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Nov. 30 — How well are attorneys in big law faring when it comes to saving for retirement through a 401(k) plan? When compared with 401(k) plans offered in corporate America, attorneys in big law are doing very well.
And in terms of sheer size, the 401(k) plans of many firms in big law are packing quite a punch.
The 401(k) plan at Latham & Watkins LLP is the largest plan among the nation’s 50 top-grossing law firms, according to Bloomberg BNA’s analysis.
Latham’s plan has more than $1.2 billion in assets and 4,899 active participants. The second place in terms of plan size goes to Kirkland & Ellis LLP. The firm’s retirement plan has more than $941 million in assets and 4,155 participants.
Jones Day’s retirement plan scored the third place with $921 million in assets and 1,386 participants. When compared with other big law 401(k) plans that have an average account balance in the $200,000s, Jones Day employees have an average account per participant of $665,000.
The top 10 largest plans in big law have more than $700 million in assets each with hefty average accounts. Some firms have also created separate 401(k) plans specially designed for partners and selected employees that have average accounts in the millions.
Retirement plans at DLA Piper and Hogan Lovells US LLP have assets that exceed $800 million each. And Sidley Austin LLP, Foley & Lardner LLP, Skadden Arps Slate Meagher & Flom LLP, Reed Smith LLP and Ropes & Gray LLP complete the list with more than $700 million in assets in their 401(k) plans each.
In terms of the size of the individual account balances, employees at Cravath Swaine & Moore LLP have some of the largest 401(k) accounts in the legal industry. The almost 200-year-old firm has one retirement plan in which its 133 participants, mainly partners and selected employees, enjoy an average account of $2.1 million, according to the firm’s latest annual report.
O’Melveny & Myers LLP also has a profit-sharing plan in which its 227 participants—partners and eligible counsel attorneys— have accumulated an average balance of $1.1 million in their accounts.
Retirement plans at Debevoise & Plimpton LLP, Shearman & Sterling LLP, Cleary Gottlieb Steen & Hamilton LLP , Milbank Tweed Hadley & McCloy LLP, Simpson Thacher & Bartlett LLP and Davis Polk & Wardwell LLP follow closely behind. These firms have plans in which average accounts per participant range from $467,299 to $865,353.
These hefty balances exceed the average account of plan participants in other industries. According to Fidelity Investments’ latest retirement analysis, the average 401(k) account balance in 2016 managed by the investment company was $90,600.
To put the 401(k) plans of the law firms in perspective, compare those plans with those sponsored by big name companies. While these plans in corporate America are extremely large, the average account balances are quite small when compared with those in the legal industry.
The retirement-saving vehicles available for lawyers and administrative staff in big law firms vary across the board. Some law firms have created separate 401(k)-type plans for partners, associate attorneys and staff members, respectively, while other firms have one plan for all employees, including partners, associates, paralegals and administrative staff.
For example, the largest plans in terms of total assets all share the same feature—all employees participate in the firm’s plan, not just attorneys. But in comparison, the firms that have the largest account balances per participant are mostly designed to cover partners and selected employees.
Firms have adopted different features in their retirement plans and offer a variety of investment options, including mutual funds, collective trusts and self-directed brokerage accounts. Some plans include automatic enrollment, immediate vesting of employer’s contributions and the option to take out a loan from the participant’s account.
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