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The Principal Financial Well-Being IndexSM Employee Questions - Second Quarter 2006

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Benefits Offered at Small and Mid-Sized Businesses (SMBs)

The top benefits offered at SMB firms are health insurance (91%), defined contribution plans (71%), life insurance (66%), free parking (59%) and disability insurance (40%).; In table 24 below, comparisons can be made with 4 previous year's benefit offerings. Significance testing was done between this quarter's results and the most previous year's results. There are significant differences between responses from this most recent quarter and 2nd quarter 2005 - indicated with "SIG" below. A significantly larger portion of employees this quarter say they have health insurance, defined contribution plans and life insurance than last year at this time.

Table 24
"What types of benefit programs (excluding vacation/holidays) does your company currently offer you?"
 Base: 1100 employed U.S. adults in firms of 10-1,000 employees

Company Sponsored
Primary Benefits
2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Health Insurance 91%SIG 84% 94% 94% 97%
Defined Contribution Plans 71%SIG 64% 74% 74% 81%
Life Insurance 66%SIG 59% 73% 69% 78%
Free Parking 59% 59% 61% 61% 70%
Disability Insurance 40%SIG 46% 56% 54% 63%
Tuition Reimbursement 26% 29% 37% 38% 41%
Flex Time 26% 25% 28% 33% 28%
Profit Sharing/Bonus 20% 22% 28% 29% 29%
Defined Benefit Plans 18%SIG 23% 23% 21% 25%
Stock Options 9% 8% 12% 9% 12%
Personal Banking Services 7% 9% 12% 8% 14%
Legal Services 6%SIG 9% 10% 7% -
Financial Planning 5%SIG 10% 11% 8% -
Executive Benefits 3% 4% 6% 4% -
Child Care Subsidies 3% 3% 4% 4% 3%
On-site Day Care 1% 2% 2% 1% 4%
Other 6% 6% 7% 8% 5%

SIG - varies significantly (95% level) from comparison

Benefit Satisfaction

Upon identifying what benefits they are offered through their employers, employees were asked to rate their satisfaction with some of the major benefits. Employees are most satisfied with their Defined Benefit Plan (65%), profit sharing/bonus plan (57%), Defined Contribution plan (56%) and Disability insurance (53%). In comparing this quarter's results with the previous year, there are significant differences in satisfaction levels for defined benefit plans.

Table 25
"Although you may have mentioned more than appear below, you indicated that you have the following benefit program(s) through your company. Using a scale from "1" to "10", where "1" means Not At All Satisfiedand "10" means Very Satisfied, please indicate how satisfied you are with each benefit program."
Percentages included in chart represent those rating satisfaction as an 8, 9 or 10.
Base: varies by benefit offered by employer

Satisfaction with Benefit 2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Defined Benefit Plans (N=207) 66%SIG 54% 55% 49% 51%
Profit Sharing/Bonus (N=223) 57% 57% 40% 42% 38%
Defined Contribution Plans (N=760) 55% 53% 54% 45% 44%
Disability Insurance (N=458) 53% 47% 50% 46% 39%
Life Insurance (N=715) 51% 51% 51% 43% 43%
Health Insurance (N=1010) 46% 46% 45% 37% 39%
Stock Options (N=73) 37% 33% 45% 28% 35%

SIG - varies significantly (95% level) from comparison

Benefit Importance

All employee respondents were asked to rate a group of benefits in terms of how important each was to them on a 10-point scale with 10 being "Very Important." As seen in Table 26, there are no significant changes from 2nd quarter 2005.

Table 26
"Using a scale from "1" to "10", where "1" means Not At All Important and "10" means Very Important, please indicate how important each benefit program is to you." Percentages included in chart represent those rating importance as an 8, 9 or 10.
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Health Insurance 89% 89% 92% 91% 93%
Defined Contribution Plans 72% 70% 72% 71% 73%
Defined Benefit Plans 55% 57% 56% 52% 57%
Disability Insurance 55% 55% 54% 55% 57%
Life Insurance 49% 52% 50% 53% 55%
Profit Sharing/Bonus 43% 42% 47% 44% 40%
Stock Options 20% 17% 16% 13% 18%

Each employee respondent was asked to identify what benefits they would most like their employers to offer, aside from those already offered. Defined benefit plans top the list with 23%, followed by Profit Sharing/Bonus with 14%.

Table 27
"Which one employee benefit do you most wish that your company would offer you (excluding vacation and holidays)?"
Base: 1099 employed U.S. adults in firms of 10-1,000 employees

Ranking Benefits 2 Qtr 2006 2 Qtr 2005
1 Defined Benefit plan 23%SIG 19%
2 Profit Sharing/Bonus 14% 14%
3 Flex Time- Flexible Work Schedule 11% 10%
4 Defined Contribution Plan 8% 7%
5 Tuition Reimbursement 6% 6%

SIG - varies significantly (95% level) from comparison

Aside from those benefits employees would like to see added to their employers' benefit programs, they were also asked to identify what benefits they would like to have improved upon. The top two benefits mentioned are Health Insurance (42%) and Defined Contribution plans (17%). See table 28 for additional detail.

