STUDY OF EMPLOYEE BENEFITS: 2006 & BEYOND - Prudential
STUDY OF EMPLOYEE BENEFITS: 2006 & BEYOND - Prudential
STUDY OF EMPLOYEE BENEFITS: 2006 & BEYOND - Prudential
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PRUDENTIAL’S GROUP INSURANCE<br />
<strong>STUDY</strong> <strong>OF</strong><br />
<strong>EMPLOYEE</strong> <strong>BENEFITS</strong>:<br />
<strong>2006</strong> & <strong>BEYOND</strong><br />
The <strong>Prudential</strong> Insurance Company of America<br />
IFS-A122418
Study of Employee Benefits: <strong>2006</strong> and Beyond<br />
Table of Contents<br />
Welcome 1<br />
Study Overview 2<br />
Methodology 3<br />
Theme One: Benefits Matter 5<br />
Theme Two: Teach Them Well 10<br />
Theme Three: Lifestyle Benefits Offer Win/Win Solution 19<br />
Theme Four: Positive Online Outlook 23<br />
Theme Five: The Progressives 28<br />
Summary of Key Findings 37<br />
About <strong>Prudential</strong> 40
Welcome<br />
The cost of employee benefits is an increasingly important factor affecting each company’s<br />
finances. For many years, U.S. businesses have shouldered the responsibility of providing<br />
employees with much needed financial products. But with healthcare costs continuing<br />
to rise at often double-digit rates, many companies have been forced to find new ways<br />
to support insurance and retirement benefits for current and retired employees.<br />
Yet, despite these economic pressures, the results of this study show U.S. businesses<br />
overwhelmingly view employee benefits as important in competing effectively in today’s<br />
market place, particularly as a means to attract and retain talent. In fact, this study<br />
suggests many plan sponsors are exploring new and innovative ways to better balance<br />
cost containment objectives and maintain a competitive benefits program.<br />
At <strong>Prudential</strong>, we remain committed to helping companies meet this challenge by providing<br />
affordable group insurance solutions that protect the financial security of employees and<br />
their families—in <strong>2006</strong> and beyond.<br />
Vivian Banta<br />
Vice Chair, <strong>Prudential</strong> Financial<br />
Our recent research yielded significant insight into the employee benefits marketplace of<br />
the next five years—and we’d like to share it with you.<br />
Of particular interest, we learned about a small but growing segment of plan sponsors<br />
we’ve called “The Progressives” because of their more strategic approach to addressing<br />
benefits challenges. Progressive firms focus on programs that manage risk rather than<br />
chase costs, such as wellness and prevention, disease state management, mental health<br />
counseling, and work/life balance initiatives. Progressive plan sponsors seek to align their<br />
valuable benefits dollars with the financial needs and wants of their employees. Their<br />
benefits programs are designed not only to attract and retain valued employees, but<br />
also help to improve the overall financial security of their workforce.<br />
I hope you’ll find this information helpful as you consider your company’s benefits<br />
strategy now and in the coming years.<br />
Ed Baird<br />
President, <strong>Prudential</strong>’s Group Insurance<br />
1
Study Overview<br />
For many U.S. businesses, employee benefits have become a balancing act. With health<br />
insurance premiums continually on the rise, some employers have cut back on other<br />
company-paid benefits or shifted a greater share of the cost to their employees. At the<br />
same time, plan sponsors want to help protect the financial security of their employees,<br />
many of whom rely on certain workplace benefits—such as life, disability, and long-term<br />
care insurance—as an important part of their overall financial plan. Furthermore,<br />
employers still recognize that a competitive benefits program is important to attracting<br />
and retaining talent.<br />
The primary objective of <strong>Prudential</strong>’s “Study of Employee Benefits: <strong>2006</strong> and Beyond”<br />
is to better understand the evolving employee benefits marketplace and provide insight<br />
into the future. This research identifies current and future employee needs and how<br />
employers plan to respond to those needs.<br />
Research Objectives<br />
We surveyed a representative cross-section of plan sponsors and plan participants about<br />
a wide range of topics, including:<br />
What are employees’ top financial and lifestyle concerns?<br />
What role will employee benefits play in the workplace of the future?<br />
Who will be the influential decision makers?<br />
What benefits will be offered and who will pay for them?<br />
Will cost-shifting increase?<br />
Are employees getting the details they need to make informed decisions?<br />
How will technology impact the delivery of services?<br />
Will the growth of work/life balance programs continue?<br />
As the workforce grows more diverse, what impact will this have on employee benefits?<br />
Five Key Themes Emerged from This Research<br />
1. Benefits Matter: Eight in Ten Plan Sponsors Remain Committed to Offering<br />
Competitive Benefits Programs<br />
2. Teach Them Well: Employees Want Greater Support in Understanding and<br />
Using Their Financial Benefits<br />
3. Lifestyle Benefits Offer Win/Win Solution: Healthy Lifestyle Emerges<br />
as a Holistic Desire for Employees and a Cost-Reduction Strategy for Employers<br />
4. Positive Online Outlook: Online Tools Are Popular and Opportunities Exist<br />
to Improve Utilization and Performance<br />
5. The Progressives: A Small But Growing Segment of Plan Sponsors<br />
2
Methodology<br />
This study surveyed a broad cross-section of employee benefit professionals from<br />
companies spanning various industries, company sizes, and geographic regions.<br />
Supplemental interviews were conducted with employees of similar size firms regarding<br />
their financial and lifestyle concerns and attitudes toward addressing those needs at the<br />
workplace. This allows us to compare and contrast opinions of employers and employees<br />
on key benefits issues. All interviews were conducted by GfK NOP, an industry leader<br />
in market research.<br />
Profile of Plan Sponsor Study<br />
Plan sponsor results are based on online surveys conducted in February <strong>2006</strong> of 1,218<br />
benefits decision makers. Respondents include executives, owners, human resources<br />
professionals, and financial management professionals.<br />
The survey sample covers all industries, including government, and is nationally<br />
representative of all U.S. businesses with at least 50 full-time, benefits-eligible employees.<br />
The data shown in this report is weighted to reflect the actual proportion of U.S. businesses<br />
by size and region based on Dun & Bradstreet business counts. The margin of error<br />
is ± 2.0% at the 95% confidence level.<br />
Below is a breakdown of survey respondents by region, company size, industry, survey<br />
participant job function, years in business, and 2005 sales.<br />
Region Number of Employees Industry<br />
31%<br />
South<br />
32%<br />
West<br />
21%<br />
Midwest<br />
16%<br />
Northeast<br />
7%<br />
10,000+<br />
45%<br />
50–99<br />
17%<br />
100–499<br />
19%<br />
1,000–10,000 12%<br />
500–999<br />
7%<br />
Construction<br />
9%<br />
Wholesale<br />
11%<br />
Retail<br />
15%<br />
Other<br />
14%<br />
Financial<br />
26%<br />
Services<br />
18%<br />
Manufacturing<br />
Job Function of Respondents*<br />
Years in Business<br />
2005 Sales or Fee Income<br />
Executive/Owner 36%<br />
Accounting/Finance/Treasury 30%<br />
HR/Employee Benefits 27%<br />
Procurement 3%<br />
Other 14%<br />
10 or less 19%<br />
11–25 29%<br />
26–50 33%<br />
51 or more 19%<br />
Mean 35<br />
Median 26<br />
