's policy mandatory. At Wolf Block Schorr & Solis-Cohen, the partnership agreement calls for attorneys at age 68 to transition out of the equity partner tier, he said.

"It does not require retirement or any particular alternative status," Alderman, Wolf Block's chairman, said.

Some attorneys retire before 68 and others continue in various capacities well into their 70s, he said.

There are also exceptions to nearly every rule. It is possible to waive the mandatory transition, Alderman said. Many partners have asked for the waiver and the firm has asked many partners if they were interested in the waiver, he said.

Eckert Seamans Cherin & Mellott Chief Executive Officer Timothy Ryan said up until about 15 years ago, his firm had a retirement policy.

"We jettisoned it with the belief that our members continue to be contributing past the age of 65," he said.

The firm's former system would take 10 percent of a member's equity away for a five-year period and then another 50 percent at age 70, which meant they were no longer a member, Ryan said.

"Sixty-five just seemed to be almost a random date selection," he said, calling the time frame an "unnecessary restraint."

The firm hasn't had any problems without a retirement policy and there hasn't been any talk of bringing one back, Ryan said. When Ryan, 48, transitioned into leadership, there were no problems with older members and the firm still has some of the same clients it did when it opened 50 years ago, he said.

Altman Weil's survey, conducted in September 2007, includes responses from 521 lawyers in management positions in U.S. law firms, including 28 percent from firms with 50 to 99 lawyers, 35 percent from firms with 100 to 249 lawyers, 17 percent from firms with 250 to 499 lawyers and 20 percent from firms with 500 or more lawyers.

The results show that lawyers in smaller law firms and women lawyers were less likely to support mandatory retirement.

In the firms where retirement was mandatory, 38 percent force retirement at age 65 and 36 percent say age 70. The smallest firms tend to use 70 as the retirement age, while most other firms look to 65.

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