Table 28
"Which one employee benefit (excluding vacation and holidays) do you most wish that your company would improve upon?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

Benefits 2 Qtr 2006 2 Qtr 2005
Health Insurance 42% 41%
Defined Contribution Plan 17% 14%
Profit Sharing/Bonus Plan 4%SIG 6%
Defined Benefit Plan 3% 4%
Life Insurance 3% 4%
Flex time-flexible work schedule 3% 3%
Tuition Reimbursement 3% 2%

SIG - varies significantly (95% level) from comparison

Automatic Enrollment

Employees were asked about automatic enrollment with a standard deferral rate and the results were significantly different than in 2002 when this same question was last asked. A significantly higher percentage of employees (59%) agree with automatic enrollment compared to 2002 when only 35% agreed. Table 29 shows the differences.

Table 29
"All eligible employees should be automatically enrolled into their employer-sponsored 401(k) retirement plan and a standard deferral rate set up."
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

Level of Agreement 2 Qtr 2006 2 Qtr 2005
Agree Completely 28%SIG 10%
Agree Somewhat 31%SIG 25%
Neither Agree Nor Disagree 20% 19%
Disagree Somewhat 14% 18%
Disagree Completely 6% 28%
  N=1100 N=982

SIG - varies significantly (95% level) from comparison

Financial Planning Services Offered Through an Employer

Employees were asked if they would be likely to use financial planning services, if the employer sponsored the services. The same question was asked in 2002 and there were no significant differences in the responses. One in four (24%) of the employees responded they would definitely use the service.

As shown in table 31, employees in 2006 were also asked how likely they would be to pay a reasonable price for the service and 49% were very or somewhat likely to say they would pay a reasonable price.

Table 30
"If financial planning services were sponsored by your employer, would you use the service?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2 Qtr 2006 2 Qtr 2005
I would definitely use the service. 24% 24%
I would possibly use the service. 58% 62%
I would not use the service. 8% 6%
Not Sure 9% 9%
  N=1100 N=982

Table 31
"If financial planning services were offered through your employer, how likely would you be to pay a reasonable price for this benefit?"
Base: N= 886 employed U.S. adults in firms of 10-1,000 employees who would use employer sponsored financial planning services

  2 Qtr 2006
Very Likely 10%
Somewhat Likely 39%
Somewhat Unlikely 31%
Very Unlikely 17%
Not Sure 3%

Retirement Planning

Only employees were asked if they feel they are on track in planning and saving for retirement. Almost seven out of ten (68%) feel they are a little or a lot behind schedule. Overall, the results from 2004 are very similar, however in 2004 a significantly higher percentage of employees felt they were a little behind schedule.

Table 32
"When it comes to planning and saving for retirement, would you say that you are on track, ahead of schedule, or behind schedule?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2 Qtr 2006
2 Qtr 2004
EE EE
A lot ahead of schedule 2% 1%
A little ahead of schedule 5% 5%
On track 24% 23%
A little behind schedule 42%SIG 46%
A lot behind schedule 26% 26%
  N=1100 N=1307

SIG - varies significantly (95% level) from comparison

Financial Hardship Options

A series of questions regarding various options to be considered in the event of financial hardships were asked on the survey. In Table 33, we see that the majority of employees either don't have children to rely on or would not be willing to move in with their children to help make ends meet.

Table 34 shows that the majority of employees (83%) would be willing to have their parents move in with them if they did not have enough savings to provide them with a financially secure retirement.

Table 33
"If your savings were not enough to provide a financially secure retirement, would you consider moving in with your children to make ends meet?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2 Qtr 2006
EE
Yes 19%
No 42%
I don't have any children 39%

Table 34
"If your parents were/are still living and did not have enough savings to provide them with a financially secure retirement, would you offer to have them move in with you?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2 Qtr 2006
EE
Yes 83%
No 17%

Deferral Amount

Employees were asked if they have changed the amount they defer into their 401(k) retirement plan within the past 2 years. Employees who do participate responded that 28% increased their deferral rate, 65% made no changes to the deferral rate and 8% decreased their deferral rate. Male employees did respond differently than female employees. Significantly more male employees (32%) increased their deferral rate than female employees (21%). Significantly more female employees (71%) responded they kept the same deferral rate than male employees (60%). This same question was asked of employees in 2004 and there were no significant differences.

Table 35
"Have you changed the amount you defer into your 401(k) retirement account within the past 2 years?"
Base: 664 employed U.S. adults in firms of 10-1,000 employees who participate in a 401(k)

  2 Qtr 2006 2 Qtr 2004
EE EE
Increased deferral rate 28% 31%
Same deferral rate 65% 62%
Decreased deferral rate 8% 7%
  N=664 N=560

SIG - varies significantly (95% level) from comparison

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