Less than $50 million 66%<br />
$50 million to<br />
under $200 million 20%<br />
$200 million to<br />
under $500 million 7%<br />
$500 million to<br />
under $1 billion 4%<br />
$1 billion or over 3%<br />
*Multiple responses accepted.<br />
3
Methodology<br />
Profile of Employee Study<br />
Employee results are based on a nationally representative sample of 400 consumers age<br />
18 or older who work full-time for a company with at least 50 employees. All surveys<br />
were conducted by telephone in March <strong>2006</strong>.<br />
The margin of error is ± 9.0% at the 95% confidence level.<br />
Below is a breakdown of survey respondents by marital status, household income, age,<br />
region, gender, ethnic/racial background, and education level.<br />
Marital Status Household Income Age<br />
22%<br />
Single-Previously<br />
Married<br />
25%<br />
Single-Never<br />
Married<br />
53%<br />
Married<br />
15%<br />
$75k–$125k<br />
9%<br />
$125k+<br />
32%<br />
$40k–$75k<br />
44%<br />
Benefits Matter<br />
Eight in Ten Plan Sponsors<br />
Remain Committed to Offering<br />
Competitive Benefits Programs<br />
1<br />
Over the next five years, even though employers expect to face higher<br />
medical insurance costs and increased pressure on expenses, most feel<br />
it is important to offer a competitive benefits package AND subsidize<br />
as much of the cost as possible in order to attract and retain employees.<br />
In fact, many plan sponsors want to do more to help their employees<br />
better understand and manage their benefits to improve their financial<br />
security. For other companies, however, the downward pressure on<br />
benefits-related costs is forcing them to make difficult choices and<br />
many are looking at creative ways to offer valued financial and<br />
lifestyle benefits while asking employees to accept a greater share<br />
of the financial responsibility.<br />
As benefits costs continue to increase as a percentage of payroll, the<br />
benefits decision-making process is becoming more complex with a<br />
widening pool of internal and external influencers.<br />
5
Benefits Matter<br />
Offering Competitive Benefits Remains Important<br />
Nearly eight in ten (78%) employers say it’s important to offer and subsidize a<br />
wide range of employee benefits. Twice as many companies believe it is “highly<br />
important” (44%) compared to those who feel it is “less important” (22%).<br />
PLAN SPONSOR COMMITMENT TO <strong>EMPLOYEE</strong> <strong>BENEFITS</strong> PROGRAM<br />
Less important: Important: Highly important:<br />
22% 34% 44%<br />
“It is not at all<br />
important that we<br />
offer any benefits<br />
to our employees.”<br />
0%<br />
2%<br />
6%<br />
14%<br />
34%<br />
27%<br />
17%<br />
“It is extremely<br />
important to offer<br />
our employees a<br />
wide range of benefits<br />
and pay for most<br />
or all of the cost.”<br />
1 2 3 4 5 6 7<br />
6
Commitment to Benefits Spans Most Company Size Segments<br />
More than half of all employers with 500+ employees remain “highly” committed<br />
to benefits. Commitment is also noticeable among smaller employers.<br />
Employers who feel that offering competitive benefits is “not important” may be<br />
faced with financial constraints, or the nature of their business makes it impractical<br />
to offer and subsidize a wide range of employee benefits. These companies tend to<br />
have the following characteristics:<br />
■ Fewer than 100 employees<br />
■ Retail and sales/trade industries<br />
■ Located in the mid-west region<br />
Larger employers are somewhat more likely to rate their benefits as “generous.”<br />
Due to their size and economic power, they are able to offer a wider variety of<br />
programs and shoulder a greater share of the cost.<br />
COMMITMENT TO <strong>BENEFITS</strong> BY COMPANY SIZE<br />
47%<br />
56%<br />
57%<br />
51%<br />
Highly important to<br />
offer generous benefits*<br />
40%<br />
Not important to<br />
offer benefits †<br />
* 6–7 responses on 7-point scale<br />
† 1–3 responses on 7-point scale<br />
28%<br />
6%<br />
4%<br />
3%<br />
2%<br />
50–99 100–499 500–4,999 5,000–9,999 10,000+<br />
7
Benefits Matter<br />
Benefits Cost Sharing Expected to Double by 2010<br />
To maintain their current benefits offerings and coverage levels, more plan sponsors<br />
will reluctantly shift costs to employees over the next five years. In fact, twice as<br />
many employers expect to increase employee cost sharing by 2010. Among their<br />
top cost-sharing strategies are:<br />
■ Asking employees to shoulder a greater proportion of contributory benefits<br />
costs, and<br />
■ Offering more voluntary benefits, where the employee pays 100% of the cost<br />
While cost sharing is an important expense reduction strategy and is gaining<br />
momentum in the marketplace, it represents only a minority of all firms surveyed.<br />
New Cost-Reduction Solutions Emerging<br />
Innovative cost-reduction initiatives gaining popularity include consumer-driven health<br />
plans and integrated health and disability management. While these programs are<br />
still relatively new and unproven, many more plan sponsors expect to implement<br />
these programs in the next five years.<br />
In addition, plan sponsors may show greater interest in flexible plans, such as<br />
low-cost, employer-paid “starter” plans with basic levels of coverage that could<br />
be supplemented by employee-paid voluntary plans.<br />
Ultimately, giving employees greater education and incentives to be effective<br />
partners in managing the cost of their benefits will be critical to the success of<br />
these cost-reduction strategies.<br />
<strong>EMPLOYEE</strong> <strong>BENEFITS</strong> COST REDUCTION INITIATIVES<br />
Cost shift to employees<br />
via contributory benefits<br />
Implement consumerdirected<br />
health plan<br />
Offer wider array of<br />
voluntary benefits<br />
Integrate healthcare/<br />
disability management<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
19%<br />
37%<br />
24%<br />
41%<br />
16%<br />
31%<br />
19%<br />
34%<br />
Multiple Increase<br />
<strong>2006</strong>-2010<br />
+2.0X<br />
+1.7X<br />
+1.9X<br />
+1.8X<br />
8
Benefits Decision Making Is Increasingly Complex with More<br />
Constituencies Having a Voice<br />
The primary benefits decision makers remain the CEO/president/owner (especially in<br />
firms with less than 100 employees), and other traditional sources of influence, such<br />
as human resources and the benefits department.<br />
Since benefits costs represent a significant portion of corporate expenses and<br />
employee compensation, the decision process has become more critical and more<br />
complex, particularly for larger firms. As a result, finance along with risk management<br />
and procurement functions are playing a larger role in helping organizations evaluate<br />
and negotiate for the most cost-effective benefits solutions.<br />
Build It and They Will Come<br />
To ensure benefits are achieving the desired result and satisfying employee needs,<br />
more companies are also soliciting employee input in deciding not only which benefits<br />
to offer, but which providers employees have confidence using. As benefit choices<br />
become more complex for employees, and employees shoulder more of the expense,<br />
benefit providers must be able to meet their needs for information, responsiveness,<br />
and trust.<br />
External guidance from benefits brokers/consultants and insurance carriers remains<br />
strong as these experts are called upon to help build the right solutions.<br />
STRONG INFLUENCERS ON <strong>EMPLOYEE</strong> BENEFIT DECISIONS<br />
<strong>2006</strong> 2010<br />
Traditional Influencers New Influencers Important Outside Influencers<br />
15%<br />
15%<br />
24%<br />
28%<br />
21%<br />
24%<br />
25%<br />
