Small Law Firms

Comparing Small Firm 401(k) Plans -- Fees, Matching, And The Best States To Work In

Will you be able to retire from your Small Law firm?

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‘…and here’s the part where you screwed up in your 30s.’

We routinely freak out over how much law firms pay their associates, but we rarely dive into firm benefits. Which is a shame because at a certain point, those benefits are more important than the salary a lawyer earns. Take the hypothetical example of two firms with a $10K pay disparity. One might assume the higher salary firm is paying more, but then you dig and find out the health plan contribution is fully covered by the cheaper firm and $800/month for the other. You learn that the cheaper firm matches retirement contributions up to $5K every year, the other doesn’t. Suddenly that lower-paying firm looks like a much better deal.

But firm benefits are a difficult thing to track. Salary and bonuses are easy because firms race to match each other, but benefits have a more nebulous impact on recruiting applicants and they just aren’t standardized like pay.

Thankfully, we can glean some insight into firm 401(k) plans. ForUsAll, a 401(k) advisor, took the time to review Department of Labor “Form 5500” filings to figure out how small law firms are handling their 401(k)s. The form allowed ForUsAll to look at NAICS codes 541110 and 541190 to find law firms with fewer than 100 employees (the only companies using the Short Form 5500).

Here’s key information, broken down by state of small firm 401(k) plans:

State Number of Firms with Plans Average Firm Contribution (Match/Profit Sharing) Average Total Yearly Contribution

(Employee + Employer)

 Average Employee Balance Average Plan Size
AK 56 $5,142 $11,296 $296,009 $2,594,920
RI 162 $5,710 $11,943 $207,019 $1,483,069
DC 364 $9,107 $17,177 $201,487 $3,507,531
ME 120 $3,788 $9,087 $199,728 $2,992,090
MT 106 $7,620 $14,077 $197,139 $1,928,078
HI 181 $6,338 $11,195 $185,502 $1,727,671
WV 176 $4,349 $8,984 $180,275 $1,948,715
MA 851 $5,339 $11,971 $174,248 $1,941,793
PA 1,207 $5,312 $10,702 $170,105 $2,359,065
AR 133 $3,843 $8,149 $168,294 $1,609,399
WY 27 $5,981 $10,118 $167,620 $1,536,339
IA 226 $5,264 $10,680 $166,261 $2,674,390
CA 4,293 $6,198 $12,155 $164,786 $1,716,174
OH 837 $4,428 $9,245 $164,574 $2,093,222
MD 592 $5,895 $12,241 $163,726 $1,835,234
WA 594 $6,483 $13,268 $163,082 $2,363,344
IL 1,292 $5,664 $11,651 $160,430 $2,110,135
CT 532 $5,598 $11,813 $159,099 $1,847,917
NY 2,770 $5,987 $11,489 $158,728 $2,025,232
KY 267 $4,229 $8,680 $158,137 $1,826,431
MI 643 $4,590 $10,033 $158,063 $2,021,438
MS 151 $4,728 $9,629 $158,043 $1,794,620
MN 500 $5,389 $11,684 $157,590 $2,480,009
NE 138 $4,841 $10,275 $154,896 $2,843,499
WI 351 $4,581 $10,382 $153,484 $2,293,963
OR 397 $7,433 $14,099 $150,580 $1,892,404
VT 61 $4,998 $11,930 $148,487 $1,873,662
NM 170 $5,799 $11,182 $147,070 $1,653,511
MO 414 $5,805 $11,484 $147,065 $2,173,815
IN 368 $3,842 $8,681 $146,421 $1,979,915
SC 314 $5,279 $10,378 $145,885 $1,542,262
TN 282 $4,416 $9,181 $143,047 $2,259,387
KS 179 $4,806 $10,077 $142,856 $1,792,499
LA 514 $4,994 $10,077 $141,385 $2,120,936
DE 117 $4,990 $11,285 $140,548 $2,241,178
AL 266 $4,556 $8,772 $139,768 $2,321,445
CO 497 $5,341 $11,260 $138,025 $1,590,176
ID 64 $4,381 $9,113 $136,702 $1,754,652
NJ 1,127 $4,563 $10,036 $135,864 $1,575,336
NH 136 $3,689 $9,483 $134,723 $1,820,969
AZ 461 $5,423 $11,095 $132,939 $1,136,691
NC 587 $4,654 $9,892 $131,724 $1,955,520
VA 649 $5,310 $11,233 $129,390 $1,672,547
NV 233 $4,397 $8,902 $128,009 $1,073,154
SD 45 $5,997 $11,716 $127,118 $2,613,797
OK 229 $4,098 $9,492 $124,004 $1,649,608
TX 1,492 $4,361 $10,163 $122,796 $1,767,889
ND 55 $4,806 $10,591 $122,201 $2,205,904
FL 1,927 $4,687 $10,070 $122,101 $1,299,718
GA 634 $5,464 $11,359 $113,961 $1,594,440
UT 153 $4,464 $9,390 $112,437 $2,070,080
Grand Total 28,046 $5,425 $11,099 $151,644 $1,887,570

Before you get too excited about moving to Alaska, that average is significantly aided by six firms that have average account balances over $800k. Oil money must be nice.

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But my eyes popped on D.C.’s $9K average employer contribution, blowing away even the nearest competition (Montana and Oregon). Coincidentally, Small Law employees in D.C., Montana, and Oregon also have the highest average contributions overall suggesting — as one would expect — that a good matching program encourages employees to contribute too.

Small Law firms may be small, but the amount of money they’re banking in retirement plans is anything but:

Not surprisingly, the bulk of the law firms in the United States with 401(k)s have under 25 employees. Collectively these smaller firms have over $25 billion in assets saved in their retirement accounts – so you’d think they would have some serious purchasing power. However, we have found a wide range of fees paid by companies of this size, and encourage law firms to regularly benchmark their 401(k) to make sure their plan is meeting their specific needs.

That disparity in fees can be a big deal. Brightspot, a 401(k) vendor, points out that small firms face steeper fees than big ones — obviously — and that can suck up savings quick:

“Large plans (over $100m in assets) almost uniformly have fees below 1%. The largest plans are usually below 0.50%. The large end of the 401(k) marketplace is incredibly competitive. The small plan marketplace is a different story. Average fees for small plans are between 1.5-2%, with plenty of plans paying more than 2% a year in fees.”

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So small-firm attorneys need to keep their eyes on their 401(k) plans because there’s a wide disparity out there. Don’t get caught at 65 wondering where all your money went!

Better 401(k)s for Law Firms: Ways For Lawyers To Optimize Their Plan [ForUsAll]

HeadshotJoe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

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