As a result of recent natural disasters and current economic uncertainty, Americans are more aware than ever of the need for legal advice to plan for their families' future and financial wellbeing. New legal issues that disproportionately affect lower and middle income workers and families continue to arise, including consumer fraud and now the mortgage foreclosure crisis. In addition to affecting home owners, the foreclosures are also forcing renters from their homes.

The ABA has long supported prepaid legal services plans as a way to increase access to the justice system for low- and middle-income Americans. These plans allow individuals and families to address legal issues before they become significant problems, reducing demands on already overburdened court systems and instilling confidence in our justice system. The plans' tax-favored status expired in 1992, not because of any opposition, but because of the need for revenue offsets in the 1992 deficit reduction act.

Legislation to restore the tax exclusion of group legal services benefits has received positive consideration, short of enactment, in the previous 108th and 109th Congresses. During the 108th Congress, the group legal services bill, H.R. 973, was included in H.R. 1776, the Pension Preservation and Savings Expansion Act of 2003, introduced by then-Representatives Rob Portman (R-OH) and Ben Cardin (D-MD). The Ways and Means Committee marked up H.R. 1776, but the group legal services provision was eliminated along with many others.

Also during the 108th Congress, Senators Gordon Smith (R-OR) and Blanche Lincoln (D-AR) in introduced S. 1556, the Group Legal Services Benefit Act of 2003. With the bipartisan support of seven committee members, then-Senate Finance Committee Chairman Charles Grassley (R-IA) included S. 1556 in his pension reform bill, S. 2424, the National Employee Savings and Trust Equity Guarantee Act (NESTEG.) The Finance Committee reported S.2424, including the group legal services provision, to the Senate. The Senate did not act on S. 2424 before adjourning.

In the 109th Congress, the legislation was reintroduced in both the House (H.R. 897) and the Senate (S. 1160) by Representatives Camp and Rangel and by Senators Smith and Lincoln, respectively. The House provision was also included in H.R.1961, then-Representative Cardin's pension reform package.

Representative Pete Stark (D-CA), along with Representative Dave Camp (R-MI), on March 29, 2007 introduced (PDF) H.R. 1840, legislation to reinstate the tax exclusion for group legal services benefits. Twelve additional original cosponsors included Ways and Means Committee Chairman Charles Rangel (D-NY) and Judiciary Committee Chairman John Conyers (D-MI). H.R. 1840 was referred to the House Ways and Means Committee for consideration.

Senators Gordon Smith (R-OR) and Blanche Lincoln (D-AR) on April 17, 2007 introduced a Senate companion measure, S. 1130. S. 1130 was referred to the Senate Finance Committee.

In May 2008, a provision to reinstate the group legal service pre-tax status for one year was included in the House-passed version of the tax extender bill, H.R. 6049. The ABA wrote the Ways and Means Committee in strong support of this provision. The provision, unlike H.R. 1840/S. 1130, would cap the pre-tax benefit at $70. Several Senate versions of the tax extender bill, including S. 3335, have also included the same provision.

The reinstatement of Section 120 benefits had not been accomplished when Congress recessed for the 2008 elections. This issue is expected to be considered again during a “lame duck” session beginning 11/17/08.

Updated November 13, 2008

• Group legal plans are important to maintaining confidence in our justice system and the rule of law.
• Group legal plans efficiently and inexpensively provide preventative legal services to low and middle income Americans.
• Group legal services help ease the burden on overtaxed government programs.
• Group legal plans enhance productivity by allowing employees to focus on their jobs, not their legal troubles.

The ABA supports the reinstatement of the tax-preferred status of employer-provided group legal services benefit plans as a way to increase access to the justice system for low- and middle-income Americans.