27%<br />
63%<br />
63%<br />
25%<br />
27%<br />
47%<br />
48%<br />
45%<br />
46%<br />
40%<br />
40%<br />
CEO/<br />
President/<br />
Owner<br />
Finance<br />
Human<br />
Resources<br />
Employee<br />
Benefits<br />
Area<br />
Company's<br />
Employees<br />
Risk<br />
Management<br />
Procurement<br />
Benefits<br />
Broker/<br />
Consultant<br />
Insurance<br />
Company<br />
Rep/Agent<br />
9
Teach Them Well<br />
Employees Want Greater Support<br />
in Understanding and Using<br />
Their Financial Benefits<br />
2<br />
Employees express concern about having adequate medical insurance<br />
and retirement income, but many are also concerned about their family’s<br />
financial security in the event of their premature death, a disability, or the<br />
need for extended care following an illness or injury.<br />
Unfortunately, many don’t fully understand or appreciate how their<br />
employers’ benefit plan offerings can better prepare them financially for<br />
these unforeseen events. Furthermore, a majority of plan sponsors are<br />
currently either unaware or unable to address their employees’ need for<br />
financial education and advice.<br />
An increase in voluntary benefits, defined contribution plans, and<br />
consumer-directed health plans will place even greater responsibility<br />
on employees to select and pay for the benefits that best meet their<br />
family’s needs. Consequently, benefits education and communication<br />
will be increasingly valued at the workplace.<br />
10
The Gap Among Top Financial Concerns Is Surprising<br />
When employees are asked to rate the importance of various financial concerns,<br />
retirement-related issues are, of course, high on the list and most employers well<br />
recognize the importance.<br />
Interestingly, many employees are also concerned about having adequate insurance<br />
protection for themselves and their families. As insurance programs have become<br />
more complex with a broader range of traditional benefits and options, employees<br />
express great interest in obtaining needed insurance at the workplace. However,<br />
the benefits priorities for many employers are elsewhere and the gap in employers<br />
recognizing these employee needs/concerns is surprisingly large.<br />
<strong>EMPLOYEE</strong>S’ TOP FINANCIAL CONCERNS<br />
Employer perceptions of importance to employees<br />
Employee actual importance<br />
Point<br />
Difference<br />
Having financial plan<br />
LTC insurance needs<br />
Life insurance needs<br />
Disability insurance needs<br />
Saving for retirement<br />
Saving for college<br />
Obtaining financial advice<br />
Education on retirement<br />
34%<br />
80%<br />
39%<br />
77%<br />
46%<br />
79%<br />
52%<br />
83%<br />
58%<br />
86%<br />
44%<br />
67%<br />
36%<br />
57%<br />
60%<br />
72%<br />
-46<br />
-38<br />
-33<br />
-31<br />
-28<br />
-23<br />
-21<br />
-12<br />
11
Teach Them Well<br />
Employers Plan to Do More to Help Employees Meet Their Financial Needs<br />
Beyond providing access to insurance and retirement benefits, most plan sponsors<br />
today offer limited advice or guidance in making benefits and other financial decisions.<br />
However, over the next five years, employers hope to do more to assist their employees<br />
in all categories studied, especially retirement planning, which has become a focus<br />
for many companies given the country’s demographic and savings trends.<br />
Unfortunately, employees’ need for non-medical insurance coverage is expected to<br />
remain underserved over the next five years. Only about one-fourth of employers expect<br />
to address their employees’ life, disability, and long-term care insurance needs by 2010.<br />
These findings suggest an opportunity for plan sponsors to build employee satisfaction<br />
and loyalty by providing the right benefits along with the appropriate educational<br />
support. More guidance can enable their workforce to make better benefits choices<br />
and become more financially secure.<br />
<strong>EMPLOYEE</strong> FINANCIAL NEEDS/CONCERNS ADDRESSED BY PLAN SPONSORS<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
Education on saving<br />
for retirement<br />
Education on managing<br />
retirement income<br />
Disability insurance needs<br />
Financial advice<br />
Life insurance needs<br />
Long-term care<br />
insurance needs<br />
College money/529 plan<br />
33%<br />
48%<br />
30%<br />
43%<br />
20%<br />
26%<br />
21%<br />
27%<br />
18%<br />
23%<br />
16%<br />
21%<br />
12%<br />
17%<br />
<strong>2006</strong>–2010<br />
Change<br />
+15<br />
+13<br />
+6<br />
+6<br />
+5<br />
+5<br />
+5<br />
12
Voluntary Benefits on the Rise, But Require Even Greater<br />
Educational Support<br />
Many employers expect to compliment basic insurance benefits with a wider array of<br />
supplemental voluntary insurance benefits. Insurance coverage needs and options are<br />
more complex and voluntary benefits broaden the capacity of employers to provide<br />
coverage access.<br />
As employees are expected to select and pay for more of their benefits going forward,<br />
the success of these voluntary programs will depend upon employees receiving the<br />
necessary information and decision support tools to make the right decisions for<br />
themselves and their families.<br />
In addition, the brand and reputation of benefits providers will be increasingly important<br />
as employees decide whether or not to participate in voluntary plans based on their<br />
familiarity and image of a carrier. Often, employees may prefer to deal with companies<br />
they know and trust.<br />
PROJECTED INCREASE IN SPECIFIC VOLUNTARY <strong>BENEFITS</strong> <strong>OF</strong>FERED<br />
<strong>2006</strong> currently offer Total expect offering in next 18 months<br />
Disability insurance<br />
Life insurance<br />
LTC insurance<br />
35%<br />
47%<br />
39%<br />
48%<br />
16%<br />
25%<br />
Expected<br />
Change<br />
+12<br />
+9<br />
+9<br />
13
Teach Them Well<br />
Benefits Education/Communication Needs to be More Effective<br />
In general, plan sponsors feel there is considerable room for improving the effectiveness<br />
of their employee benefits education and communication materials. According<br />
to employers, the education/communication materials for their medical, dental, and<br />
defined contribution plans—arguably more complicated benefits—are more effective<br />
than those for life, disability, and long-term care plans.<br />
In fact, one in five rate their current communication materials for their non-medical<br />
insurance programs as “ineffective,” while four in ten rate the effectiveness as no<br />
better than “moderate.” With the increased complexity and options for insurance<br />
products, education and information must catch up.<br />
Benefits providers who can develop education/communication campaigns that motivate<br />
and educate employees can provide a much needed service. Special attention should<br />
be paid to pre-enrollment communications, which can be used to convey the value<br />
of the employer’s benefit package and help boost participation rates.<br />
PLAN SPONSOR ASSESSMENT <strong>OF</strong> THE EFFECTIVENESS <strong>OF</strong> <strong>BENEFITS</strong> EDUCATION<br />
Ineffective<br />
19%<br />
17%<br />
18%<br />
11%<br />
13%<br />
11%<br />
Moderately effective<br />
Highly effective<br />
39%<br />
41%<br />
44%<br />
33%<br />
37%<br />
37%<br />
42%<br />
42%<br />
38%<br />
56%<br />
50%<br />
52%<br />
Disability<br />
Life<br />
LTC<br />
Medical<br />
Dental<br />
401k<br />
14
Most Plan Sponsors Do Not Require Carriers to “Step Up”<br />
to Assist with Benefits Education/Communication<br />
Often, benefits providers are experts at communicating all aspects of an employee<br />
benefit program. They should be well versed on all legal issues and have experienced<br />
