103 N.J.L.J. 246
March 22, 1979
COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW
Employee Benefit Planning
It has been brought to the attention of the Unauthorized Practice of Law Committee that laymen with varying backgrounds and experience in the pension field are soliciting employers to establish pension plans; recommending various types of pension plans and providing draft documents for the implementation of plans. In addition, these laymen offer to provide legal advice through third party attorneys employed by the laymen to qualify the plan with government agencies, to administer the plan and to confer with regulatory authorities if questions arise. The question is which of these activities constitutes the unauthorized practice of law by laymen.
The Committee is aware that the representation and administration of employee benefit plans requires the cooperative effort of lawyers, actuaries and accountants, among others. Decisions will often require input and advice from all of these disciplines. However, the practice of law relates to the rendition of services for others that calls for the professional judgment of a lawyer. The essence of the professional judgment of the lawyer is his educated ability to relate the general body and philosophy of law to a specific legal problem of a client; and thus the public interest will be better served if only lawyers are permitted to act in matters involving professional judgment. ABA Code of Professional Responsibility EC 3-5. Accordingly it is important that laymen not be permitted to perform services which constitute the practice of law and thereby deprive the client of the protection from the dangers inherent in such nonprofessional advice.
The question of what activities are properly within the confines of the practice of law has been thoroughly studied by the Standing Committee on the Unauthorized Practice of Law Committee of the American Bar Association on a continuing basis. Most recently the Committee conducted extensive hearings with broad participation by the entire pension plan industry. As a result it issued Employee Benefit Planning Informative Opinion A of 1977 in which it analyzed the entire problem and arrived at guidelines.
This Committee concurs in the essential elements of that Informative Opinion.
Non-lawyers should not hold themselves out as lawyers or as substitutes for lawyers by stating or suggesting in the course of solicitation that they will perform any necessary legal services, such as legal drafting, representing clients before courts or government agencies, or interpreting statutes, regulations or rulings. Because lawyer-employees of companies offering such plans may perform legal services only on behalf of the employer and not on behalf of the employer's clients or customers, the Committee believes that references in promotional materials to legal experts or legal expertise are misleading.
However, non-lawyers do not engage in unauthorized practice when they merely promote the sale of services or merchandise in connection with employees benefit planning. To the extent permitted by other laws and ethical standards of their professions, non- lawyers may properly advertise with respect to the sale of master plans or announce their availability to perform actuarial, accounting, banking, insurance, employee relations, investment consulting and other non-legal services in connection with plan design and administration.
A non-lawyer does not engage in unauthorized practice when he relies upon his particular professional skill and specific knowledge of ERISA, the Internal Revenue Code and other laws, rulings or regulations for the purpose of (1) assembling data on an employer's work force; (2) gathering information on the employer's business objectives, financial resources, etc.; (3) outlining various options available to the employer concerning the fundamental economic structure of the plan (for example, whether to adopt a pension or a profit-sharing plan, types of benefit vesting formulae, eligibility considerations, etc.); (4) calculating the economic cost, liabilities and requirements (including tax savings) associated with various options; (5) assessing the employee relations advantages or disadvantages associated with various options; and (6) providing recommendations concerning the basic economic structure of the proposed plan on the basis of such data, information, calculations and assessments.
Generally, only a lawyer in the course of a non-client relationship with an employer should (1) advise an employer with respect to the fiduciary obligations created by the plan; (2) offer an opinion on or interpretation of existing trust instruments, contracts or other agreements; (3) advise the employer with respect to the form of corporate documents and actions necessary to effectuate the plan; (4) advise the employer on the specific legal consequences of financial transactions, forms of property ownership, etc; and (5) offer an opinion that an existing or proposed plan is in compliance with ERISA or any other law, is or will qualify for special tax treatment, or is in any other respect legally sufficient.
The preparation and drafting of legal documents, such as trust instruments, contracts, and corporate documents, for execution or use by others is the practice of law. Therefore, non-lawyers engage in the unauthorized practice of law when they prepare, draft, or assist other non-lawyers in the preparation or drafting of such legal documents. The preparation and drafting of the legal documents effectuating the adoption or amendment of employee benefit plans do not constitute an exception to this well- established rule. On the contrary, the complex and diverse quality of the legal issues involved and the potential for conflicting interest and responsibilities among the various parties affected by an employee benefit plan mandate the need for the exercise of independent as well as competent legal judgment by the draftsman.
Accordingly, it is this Committee's opinion that non-lawyers are not authorized to prepare or draft any legal documents effectuating the adoption or amendment of an employee benefit plan, nor should they assist other non-lawyers (including their client or customer) in the drafting of such legal documents. This includes the preparation and drafting of trust instruments, contracts and corporate documents. This does not include materials furnished to the employee's lawyer. Nor does it include reports, returns, schedules, etc., required by governmental agencies to be prepared by specified non-lawyer professionals. Specimen documents may be delivered to an employer provided a statement is prominently displayed on such documents to the effect that the documents are important legal instruments with legal and tax implications and should be reviewed by the employer's lawyer.