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The Benefit of Counsel

May 13, 2008
Related Topics: Benefit Design and Communication, Featured Article, Compensation
Kathy Bartow worries that it’s only a matter of time before the housing market crisis begins to affect her workforce.

So far, the 6,000 employees of Sunnyvale, California-based Fujitsu America have been unscathed by the wave of foreclosures sweeping the country, says Bartow, the company’s director of benefits. But if employees are concerned about the possibility of foreclosure, Fujitsu offers a service to help them. Through its group legal plan, employees can contact an attorney to help them review their mortgage agreements.

Prompted by the national mortgage mess and myriad other legal issues that people face, an increasing number of employers are following in Fujitsu America’s footsteps by offering group legal plans to employees. Under these programs, employees sign up for payroll deduction to pay the fee—usually around $200 annually—to have access to attorneys.

Thirty-three percent of large employers offered group legal plans in 2007, up from 27 percent the previous year, according to a recent study by the Society for Human Resource Management.

Hyatt Legal Plans, the Cleveland-based company that provides group legal plans to companies like Fujitsu, has seen its sales jump more than 44 percent from 2006 to 2007, says Marcia Bowers, sales and marketing director.

It’s becoming increasingly common for prospective clients to ask what the group legal plans cover in terms of refinancing and mortgage issues, Bowers says.

Providers of group legal plans say issues related to the collapse of the subprime mortgage market are keeping them busy.

Last year, Hyatt Legal Plans saw its mortgage-related legal activity jump 44 percent. In the first two month of 2008, it grew 27 percent, Bowers says. Similarly, ComPsych, a Chicago-based employee assistance provider that offers a legal information and referral service, says that the number of real estate-related legal questions it received has doubled over the past year.

"The legal service is the second-highest most used offering we have with most clients today," says Adam Gotskind, director of LegalConnect, ComPysch’s legal information and referral service.

CLC Inc., a Granite Bay, California-based company that provides financial coaching to employees and legal referral assistance through EAPs, says calls related to foreclosures doubled in the first quarter of 2008.

"Already today 70 percent of people are living paycheck to paycheck, and then you throw this mortgage crisis on top of it," says Brad Barron, chief executive of CLC. "We have an enormous problem on our hands."

Keeping employees focused
    Fujitsu has offered group legal plans since 1995. The technology provider originally offered the plans to assist the several hundred Japanese assignees it has in the U.S., but usage has spread, Bartow says. Today 24 percent of employees are signed up for the service.

Giving employees easy access to attorneys can help them focus on work, instead of worrying about how they’re going to find and pay for a lawyer. That helps both the employee and the company, Bartow says.

Employee productivity has been the sales pitch for group legal plan providers for years, but today it seems to ring particularly true for many employers, experts say.

"With everything going on, employers are definitely concerned about employee productivity," says Lawrence Singer, senior vice president at the Segal Co., a New York-based consultant.

An April 2007 study conducted by Russell Research for ARAG, a Des Moines, Iowa-based group legal plan provider, found that seven out of 10 employees experienced at least one legal "life event," such as a divorce, in the past year. Sixty-nine percent experienced two or more such events.

What’s more disturbing for employers, however, is that the study found 40 percent of employees who experienced a legal life event said it negatively impacted their work lives. One out of five employees said they were less productive at work. One out of three took time off because of the issue—with the average absence being 13 days.

Much of the distraction comes from the fact that employees often don’t know how to find affordable attorneys, says Ann Dieleman, chief marketing officer at ARAG.

"So they are sitting there talking to their colleagues, trying to figure out who might know of a good attorney to help them with their issues," she says.

If the legal life event is emotionally taxing, such as the death of a family member or a divorce, that will obviously also affect their ability to focus on their work, she says.

That’s why a number of providers of group legal plans package their offering with other services, experts say.

For example, it’s not unusual that an employee who is seeking an attorney because of a possible foreclosure may actually need to speak to a financial advisor, Gotskind says.

"If someone calls about a foreclosure, we won’t automatically transfer them to a lawyer. We will first have them speak to a financial professional to see if it is a problem that can be addressed through credit counseling," he says.

That’s the reason that CLC, whose main business is providing a legal referral service to EAPs, added financial coaching for employers a few years ago, Barron says.

On top of offering financial coaching seminars to employees, the company also offers access to financial advisors. Because of an increase in demand over the past few months, CLC is hiring aggressively this year and expects to have around 25 financial coaches on staff by the end of the year, up from the 13 it has currently, Barron says.

Until recently, CLC has offered its financial advisory service as a voluntary benefit that employees could sign up for through their employers. But increase in demand has prompted the company to introduce an employer-funded version. The pricing depends on the size of the company, Barron says.

"Employers can pay for a three-month or a six-month membership for employees, and then at the end they can convert to a self-pay program," with employees footing the bill, he says.

Similarly, demand at ARAG prompted the company to introduce an employer-paid model for a basic legal service for employees, Dieleman says.

"This service allows employees to talk to an attorney over the phone and get basic advice and guidance," she says. "It can help them understand if they have a legal issue or not."

For example, employees can call in as they’re trying to figure out whether they need a lawyer for a mortgage problem, Dieleman says. The pricing is $5 per employee per month.

The thinking behind these new product offerings is that the current economic downturn and housing market crisis may be a reality for employees for a while, executives say.

Bartow, for one, says she and her colleagues are concerned about how Fujitsu’s employees will be affected in the long run.

"A lot of people’s mortgage rates are scheduled to reset at higher rates in the next few years," Bartow says. "We are monitoring this closely."

Barron agrees that because many adjustable-rate mortgages will reset over the next couple of years, many more people may find themselves in need of financial and legal assistance. "This is just the beginning," he says.

But even after this turmoil has past, employers would be wise consider making programs available to employees, Singer says.

"The financial and legal environment we live in isn’t going to get any less complicated," he says.

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