associates able to provide effective written and verbal communications. While many<br />
plan sponsors may desire to customize or fine-tune the final materials, benefits<br />
providers should be able to create an effective foundation of information.<br />
However, among plan sponsors who are dissatisfied with their existing materials,<br />
most are not “highly interested” in obtaining assistance from benefits providers,<br />
especially for group life and disability plans. By comparison, 47% rely on providers<br />
for help communicating 401(k) plans. Yet fewer require the same provider assistance<br />
for disability, life, or long-term care insurance benefits.<br />
More effective communication may help employees better understand and appreciate<br />
the real value of these programs, as well as help educate employees about how these<br />
benefits can provide needed protection for themselves and their families.<br />
INTEREST IN CARRIER HELP WITH <strong>BENEFITS</strong> EDUCATION/COMMUNICATIONS<br />
AMONG EMPLOYERS WHO RATE THEIR EDUCATION/COMMUNICATION EFFORTS “INEFFECTIVE”<br />
74%<br />
71%<br />
65%<br />
57%<br />
67%<br />
53% Not highly interested<br />
(1–5 of 7 point scale)<br />
Highly interested<br />
(6–7 of 7 point scale)<br />
43%<br />
47%<br />
26%<br />
29%<br />
35%<br />
33%<br />
Disability<br />
Life<br />
LTC<br />
Medical<br />
Dental<br />
401k<br />
15
Teach Them Well<br />
Demographic and Social Trends Will Strongly Influence<br />
Future Benefit Offerings<br />
Thirty years ago, workplaces were treated as mostly homogeneous and companies<br />
struggled to make any benefits package available. Employers did not have the luxury<br />
or need to develop benefits solutions by employee segment.<br />
Today, the rapidly changing workforce is a reflection of our changing world and its<br />
economic forces. The pre-retiree and even retiree populations (from former “primary”<br />
careers) work alongside other generations. Multicultural and multilingual employees<br />
who are so important to our future, also have special benefits needs. Dual working<br />
parents, single parents, and empty nesters (no children at home) often require special<br />
consideration as well.<br />
Today, savvy companies and their HR functions seek to develop benefits programs<br />
that meet the needs of various employee segments to keep workforce retention and<br />
production high. Benefits providers must be effective partners, capable of developing<br />
benefits features and communications that meet the challenges of a modern 21st<br />
century workforce.<br />
IMPACT <strong>OF</strong> DIVERSITY TRENDS ON <strong>BENEFITS</strong> <strong>OF</strong>FERINGS<br />
STRONG INFLUENCE — TOP 2 POINTS <strong>OF</strong> 7-POINT SCALE<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
Mature employees<br />
age 50+<br />
Multigenerational<br />
workforce<br />
Multilingual/multicultural<br />
workforce<br />
Workforce<br />
education/income gap<br />
Dual working couples<br />
Single working parents<br />
Same sex partners<br />
26%<br />
47%<br />
23%<br />
33%<br />
25%<br />
33%<br />
17%<br />
24%<br />
19%<br />
26%<br />
27%<br />
33%<br />
12%<br />
16%<br />
<strong>2006</strong>–2010<br />
Change<br />
+21<br />
+10<br />
+8<br />
+7<br />
+7<br />
+6<br />
+4<br />
16
Plan Sponsors and Participants Are Receptive<br />
to Targeted Communications<br />
The complexity of insurance and retirement products and the challenge of reaching<br />
financial goals cause many employees to prefer more tailored, personalized benefits<br />
communication. A surprising four in ten employees are willing to share personal<br />
information to receive more effective and customized benefits offerings and advice.<br />
Plan sponsors who are frustrated by low participation in certain voluntary benefits<br />
are testing various communication and enrollment strategies. Among these emerging<br />
strategies is life-stage or life-event marketing, offering more customized benefit<br />
communications to select employee segments based on personal information the<br />
employer has obtained willingly from its employees (e.g., “permission marketing”).<br />
This allows a plan sponsor or its benefits provider to target the right benefits options<br />
to the right employees at the right time.<br />
WILLINGNESS TO SHARE PERSONAL INFORMATION<br />
FOR PERSONALIZED BENEFIT <strong>OF</strong>FERINGS/COMMUNICATIONS<br />
61%<br />
64% Not very willing<br />
to share<br />
personal information<br />
Very willing<br />
to share<br />
personal information<br />
39%<br />
36%<br />
Employers<br />
Employees<br />
17
Lifestyle Benefits<br />
Are a Win/Win Solution<br />
Healthy Lifestyle Emerges as a<br />
Holistic Desire for Employees and a<br />
Cost-Reduction Strategy for Employers<br />
3<br />
The availability of lifestyle programs, which help employees manage<br />
their health and balance the demands of work and family, will increase<br />
over the next five years.<br />
Lifestyle programs are a win-win solution—employees get access to<br />
essential services and employers often benefit from higher productivity<br />
and lower medical expenses.<br />
18
Employee Concerns Extend Beyond Financial Needs<br />
Overtime, travel, and e-mail all require more time and commitment from employees.<br />
The quid pro quo of this more demanding “just-in-time” society is employees asking<br />
for consideration with more flexible and paid time off when possible. Employers and<br />
employees have done well working together to meet each other’s needs in these areas.<br />
Quite surprising, and likely a function of our very stressful and often confusing<br />
environment, 52% of employees would value more mental health counseling. Today,<br />
we know most employees will face one or more difficult periods during their career,<br />
and the range of potential situations across a given employee population is vast.<br />
Well understood by retail product markets, but not yet fully appreciated by employers,<br />
83% of employees are trying to achieve an overall holistic sense of a healthy lifestyle.<br />
This broader definition of wellbeing will likely necessitate continued evaluation<br />
of environment, workplace systems, and benefits to meet employee needs and<br />
maximize effectiveness.<br />
TOP LIFESTYLE CONCERNS<br />
Employer perceptions of importance to employees<br />
Employee actual importance<br />
Point<br />
Difference<br />
Flexible/generous<br />
paid time-off policies<br />
Flexible workplace<br />
arrangements<br />
Mental health counseling<br />
Healthy lifestyle<br />
61%<br />
66%<br />
46%<br />
57%<br />
30%<br />
52%<br />
36%<br />
83%<br />
5<br />
11<br />
22<br />
47<br />
19
Lifestyle Benefits Are a Win/Win Solution<br />
Healthy Lifestyle Benefits Are Catching On<br />
The food/beverage, travel, fitness, nutrition, cosmetics, and other industries have<br />
capitalized on marketing the healthy lifestyle to great success and profits. They<br />
are tapping in to a growing need and emerging mindset in our advanced society.<br />
Employers are also beginning to catch up and will eventually double programs<br />
designed to create a healthier workforce. Still, with only 40% addressing this need<br />
by 2010, the gap is well below the current need expressed by 83% of employees.<br />
Employers may show a greater interest in providers who will coordinate medical and<br />
disability insurance programs with wellness/EAP programs.<br />
PLAN SPONSOR ACTIVITY TO ADDRESS <strong>EMPLOYEE</strong> LIFESTYLE NEEDS/CONCERNS<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
Healthy lifestyle<br />
Mental health counseling<br />
Flexible workplace<br />
arrangements<br />
22%<br />
40%<br />
25%<br />
33%<br />
21%<br />
34%<br />
20
Interest in Lifestyle Benefits Varies Widely by Region, Size, and Industry<br />
