Also known as: retirement plan · pension plans
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
An exception to the prohibition on sharing legal fees with nonlawyers that permits a lawyer or law firm to include nonlawyer employees in a compensation or retirement plan even though the plan is based in whole or in part on a profit-sharing arrangement.
Employee benefit arrangements that an employer may establish and fund to provide pensions and deferred compensation to current or former directors, officers, employees, and agents, often passing outside probate by beneficiary designation and subject to federal preemption.
Each sense below has its own examples, sources, and questions.
An exception to the prohibition on sharing legal fees with nonlawyers that permits a lawyer or law firm to include nonlawyer employees in a compensation or retirement plan even though the plan is based in whole or in part on a profit-sharing arrangement.
Select any source to read its text and confirm it supports the definition.
Redwood Bank retains environmental scientist Rosalind Reed as a nonlawyer employee. The firm adopts a retirement plan that calculates her annual benefits as a percentage of the firm's overall long-term profitability from all matters after five years of service. The arrangement satisfies professional conduct standards because the exception expressly authorizes profit-sharing elements in nonlawyer employee retirement plans.
A lawyer or law firm may include nonlawyer employees in a compensation or retirement plan even if the plan is based in whole or in part on a profit-sharing arrangement. The exception applies when the plan functions as a standard benefit available after a vesting period and uses firm-wide profitability metrics rather than direct allocations from individual matters.
Supporting sources
The plan remains permissible when payments are calculated from the firm's overall long-term profitability and distributed uniformly to qualifying nonlawyer employees after a service threshold. The rule expressly tolerates profit-sharing elements in retirement plans so long as the arrangement serves retention rather than matter-specific fee division.
Employee benefit arrangements that an employer may establish and fund to provide pensions and deferred compensation to current or former directors, officers, employees, and agents, often passing outside probate by beneficiary designation and subject to federal preemption.
Select any source to read its text and confirm it supports the definition.
Riverstone Manufacturing establishes a pension plan for its current and former officers and employees funded through company contributions tied to annual profits. The board approves the plan as part of its authority to create benefit programs that reward service and encourage retention across the workforce.
After Isaac's death, his second wife Sandra asserts community property rights under state law to a portion of retirement benefits earned during his first marriage. Federal law preempts the state claim because ERISA governs the distribution of the employer-sponsored retirement plans and controls beneficiary rights.
A corporation may pay pensions and establish pension plans, profit-sharing plans, and other benefit or incentive plans for any or all of its current or former directors, officers, employees, and agents. This power is part of the corporation's general authority to manage compensation and retain talent.
Supporting sources
Retirement plans often function as will substitutes that pass by beneficiary designation outside probate. Federal law under ERISA preempts conflicting state community property or spousal share claims, and the slayer rule may bar a beneficiary who intentionally kills the participant from receiving benefits.
Supporting sources
…Sandra, and they remained married until his death in 1989. Upon retirement, Isaac received various benefits from his employer's retirement plans. One was a lump-sum distribution from the Bell System Savings Plan for Salaried Employees (Savings Plan) of $151,628.94, which he rolled over into an Individual Retirement Account (IRA). He…
…Mayo’s nephews and niece (John Chamberlain, Allan Chamberlain, and Mira Hinman), and the administrators of the Boston University Retirement Plan
…was inserted simply out of an abundance of caution. The taxpayer received in cash a refund of his contributions to the retirement plans
…it might go bankrupt. The Company makes no contention that its statutory duty has in any way hindered its ability to operate its retirement plan
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