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Never Mind The 401(K) How's The Legal Plan?


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NEVER MIND THE 401(k)--HOW'S THE LEGAL PLAN?

For years, Alice and Gary Richardson feared that a collection agency would force them to pay $10,000 on a debt they said belonged to their son. No matter how much the couple protested, the agency kept coming. "We didn't know how to handle it," recalls Alice, a 59-year-old former office worker in Louisville, Ohio.

That all changed last August, when the Richardsons signed up with Pre-Paid Legal Services Inc., one of a growing number of outfits that are offering legal-aid plans to individuals. They quickly got legal advice--and got the would-be debt collector to drop its claim--all for $16 a month. "We had pushed aside our problems because we couldn't afford an attorney," says Alice. "Now, we have access to the best legal counsel we can find."

More and more, prepaid legal care is taking its place alongside such hot employee perks as elder care and day care. Typically offered as part of so-called cafeteria plans, which let workers choose from an array of benefits, these schemes have caught on with such employers as AT&T, American Express, and the Big Three U.S. auto makers. "This one is going to get into the common-benefits category," says Joseph A. Licata, manager of benefits at Salomon Brothers Inc., where 13% of employees have opted for legal plans.

FLAT FEE. At least six companies now administer group legal-plan services. The leader, Hyatt Legal Plans Inc. in Cleveland, sells its wares to PepsiCo Inc., among others, and says that the business is growing at an annual rate of 20%. In the past three years, Prudential LegalCare, a unit of Prudential Insurance Co., has seen its clientele quadruple, to 80 companies, including Sears, Roebuck & Co. Des Moines-based Midwest Legal Services provides prepaid plans to more than 500 companies, among them Microsoft Corp. and Procter & Gamble Co. "This is extremely attractive because it gives employees good value without the companies' having to put up dollars," says David A. Osterndorf, a benefits consultant at Towers Perrin.

Prepaid legal services operate much the same way as health-maintenance organizations for medical care. Workers pay a flat fee--typically $10 to $20 a month--in return for the right to use the services of a network of lawyers to handle everything from house closings to the drafting of wills. Even preexisting problems, such as divorce proceedings or the debt-collection issue that was plaguing the Richardsons, are covered fully or at a discount off regular fees. More unusual services, however, such as defense against criminal charges, are excluded.

BOON FOR LAWYERS. Although available for decades in Europe and through some U.S. unions, the concept has only now moved into the mainstream. The change has come partly because of aggressive marketing by plan providers. Also, employers and consumers both feel more comfortable with such benefits now, after experience with managed health care. "People understand the concept of paying a monthly fee and getting a basic service," says John Westergaard, an analyst who follows the industry.

Lawyers favor the plans because they help provide a steady stream of business and guaranteed payment in a tough climate. Riggs, Abney, Neal, Turpen, Orbison & Lewis, Oklahoma's third-largest firm, gets $100,000 a month from Pre-Paid Legal to handle the needs of state participants. Such plans also put lawyers in contact with clients they wouldn't be apt to see otherwise. "Most people hate the idea of getting a lawyer because they don't know whom to contact or how much they should be charged," says Christopher N. Giuliana, a lawyer in Clearwater, Fla., whose firm manages about 5,000

legal-plan cases a year. "The beauty of a prepaid plan is that you don't have to sit there and talk about fees--because they're already

arranged."

Not everyone is jumping on the legal-plan bandwagon. Michael J. Butler, a benefits consultant at Hewitt Associates, says just 4% of the more than 600 companies his firm surveyed offered the benefit in 1994. An additional 10%, however, said they planned to offer coverage within three years. That could prove a nice perk for millions of workers--and a boon to the legal profession.

THE NEW LEGAL BENNIES

What's covered under typical

employer-sponsored legal-benefit plans

CONSULTATIONS Unlimited phone access to lawyers for inquiries about any personal legal problem

CONTRACTS Review and drafting of documents for such issues as buying a car or selling a house

ESTATE AND TAX PLANNING Writing of wills and counsel on a range of tax issues, including IRS audits

CONSUMER PROBLEMS Help with disputes involving product manufacturers, retailers, and debt collectors

TRAFFIC VIOLATIONS Advice on beefs with insurers or law enforcers over speeding tickets or other infractionsBy Linda Himelstein in New York


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