Plan sponsors in the northeast are most likely to offer flexible workplace arrangements,<br />
while those in the south and west are the most likely to be implementing healthy<br />
lifestyle programs.<br />
Across all size segments, more plan sponsors are working toward addressing employee<br />
concerns about living a healthy lifestyle and expect to implement programs over the<br />
next 10 years. While larger companies (5,000+ employees) can provide a wider array<br />
of benefits in general, many smaller firms are making strides in promoting healthy<br />
lifestyle programs and work/life balance.<br />
Financial and services firms are among the most receptive to flexible workplace<br />
arrangements, since the work is conducive to such arrangements in these industries.<br />
Companies in manufacturing, sales, and heavy industry have less opportunity to<br />
offer flexible hours and paid time off so they appear to be focusing on healthy<br />
lifestyle programs.<br />
EMPLOYER INTEREST IN ADDRESSING <strong>EMPLOYEE</strong> LIFESTYLE NEEDS—BY REGION<br />
38%<br />
43%<br />
50%<br />
51%<br />
66%<br />
30%<br />
24%<br />
31%<br />
34%<br />
83%<br />
57%<br />
41%<br />
25%<br />
29%<br />
34%<br />
52%<br />
36%<br />
32%<br />
32%<br />
39%<br />
Highly important<br />
to employees<br />
Expect to address by 2010:<br />
Northeast<br />
Midwest<br />
South<br />
West<br />
Healthy Lifestyle Flex/Generous PTO Flexible Workplace Counseling<br />
21
Lifestyle Benefits Are a Win/Win Solution<br />
EMPLOYER INTEREST IN ADDRESSING <strong>EMPLOYEE</strong> LIFESTYLE NEEDS—BY SIZE<br />
Highly important<br />
to employees<br />
Expect to address by 2010:<br />
50–99<br />
100–499<br />
500–4,999<br />
83%<br />
43%<br />
49%<br />
54%<br />
58%<br />
58%<br />
66%<br />
27%<br />
31%<br />
33%<br />
45%<br />
43%<br />
57%<br />
29%<br />
30%<br />
35%<br />
46%<br />
40%<br />
52%<br />
30%<br />
38%<br />
47%<br />
55%<br />
50%<br />
5,000–9,999<br />
10,000+<br />
Healthy Lifestyle Flex/Generous PTO Flexible Workplace Counseling<br />
EMPLOYER INTEREST IN ADDRESSING <strong>EMPLOYEE</strong> LIFESTYLE NEEDS—BY INDUSTRY<br />
Highly important<br />
to employees<br />
83%<br />
Expect to address by 2010:<br />
66%<br />
Heavy Industry<br />
Manufacturing<br />
Sales/Trade<br />
Financial/Ins/<br />
Real Estate<br />
50%<br />
52%<br />
41%<br />
44%<br />
44%<br />
22%<br />
22%<br />
23%<br />
36%<br />
31%<br />
57%<br />
25%<br />
23%<br />
23%<br />
34%<br />
34%<br />
52%<br />
26%<br />
27%<br />
25%<br />
36%<br />
37%<br />
Services<br />
Healthy Lifestyle<br />
Flex/Generous PTO<br />
Flexible Workplace<br />
Counseling<br />
22
Positive Online Outlook<br />
Online Tools Are Popular<br />
and Opportunities Exist to<br />
Improve Performance<br />
4<br />
Development and installation of online systems for plan sponsors and<br />
employees have increased at a rapid pace over the past five years.<br />
Availability of benefits web tools will continue to grow over the next five<br />
years; however, utilization is trailing provider efforts to expand functionality.<br />
To increase utilization, plan sponsors would like to see improvements<br />
in ease of use, site navigation, training, and quality of information.<br />
23
Positive Online Outlook<br />
Benefits Administrators Use Online Systems to Increase Effectiveness<br />
In the past decade, HR teams have been asked to do more with often substantially<br />
reduced staffs. During this time, the need for information to support analysis and<br />
projections for management has increased dramatically.<br />
As benefits providers launched and expanded online capabilities, benefits administrators<br />
were quick to use these systems and help to continue to refine these systems to better<br />
meet their needs.<br />
Current availability is high for basic functionality, including reporting, but benefit<br />
administrators expect to greatly expand their usage of online tools by 2010 for key<br />
transactions such as claims submission, billing, and eligibility processing.<br />
ONLINE TOOLS AVAILABLE FOR <strong>BENEFITS</strong> ADMINISTRATORS<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
<strong>2006</strong>–2010<br />
Change<br />
Submit claims<br />
35%<br />
56%<br />
+21<br />
High Current Usage Future Growth<br />
Pay bills<br />
Obtain eligibility updates<br />
Obtain billing info<br />
Integrate payroll processing<br />
Process employee eligibility info<br />
Handle enrollment<br />
Check claim status<br />
Access claims forms<br />
Access reports<br />
40%<br />
56%<br />
43%<br />
59%<br />
44%<br />
60%<br />
41%<br />
55%<br />
45%<br />
59%<br />
51%<br />
64%<br />
48%<br />
58%<br />
52%<br />
61%<br />
54%<br />
61%<br />
+16<br />
+16<br />
+16<br />
+14<br />
+14<br />
+13<br />
+10<br />
+9<br />
+7<br />
24<br />
Review/process D.C. deferrals<br />
57%<br />
63%<br />
+6
Web Technology is Empowering Employees<br />
Online tools to serve employees help to provide easy access to information, legal protection,<br />
and consistent information while freeing up limited HR resources for higher value activities.<br />
Benefits web technology designed for employee self service has been well received<br />
by plan sponsors. The most common functionality available in the marketplace is for<br />
managing retirement plans, accessing claims information and forms, and for financial<br />
planning. The market is quickly evolving toward more transactional and decision<br />
support tools to help employees effectively manage their own benefits and make<br />
benefits selections that best meet their individual needs.<br />
Interestingly, about twice as many employers expect to be deploying employee web tools<br />
for accessing PTO information, as well as enrollment and claims submission by 2010.<br />
ONLINE TOOLS AVAILABLE FOR <strong>EMPLOYEE</strong>S<br />
Doing in <strong>2006</strong> Plan to do by 2010<br />
<strong>2006</strong>–2010<br />
Change<br />
Access PTO info<br />
22%<br />
52%<br />
+30<br />
Handle enrollment<br />
34%<br />
62%<br />
+28<br />
Submit claims<br />
Update beneficiary<br />
Update personal info<br />
Verify eligibility<br />
Access financial info/tools<br />
Check claim status<br />
Access ins. & ret. plan info<br />
Obtain forms<br />
35%<br />
60%<br />
41%<br />
65%<br />
43%<br />
64%<br />
39%<br />
59%<br />
50%<br />
65%<br />
50%<br />
65%<br />
54%<br />
66%<br />
63%<br />
68%<br />
+25<br />
+24<br />
+21<br />
+20<br />
+15<br />
+15<br />
+12<br />
+5<br />
Future Growth High Current Usage<br />
Manage D.C. plan<br />
70%<br />
70%<br />
–<br />
25
Positive Online Outlook<br />
Adoption Rates for Web Technology Vary<br />
Most firms (56%) are either trying to keep pace with technology or follow the<br />
market in adopting proven technologies. However, almost one-third (29%) believe<br />
their company is either “at the forefront” or “somewhat ahead” of other companies<br />
when it comes to adopting new technology.<br />
Financial services (19%) and other service industries (17%) are more likely to be early<br />
adopters of technology, likely because their industries use technology in so many areas<br />
of their businesses. Heavy industry and manufacturing is extremely competitive—more<br />
than half strive to stay ahead of or equal to their market competitors.<br />
The sales/trade industry is least willing to be early adopters of new technology.<br />
Providing technology for commission-based and geographically dispersed sales<br />
associates is challenging and benefits providers need to consider how to better<br />
meet this need.<br />
Adoption of online technology is highly correlated to company size. Over 50% of<br />
employers with 5,000 – 10,000 employees consider themselves ahead of the market<br />
when it comes to adopting new technologies.<br />
