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Group legal coverage grows in popularity as voluntary benefit


Group legal plans have never enjoyed the popularity of top-tier employee benefits, such as health insurance, but they have grown in recent years.

Not long ago, many benefit managers didn't even know what they were, said Marcia L. Bowers, group sales director for Hyatt Legal Plans Inc., a Cleveland- based MetLife Inc. company. Ms. Bowers recalled times during the 1990s when "I went to a lot of trade shows and benefits managers would come up to my boothÖand they would say, 'Interesting. What is it?"'

In recent years, though, group legal plans have picked up steam.

In 2006, 27% of U.S. human resource professionals said their organizations offered legal services, up from 24% in 2004, according to a survey by the Society for Human Resource Management in Alexandria, Va. The figure rises as companies increase in size, with 34% of businesses with 500 or more employees offering legal services to employees, the survey found.

Such plans can help employers distinguish their benefits from those of their competitors, vendors say.

"It complements an employer's package," said Cathy M. Branigan, Chicago-based area senior vp for client development at Gallagher Benefit Services Inc., an employee benefits consulting firm.

And employers see offering legal services as a means to reduce absenteeism, said Kevin Buske, assistant vp of worksite marketing at Legal Access Plans L.L.C. in Houston. "Somebody facing the possibility of revocation or suspension of their driver's license due to too many traffic tickets, that's going to take away from their focus on their work; that's going to lend itself to absenteeism," he said.

Not on the short list

Although the popularity of legal plans' is rising, employers often are more concerned about fixing health care and bidding out life insurance than adding a legal benefit, said Ms. Bowers of Hyatt Legal Plans. "We are by no means on the short list for benefits professionals."

Concurring was Patrick O'Brien of GE Money-Benefit Solutions, which sponsors the Signature LegalCare plan. "We are actually disappointed that more employers aren't offering the plan, but we've seen strong growth over the last several years and anticipate and hope that it will continue to grow at even a faster pace going forward," said the Schaumburg, Ill.-based senior vp of benefit solutions.

Group and prepaid legal services have been around since the 1970s, said Tori Wible, executive director of the American Prepaid Legal Services Institute in Chicago, an affiliate of the American Bar Assn.

Initially, unions negotiated this coverage as part of their benefits package, with employers picking up the cost. Over time, Ms. Wible said, employer subsidization has waned, in large part due to the elimination in 1992 of the tax-preferred status of employer-paid group legal plans under the federal tax code. Today, most employers that offer legal services do so as a voluntary, employee-paid benefit.

Generally, there are two types of group legal plans (see box, page 14).

"We really look to coverÖthe majority of personal legal needs that an individual may have," including financial planning, identity theft and consumer protection services, said Ann Dieleman, senior vp of sales and marketing for ARAG North America Inc. in Des Moines, Iowa. Family matters, including adoption and divorce, are also commonly used, she noted.

Since the 2005 death of Terri Schiavo, the brain-damaged woman whose husband won court approval to remove her feeding tube, U.S. residents have become more aware of the need for a living will. "We did see an increase in that particular benefit usage and it has remained high," Mr. Buske said.

Likewise, the terrorist attacks of Sept. 11, 2001, have bolstered demand for wills and estate planning, he added.

Limits protect employers

Still, group legal plans don't cover every legal need.

"The programs that you will find in this spaceÖare designed to help people with personal legal matters. So we're not there to help people with their business law or their criminal law," said Dell Kubler, Atlanta-based national sales director for GE Money-Benefit Solutions.

These plans also are designed to protect the employer, so they can't be used to bring suit against the company, he said.

When shopping for a plan, employers should weigh the options carefully, experts said.

"You just want to make sure it's a reputable company offering the benefit," said Cathy Eichenlaub, first vp and manager of health and welfare benefits at Mellon Financial Corp. in Pittsburgh.

More than 400 of Mellon's 14,000 employees are enrolled in Hyatt Legal Plans, which the financial services company has offered for about three years.

Fujitsu America Inc. in Sunnyvale, Calif., began offering Hyatt Legal in 1995. "Initially, we made some errors in how we structured our offerings to our employees," said Joyce Mitome, the company's senior benefit analyst. Instead of offering a single plan, the information technology company created high- and low-end plans. "We found that it confused our employees."

A year later, "we learned our lesson" and offered a single plan, which Ms. Mitome described as "sort of a middle ground" between the two previous options. "Employees seem to really like" the new option, she said.

One key to the plan's success is having a funding system that is administratively workable, said Ms. Mitome, who supports Fujitsu throughout the United States. Each company arm collects member premiums and directs them to a central location that, in turn, pools the money and writes a single check to the insurer.

Consumer product giant Procter & Gamble Co. has offered a voluntary legal benefits plan through ARAG for more than a decade, said a company spokesman in Cincinnati. "We do monitor the marketplace to be sure we are delivering a competitive product to employees," he said.

Among other things, P&G considers the depth and breadth of coverage and the vendor's efficiency in handling claims and responsiveness in handling customers. Another factor, he said, is the vendor's standing, as measured by years in business, key clients and financial rating.

Still, group legal plans still are far from the most popular employer benefit.

Hyatt Legal and ARAG report average enrollment rates of 8% to 20%. While historical data is unavailable, officials at GE Money's Signature LegalCare program look for 10% to 15% enrollment in the first year, with 20% annual growth in the first few years.