Chapter 56
LEGAL SERVICES PLAN
LEARNING OBJECTIVES:

Have a basic understanding of legal services plans
REVIEW:
This chapter briefly covers legal services plans, or prepaid legal services plans.
Advantages, especially for middle and lower income employees, and
disadvantages are mentioned. This section is followed by a group of design
features, including suggestions for items to include on a benefit schedule. Tax
implications are reviewed, and the chapter ends with a reference for learning
more.
CHAPTER OUTLINE:
I. What Is It?
II. When Is It Indicated?
III. Advantages
IV. Disadvantages
V. Design Features
VI. Tax Implications
VII. Where Can I Find Out More About It?
VIII. Chapter Endnotes
FEATURED TOPICS:
Legal services plans
1
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CFP® CERTIFICATION EXAMINATION TOPIC:
Topic 30: Other employee benefits
D. Prepaid legal services
COMPETENCY:
Upon completion of this chapter, the student should be able to:
1. Have a basic understanding of legal services plans.
KEY WORDS:
Legal services plan
Prepaid legal services plan
Scheduled benefits
Comprehensive benefits
Indemnity basis
Prepayment basis
Open-panel prepayment plan
Closed-panel prepayment plan
DISCUSSION:
1. Discuss types of legal services that might be included in a legal services plan.
2. Discuss differences between indemnity and prepayment-type plans.
QUESTIONS:
1. Which of the following types of benefits are often provided by a legal services
plan?
(1) will preparation
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(2) adoption proceedings
(3) civil or criminal defense
(4) divorce
a.
b.
c.
d.
(1) only
(1) and (2) only
(1), (2), and (3) only
(1), (2), (3), and (4)
Chapter 56, pp. 409, 410
2. When a plan provides services on an indemnity basis, how are legal
expenses handled?
a.
b.
c.
d.
covered expenses are reimbursed
a set benefit amount is set aside each year
all legal services are paid for
all legal services are paid for except IRS audits and class action suits
Chapter 56, p. 410
3. Which of the following actions must an employee take to get a benefit from a
closed-panel prepayment plan?
a. submit estimated expenses for a predetermination evaluation
b. the lawyer must agree to stay within a list of usual, customary and
reasonable charges
c. obtain covered services from groups of lawyers specified by the plan
d. agree to arbitration when available
Chapter 56, p. 410
4. Which of the following actions must employees take to get a benefit from an
open-panel prepayment plan?
(1) choose their own lawyer
(2) the lawyer must agree in advance to a previously set fee schedule
(3) choose a lawyer from an approved list
(4) submit all expenses in advance of reimbursement
a.
b.
c.
d.
(1) and (3) only
(1), (2), and (3) only
(2), (3), and (4) only
(1), (2), (3), and (4)
Chapter 56, p. 452
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ANSWERS:
1. d
2. a
3. c
4. b