Four in ten employers (41%) take a “wait and see” approach and either rely on<br />
legacy technologies or adopt new technologies only after they have proven effective.<br />
PLAN SPONSOR WILLINGNESS TO ADOPT NEW TECHNOLOGY<br />
BY INDUSTRY<br />
13%<br />
3%<br />
4%<br />
9%<br />
19%<br />
17%<br />
16%<br />
20%<br />
20%<br />
8%<br />
20%<br />
14%<br />
30%<br />
31%<br />
34%<br />
16%<br />
34%<br />
32%<br />
28%<br />
29%<br />
26%<br />
39%<br />
20%<br />
26%<br />
13%<br />
13%<br />
12%<br />
23%<br />
6%<br />
9%<br />
At the Forefront<br />
of technology<br />
Somewhat Ahead<br />
of the market in adopting<br />
new technologies<br />
Keep Pace<br />
with the market in adapting<br />
new technologies<br />
Tend to Follow<br />
the market and only adopt<br />
proven technologies<br />
Rely on Legacy<br />
technologies<br />
26<br />
All Employers Heavy Industry Manufacturing Sales/Trade Financial/Ins/Real Estate Services<br />
% of Total Sample: 13% 16% 30% 28% 13%
Plan Sponsors Want Enhanced Performance from Online Tools<br />
Despite great progress, the potential value of online technology has yet to be fully<br />
realized. Most plan sponsors feel that current online tools have not adequately met<br />
their expectations regarding cost/time savings, data quality, and convenience.<br />
When asked to compare the importance of various online tools with the actual<br />
performance, the largest gaps were in:<br />
■<br />
■<br />
■<br />
■<br />
Reducing costs<br />
Allowing HR staff to focus on strategic initiatives<br />
Improving the quality of information available to employees<br />
Reducing errors<br />
Employers have issues with the quality of the information provided online, saying<br />
it is too general (not personalized), not available 24/7, and not current. In addition,<br />
employers saw no reduction in time spent on plan administration by benefit<br />
administrators.<br />
Carriers should strive to offer enhanced services designed to match user needs, better<br />
training, increased user support, and greater “proof” of system effectiveness.<br />
IMPACT <strong>OF</strong> WEB TECHNOLOGY IN <strong>BENEFITS</strong> ADMINISTRATION<br />
High performance High importance Delivery<br />
Shortfall<br />
Reduce costs<br />
24%<br />
63%<br />
-39<br />
Enable HR to focus on<br />
strategic initiatives<br />
21%<br />
53%<br />
-32<br />
Improve quality of<br />
info for employees<br />
33%<br />
62%<br />
-29<br />
Reduce errors<br />
34%<br />
63%<br />
-29<br />
Personalized employee info<br />
26%<br />
52%<br />
-26<br />
More up-to-date info<br />
36%<br />
60%<br />
-24<br />
Access 24/7<br />
33%<br />
55%<br />
-22<br />
27
The Progressives<br />
A Small But Growing Segment<br />
of Plan Sponsors<br />
Companies approach benefits differently. There is no one “rule” for<br />
success. Gauging employees’ needs and contributions to the company,<br />
the competitive environment, and the ability to subsidize expenses must<br />
all be carefully weighed to tune a benefit program. To effectively meet each<br />
firm’s goals, understanding the breadth of approaches can be helpful in<br />
developing a business strategy.<br />
5<br />
From the study participant responses, a continuum of plan sponsor<br />
“progressiveness” in terms of vision and strategy was developed to serve<br />
as a starting point for plan sponsors in gauging the relative orientation<br />
of their firm toward employee benefits as a strategy for attracting and<br />
retaining talent.<br />
28
Criteria for Progressive Plan Sponsors<br />
Currently offer benefits that are competitive within their industry/size segment.<br />
Understand employees’ greatest financial and lifestyle concerns.<br />
Highly interested in helping employees address their needs AND planning to do so<br />
by 2010, particularly in maintaining a healthy lifestyle, providing access to mental<br />
health counseling, retirement planning, and work/life balance programs.<br />
The Number of “Progressives” Will Increase By 2010<br />
On average, 11% of employers (about 68,000 businesses nationwide) consider<br />
themselves “progressive.”<br />
Another 31% consider themselves “above average,” meaning they have a progressive<br />
benefit philosophy, but take a slightly more conservative approach in adopting new<br />
programs, communication strategies, technology, and outsourcing.<br />
Across plan sponsors in the research, the percent of progressive and forward-thinking<br />
companies will be increasing by 2010 to more than 50% of all employers.<br />
THE PROGRESSIVE CONTINUUM <strong>OF</strong> PLAN SPONSORS<br />
U.S. BUSINESSES WITH 50+ <strong>EMPLOYEE</strong>S<br />
46%<br />
11%<br />
22%<br />
31%<br />
36%<br />
Progressives Forward Looking Followers Status Quo<br />
29
The Progressives<br />
Progressive Employers Come in All Sizes<br />
Interestingly, every employer segment by company size has a substantial share of<br />
both progressives and forward-thinkers.<br />
Employers with 5,000-9,999 employees comprise the largest share of progressives<br />
at 34%. Companies in this segment might have achieved the financial ability to offer<br />
stronger benefits, but likely also feel advanced benefits programs are key to attracting<br />
and retaining talent as they seek to reach the next level.<br />
The largest employers (10,000+) are solidly positioned as forward-thinkers. Their<br />
resources, success, brand names, and other factors are strong tools for attracting<br />
and retaining talent. Yet, most are unwilling to allow their competition to surpass<br />
them in terms of benefits offerings.<br />
Forward-thinkers is the largest segment of employers in the broad mid-size (and<br />
emerging large) market of 500-5,000 employees. As these firms gain success and<br />
increase the ranks of longer-term employees in whom they’ve invested, benefits<br />
become an important tool.<br />
Employers with less than 1,000 employees have a healthy distribution of progressives<br />
and forward-thinkers. Given their size and other priorities, some firms’ “status quo”<br />
approach to benefits is not surprising. Even so, smaller companies tend to watch<br />
market trends closely and adjust when necessary.<br />
PROGRESSIVE EMPLOYERS BY COMPANY SIZE<br />
9%<br />
14%<br />
19%<br />
13%<br />
15%<br />
14%<br />
19%<br />
21%<br />
20%<br />
14%<br />
21%<br />
14%<br />
23%<br />
23%<br />
14%<br />
22%<br />
28%<br />
24%<br />
33%<br />
34%<br />
30%<br />
29%<br />
34%<br />
39%<br />
42%<br />
46%<br />
45%<br />
41%<br />
30<br />
50-99<br />
100–499<br />
500–999<br />
1,000–1,999 2,000–4,999 5,000–9,999<br />
10,000+<br />
Progressives Forward-Thinkers Followers Status Quo
Progressives Are More In Sync with Employee Financial and Lifestyle Needs<br />
In the next five years, progressive employers plan to assist their employees with both<br />
financial and lifestyle needs at significantly higher rates than other employers.<br />
TOP BENEFIT INITIATIVES TO BE ADDRESSED BY 2010<br />
% Rating “highly important” Progressives All Firms Point Difference<br />
Programs to promote healthy lifestyle 98% 40% +58<br />
Tailored benefits for aging workforce 83% 29% +54<br />
Assistance with return to work 93% 39% +54<br />
Employee education on disability plan 80% 26% +54<br />
Flexible workplace arrangements 82% 33% +49<br />
Integrated healthcare/disability management 82% 33% +49<br />
Access to mental health counseling 81% 32% +49<br />
Education on retirement plan payout 91% 43% +48<br />
Retirement investment education 93% 48% +45<br />
Consumer-Directed health plans 81% 41% +40<br />
Progressives Are More Responsive to Diversity Trends<br />
On many issues, progressives are twice as likely as other employers to say diversity<br />
has an influence on employee benefits. And, not only are progressive employers<br />
