Legal professionals face lack of retirement plan options at law firms
Four years ago, Lawyers Financial’s board of directors were told many lawyers have an issue with retirement — they just don’t do it.
One of the major hurdles is the lack of retirement plan options available at law firms. It’s not realistic to expect individual firms to set up their own defined benefit pension plans, the kind of retirement savings vehicle often hailed as the gold standard, because “it’s very risky,” says Dawn Marchand, president and CEO of CBIA/Lawyers Financial, the not-for-profit insurance and investment services organization that serves the legal profession.
“It would be a single employer plan and there would be a lot of governance, not to mention the financial risk of having to deliver on the promises of the pension. There’s no way a firm could do that — there’s no way most companies could do that.”
Randy Bauslaugh, counsel at McCarthy Tétrault, led a task force to look into the best way to address this gap in the legal space, and after three years of investigation Lawyers Financial was seriously considering setting up its own pension plan. At around the same time, in 2018, the Colleges of Applied Arts and Technology (CAAT) — the pension provider for colleges in Ontario for more than 50 years — announced they were opening up their pension plan to all Canadian organizations under the name DBplus, with an almost identical formula to the one Bauslaugh and team had come up with.
“We know law firms are very busy doing the business of law — if we were going to provide them with something it had to be super easy,” says Marchand. “That’s why the CAAT solution made perfect sense.”
Lawyers Financial decided to join forces with CAAT and approach it as an affinity arrangement, with the former doing some of the leg work by facilitating all sizes of law firms to join. Lawyers Financial is “not making one single penny on this plan,” Marchand notes, adding “it’s something our board has said is the right thing to do, so we have invested money to do this for the legal community.” DBplus was rolled out to the legal profession in July of 2020, and "we’ve had law firms signing up every month since.”
By joining DBplus, firms are joining CAAT’s established, multi-employer, jointly sponsored plan. That means there’s no financial risk to the employers — all of the risk lies with CAAT. CAAT also handles all member education and communication, making DBplus “a turnkey solution for law firms — there’s no administration, no technology, no infrastructure, no investment risk, no fees,” Marchand notes. The only cost is a percentage contribution of employees' T4 income, which is easily done by copying the automatic monthly process for CPP and allocating a portion from employer and employee to the pension.
“First and foremost, it’s a better bang for the buck spent on pensions for employees — these types of plans generally deliver twice as much retirement income for the same amount contributed to a defined contribution arrangement,” says Bauslaugh, adding it’s good for lawyers to take a look at but it’s even better in terms of providing for their staff.
Since the end of mandatory retirement at age 65, even within his firm there are admin assistants or other staff that ask him if he thinks they’ve got enough saved up to be able to retire and Bauslaugh finds that unacceptable.
“We should be able to provide more certainty, more predictability about retirement income — and DBplus offers that for staff,” he says.
On top of that reliable income for life, employees have reduced stress without complex investment decisions, can consolidate existing registered funds into DBplus and rest easy knowing the pension is portable within the legal profession. Employers can leverage the plan as a compelling attraction and retention tool, enjoy reduced costs, risks and administration compared to other avenues and not have to worry about compliance and fiduciary risk. Bauslaugh also notes it’s a way to ensure employees can transition to retirement with confidence, making room for other employees to move up in the ranks.
Like so much else, the pandemic took its toll on the promotion of DBplus, which was originally going to consist of roadshows where Lawyers Financial met with law firms across the country for the entirety of 2020. Lawyers Financial decided to take it digital and have been working with the CBA to market it through a series of webinars. Sticking with the general overview webinar into the fall, as they keep reaching new people and interest is growing through word of mouth, Marchand says they do have plans in the works to “expand into some specialized topics such as a deeper dive into how to buy additional money in DBplus, or how does it specifically to partners versus employees?”
Despite the bumps in the road, also in true pandemic fashion, there was a silver lining to this new approach.
“I think we reached people we wouldn't have if we were standing in a room together, so that worked out well,” Marchand says, though she notes with the big law firms they really need to get into a board room with their executive team and talk things through in person.
No matter how word gets around, Marchand has no doubt that it will — DBplus and what it offers speaks for itself.
“It’s hard not to make it sound like an infomercial because it’s so good,” Marchand laughs. “That’s my problem!”
To learn more about DBplus, sign up for Lawyers Financial’s upcoming webinar.