BigLaw Benefits Overview

BigLaw Attorneys often find themselves surprised by the reality of BigLaw benefit structures. While high cash compensation is appealing, minimal retirement matching and entirely partner-funded benefits significantly impact cash flow and financial planning strategies as you advance through your career.

Managing Retirement Contributions

Most BigLaw firms have minimal to zero employer matching contributions for 401(k) plans. Partners often face mandatory retirement contributions, which reduce available cash but ensure disciplined savings.

Planning Tip:

Consider maximizing 401(k) contributions despite limited matches to benefit from immediate tax savings and future growth. This strategy may be in contrast to some financial “wisdom” from online gurus, but BigLaw attorneys should have the cash flow to make these savings work, despite the reduced incentive from the firm itself.

Health InsurancE

BigLaw health plans typically offer a few versions of the same underlying health network, where the difference between the versions just comes down to the up-front cost you pay via monthly premiums, and the variable costs of deductibles and co-pays/co-insurance. However, the plans are typically all using the same network of doctors and facilities, so the choice really comes down to the math of the various payment options.

In general, our analysis of many BigLaw health insurance options has shown us that choosing a High Deductible Health Plan (HDHP) and maxing out the associated Health Savings Account (HSA) is often a good choice for BigLaw attorneys. While the deductible and maximum-out-of-pocket (MOOP) may be higher relative to the “traditional” version of the plan, the high tax rates that you face mean that the tax savings derived from the HSA may offset those extra costs, when combined with the typically lower monthly premium cost for the plan itself.

One final note is that the health insurance costs are not subsidized for Equity Partners, leading to a notable reduction in net cash compensation.

Disability Coverage

One common theme we see among nearly all of our clients is that the firm-provided disability insurance coverage is inadequate. Remember, we do not sell insurance nor have any economic interest in whether clients purchase supplemental insurance; this is just what we see out there.

Typically, a firm’s coverage will be 60% of gross income. For Associates, it is often a taxable benefit in the event you need it, meaning your net take-home benefit will be less than the target 60%, after taxes. For Equity Partners, the benefit is generally not taxable, but that is because you are paying for 100% of the insurance premiums yourself via reduced monthly draws.

Disability coverage often has limitations, such as caps on monthly benefits, often in the $10k-$25k range. This means that a single first year Associate earning $225,000 in salary may already be subject to a cap and would receive a lower % benefit compared to what is stated in the benefits guide ($225k x 60% / 12 months = $11,250, over a hypothetical $10k monthly cap). At the Partnership level, we see much higher caps, but caps, nonetheless.

Disability Insurance Gaps: Typical monthly benefits may be insufficient for high earners because of caps on the payouts. Additionally, disability payments are usually taxable for Associates, further reducing the effective benefit.

Action Step:

Consider supplemental disability coverage to bridge gaps and ensure financial stability if an injury or illness occurs.

Exploring Unusual and Valuable Benefits

Beyond traditional offerings, many BigLaw firms provide specialized benefits that are often overlooked but can be incredibly valuable:

After-Tax 401(k) Contributions: Allows significant additional savings, distinct from Roth or traditional contributions, offering additional tax and retirement planning opportunities.
Subsidized Childcare: Some firms offer childcare support or subsidized rates, easing significant financial burdens for attorneys with families.
Legal and Identity Protection Services: Available through firm-negotiated programs, offering substantial protection at reduced costs.

Proactive Strategies for BigLaw Attorneys

Evaluate your full compensation package (cash plus all benefits).
Strategically leverage retirement plans and HSAs for additional tax-advantaged savings.
Understand your risk coverages offered through work, and supplement when necessary.
Actively seek out and utilize specialized firm-offered benefits such as childcare subsidies and identity protection.
Regularly consult with a financial planner experienced with the unique financial profiles of BigLaw attorneys to help you make the right choices around your annual benefit elections.

Conclusion: Maximizing Your Financial Security

Understanding and strategically navigating the complex landscape of BigLaw employee benefits is essential for attorneys seeking long-term financial stability. Taking advantage of traditional and lesser-known benefits can significantly enhance your overall compensation value and financial security.

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