doing more to accommodate diversity now, they plan to do more in the future.<br />
Progressive firms may be better positioned to attract and retain their top talent.<br />
EXPECTED INFLUENCE <strong>OF</strong> DIVERSITY TRENDS ON <strong>BENEFITS</strong> PROGRAMS BY 2010<br />
% Rating “highly important” Progressives All Firms Point Difference<br />
Balancing work and personal life 75% 29% +46<br />
Workforce education and income gaps 68% 24% +44<br />
Multigenerational workforce 77% 33% +44<br />
Single working parents 67% 33% +34<br />
Multilingual/multicultural workforce 64% 33% +31<br />
Dual working couples 57% 26% +31<br />
Same sex couples 47% 16% +31<br />
Growing number of employees age 50+ 75% 47% +28<br />
31
The Progressives<br />
Progressives Are Tech Savvy<br />
More than half of progressive employers (54%) consider themselves at the forefront<br />
of technology or somewhat ahead of the market in adopting early technology.<br />
EMPLOYER PHILOSOPHY TOWARD <strong>BENEFITS</strong> TECHNOLOGY<br />
Progressives All Firms Point Difference<br />
At the forefront of benefits technology 29%<br />
54%<br />
13% +16<br />
Keep pace with the market in adopting new technology 22% 30% +12<br />
Somewhat ahead of the market in adopting new technology 25% 16%<br />
72%<br />
+9<br />
Tend to follow the market and only adopt proven technologies 20% 28% -8<br />
Rely on legacy technologies 2% 14% -12<br />
Online Services for Employees Are More Popular Among Progressive Firms<br />
Progressive firms make online tools available to increase enrollment, help employees<br />
manage transactions, provide guidance on financial and retirement planning, and<br />
ultimately, reduce costs.<br />
CURRENT AVAILABILITY <strong>OF</strong> WEB TECHNOLOGY FOR <strong>EMPLOYEE</strong>S<br />
Progressives All Firms Point Difference<br />
Handle enrollment 61% 34% +27<br />
Access PTO info 48% 22% +26<br />
Access financial planning tools 76% 50% +26<br />
Access retirement plan info 79% 54% +25<br />
Obtain forms 83% 63% +20<br />
Update personal info 62% 43% +19<br />
Update beneficiary info 58% 41% +17<br />
Submit claims 50% 35% +15<br />
Manage retirement plan 81% 70% +11<br />
Verify eligibility 49% 39% +10<br />
Check claims status 57% 50% +7<br />
32
Progressives Also Outpace Other Companies in Planned Future Use<br />
of Online Tools for Employees<br />
By 2010, benefit administrators at progressive firms will be more likely to use the<br />
web to process bills, check claim status, process 401(k) deferrals, obtain forms, and<br />
update eligibility processing.<br />
Employees at progressive firms will continue to use self-service tools that allow<br />
them to manage their 401(k), update information, enroll for coverage, and access<br />
educational information.<br />
EXPECTED AVAILABILITY <strong>OF</strong> WEB TECHNOLOGY FOR <strong>EMPLOYEE</strong>S BY 2010<br />
Progressives All Firms Point Difference<br />
Access PTO info 79% 52% +27<br />
Update personal info 90% 64% +26<br />
Handle enrollment 87% 62% +25<br />
Access financial planning tools 89% 65% +24<br />
Access retirement plan info 89% 66% +23<br />
Update beneficiary info 87% 65% +22<br />
Verify eligibility 81% 59% +22<br />
Manage retirement plan 91% 70% +21<br />
Obtain forms 86% 68% +18<br />
Submit claims 74% 60% +14<br />
Check claims status 76% 65% +11<br />
33
The Progressives<br />
Progressive Employers Expand Web Tools for Benefits Administrators<br />
Transactional tools such as billing, managing retirement plans, and claims inquiry<br />
are more likely to be used by progressive employers and will be even more widely<br />
available by 2010.<br />
EXPECTED AVAILABILITY <strong>OF</strong> WEB TECHNOLOGY FOR EMPLOYERS BY 2010<br />
Progressives<br />
All Firms<br />
<strong>2006</strong> 2010 <strong>2006</strong> 2010<br />
Access billing info 58% 78% 44% 60%<br />
Review/Process DC plan deferrals 69% 77% 57% 63%<br />
Check claims status 57% 76% 48% 58%<br />
Access claims forms 65% 73% 52% 61%<br />
Handle enrollment 57% 71% 51% 64%<br />
Process employee eligibility info 63% 70% 45% 59%<br />
Receive updated eligibility info 57% 69% 43% 59%<br />
Access reports 58% 68% 54% 61%<br />
Submit claims 50% 64% 35% 56%<br />
Pay bills 48% 63% 40% 56%<br />
Integrate payroll processing 48% 62% 41% 55%<br />
34
Progressive Employers Value Personalized Communications<br />
Most progressive employers (94%) say it’s important to tailor benefits information<br />
to individual employees.<br />
Progressive employers (63%) are also more willing to share employee information<br />
to enhance communications.<br />
EMPLOYER ATTITUDES TOWARD PERSONALIZED <strong>EMPLOYEE</strong> COMMUNICATIONS<br />
Progressives All Firms Point Difference<br />
Providing personalized communications is “highly important” 94% 52% +42<br />
Willingness to share/use employee information for 63% 39% +24<br />
personalized communications<br />
Progressives Are More Likely to Outsource<br />
More than half of progressive employers (58%) plan to outsource their<br />
medical/pharmacy and non-medical insurance programs by 2010.<br />
Almost seven in ten progressive employers (67%) plan to outsource their<br />
retirement programs.<br />
EMPLOYERS EXPECTING TO INCREASE ADMINISTRATION OUTSOURCING ACTIVITY BY 2010<br />
Progressives All Firms Point Difference<br />
Retirement plans 67% 37% +30<br />
Non-medical group insurance plans 58% 40% +18<br />
Medical/Pharmacy plans 58% 43% +15<br />
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Summary of Key Findings<br />
The themes uncovered in <strong>Prudential</strong>’s “Study<br />
of Employee Benefits: <strong>2006</strong> and Beyond”<br />
provide valuable insight into the evolving<br />
trends shaping the employee benefits<br />
landscape.<br />
By providing a look into the future, this research can assist plan sponsors,<br />
brokers/consultants, third-party administrators, and other key stakeholders<br />
in developing their strategic business plans.<br />
37
Summary of Key Findings<br />
Theme One: Benefits Matter<br />
Eight in Ten Plan Sponsors Remain Committed to Offering Competitive Benefits Programs<br />
An unexpected finding, considering recent press coverage on benefits cutbacks,<br />
suggests that plan sponsor commitment to offering a competitive employee benefits<br />
package remains quite strong—even in a challenging economic environment. This trend<br />
is true among companies of all size categories, but particularly for larger firms. As plan<br />
sponsors look to balance employee needs with the bottom line, many will reduce their<br />
benefits expenses by increasing employee cost-sharing on contributory plans, offering a<br />
wider range of voluntary benefits, and introducing more flexible plan designs. To further<br />
reign in costs, finance and procurement are increasingly influential in benefits decisions<br />
in larger companies, where the decision process is becoming more complex.<br />
Theme Two: Teach Them Well<br />
Employees Want Greater Support in Understanding and Using Their Financial Benefits<br />
This research highlights gaps between employees’ greatest financial and lifestyle<br />
concerns and employer priorities in terms of addressing those needs. However, many<br />
plan sponsors want to do more and expect to do so in the next five years, to better<br />
meet their employees’ needs. As consumers rely on the workplace for a growing share<br />
of their insurance and savings products, effective benefits communication and education<br />
are becoming more essential. However, many plan sponsors agree that their current<br />
education/communication efforts are lacking, particularly for benefits such as group life,<br />
disability, and long-term care insurance. Over the next five years, more employers will be<br />
tailoring benefits offerings as well as personalizing benefits communications to better<br />
address the diverse needs and life stages of their changing workforce.<br />
Theme Three: Lifestyle Benefits Offer Win/Win Solution<br />
Healthy Lifestyle Emerges as a Holistic Desire for Employees and a Cost-Reduction<br />
Strategy for Employers<br />
As the lines continue to blur between their work and personal lives, employees are feeling<br />
stressed and desire better balance in their lives. A more balanced, healthier lifestyle is<br />
an aspiration for many workers and increasingly, they are turning to their employers for<br />
help in the form of flexible work arrangements and paid time off policies. But lifestyle<br />
issues are equally important for plan sponsors because a healthier workforce leads to<br />
lower medical and disability costs, as well as improved morale and productivity. As more<br />
employers see value in offering employee assistance programs, wellness programs,<br />
disease management, and mental health counseling, access to such plans is expected<br />
to grow significantly by 2010.<br />
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Theme Four: Positive Online Outlook<br />
Online Tools Are Popular and Opportunities Exist to Improve Utilization and Performance<br />
The increase in benefits-related web technology during the past five years has been<br />
an important trend and one the research indicates will continue through 2010. Thanks<br />
to the availability of more transactional functionality, plan sponsors are shifting many of<br />
their paper-based processes and administrative tasks to the web as a means of controlling<br />
benefits costs and increasing self-service options for their employees. However, the<br />
desired benefits of these online tools—saved time/money, improved data quality and<br />
access—have not yet been fully realized. For many employers, utilization of online<br />
technology is lagging, in part because performance is falling short of expectations.<br />
Regardless, more plan sponsors and employees anticipate using them in the future.<br />
Benefits providers can improve utilization and satisfaction with web tools by focusing on<br />
ease of use and site navigation, as well as providing increased training and user support.<br />
Theme Five: The Progressives<br />
A Small But Growing Segment of Plan Sponsors<br />
Finally, our study looked at employers who are taking a progressive approach to benefits.<br />
Rather than limit benefit availability, these employers have expanded their employees’<br />
access to a wide range of financial and non-financial benefits and consider it critical<br />
to offer and subsidize a generous benefits package. The number of progressive<br />
businesses—68,000 or 11% of the market—creates an interesting segment for<br />
comparison. These progressive employers believe their actions are long-term solutions<br />
that will contribute to their companies’ success.<br />
Looking Forward Through <strong>2006</strong> and Beyond<br />
The employee benefits industry is more dynamic than ever given the various economic,<br />
demographic, social, legal/regulatory, and competitive forces at work. As plan sponsors<br />
look ahead and consider the role of benefits within their organizations, more significant<br />
change is likely in store. Benefits will continue to be a critical tool for attracting and<br />
retaining talent but the range of benefits offered, how they are funded, and the ways<br />
in which they are communicated and delivered will evolve as the composition of the<br />
workforce experiences even greater change.<br />
39
About <strong>Prudential</strong> Financial<br />
Currently <strong>Prudential</strong>’s Group<br />
Insurance statistics include:<br />
■ More than $1 trillion in group<br />
life insurance coverage 1<br />
■ Over $3.5 billion of group<br />
insurance reported premiums,<br />
policy charges, and fee income 2<br />
■ Over $131 million in long-term<br />
care premiums 3<br />
■ Solid financial strength ratings: 4<br />
■ A.M. Best A+<br />
■ Standard & Poor’s AA-<br />
■ Moody’s Aa3<br />
■ Fitch<br />
AA<br />
■ 2nd largest carrier of group<br />
life insurance and a leading<br />
disability and long-term care<br />
insurance carrier 5<br />
■ Over 12,000 group life clients<br />
insuring more than 15 million lives 1<br />
<strong>Prudential</strong> Financial companies, with approximately $547 billion in total assets under<br />
management as of March 31, <strong>2006</strong>, serve individual and institutional customers<br />
worldwide and include The <strong>Prudential</strong> Insurance Company of America, one of the<br />
largest life insurance companies in the United States. These companies offer a variety<br />
of products and services, including life insurance, mutual funds, annuities, pension<br />
and retirement-related services and administration, asset management, banking and<br />
trust services, real estate brokerage franchises, relocation services, and, through a<br />
joint venture, retail brokerage services.<br />
<strong>Prudential</strong> Financial’s distinctive Rock logo and the <strong>Prudential</strong> name are among the most<br />
enduring brands in U.S. corporate history. The company’s long history is a testament<br />
to the quality of service it has provided its customers. In addition to the level of service,<br />
<strong>Prudential</strong> Financial is today recognized for the breadth of products and services it<br />
provides and continues to be a recognized company of quality financial services at<br />
home and abroad.<br />
About <strong>Prudential</strong>’s Group Insurance Business Unit<br />
Our Group Insurance business segment manufactures and distributes a full range of<br />
group life, long-term and short-term group disability, long-term care, and corporate and<br />
trust-owned life insurance in the U.S. to institutional clients primarily for use in connection<br />
with employee and membership benefits plans. <strong>Prudential</strong>’s Group Insurance also sells<br />
accidental death and dismemberment and other ancillary coverages and provides plan<br />
administrative services in connection with its insurance coverages.<br />
■ Over 4,000 long-term disability<br />
clients covering more than<br />
2 million lives 6<br />
■ Over 2,800 short-term disability<br />
clients covering almost 1 million<br />
lives 6<br />
■ 98% overall client satisfaction<br />
rate 7<br />
■ 90 years group life, 55 years<br />
disability, and 20 years long-term<br />
care insurance experience<br />
For the latest statistics, please visit<br />
www.investor.prudential.com.<br />
40
1 2005 Statutory Annual Statement of <strong>Prudential</strong> (Blue Book).<br />
2 <strong>Prudential</strong> Financial, Inc., Quarterly Financial Supplement, Fourth Quarter 2005.<br />
3 LIMRA, 2005 Annual Group LTC & Individual LTC Sales and Inforce Studies.<br />
4 As of March <strong>2006</strong>. A.M. Best ratings range from A++ (Superior) to F (In Liquidation); Standard & Poor’s ratings range from AAA (Extremely Strong) to CC (Extremely Weak);<br />
Moody’s ratings range from Aaa (Exceptional) to C (Lowest Rated); Fitch ratings range from AAA (Exceptionally Strong) to D (Distressed).<br />
5 LIMRA, 2005 Annual Surveys of U.S. Group Life, Group Disability, and Group Long-Term Care Insurance.<br />
6 JHA, Inc., The 2005 JHA U.S. Group Disability Market Survey.<br />
7 The <strong>Prudential</strong> Insurance Company of America, <strong>2006</strong> Group Insurance Client Satisfaction Study.<br />
© <strong>2006</strong>. The <strong>Prudential</strong> Insurance Company of America, 751 Broad Street, Newark, NJ 07102-3777. All rights reserved. <strong>Prudential</strong> Financial and the Rock logo are registered<br />
service marks of The <strong>Prudential</strong> Insurance Company of America and its affiliates. www.prudential.com<br />
42 IFS-A122418 Ed. 0806 101624-0906-5M