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

Benefits Offered at Businesses with 10 to 1,000 Employees

The top benefits offered at firms with 10 to 1,000 employees are health insurance (92%), defined contribution plans (74%), life insurance (71%), free parking (60%) and disability insurance (47%). In table 18 below, comparisons can be made with 2 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 3rd quarter 2005 - indicated with "SIG" below. A significantly larger portion of employees this quarter say they have health insurance, defined contribution plans, life insurance and defined benefit plans than last year at this time.

Table 18
"What types of benefit programs (excluding vacation/holidays) does your company currently offer you?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees

Company Sponsored
Primary Benefits
3 Qtr 2006 3 Qtr 2005 3 Qtr 2004
Health Insurance 92%SIG 88% 90%
Defined Contribution Plans 74%SIG 66% 68%
Life Insurance 71%SIG 64% 66%
Free Parking 60% 63% 65%
Disability Insurance 47%SIG 51% 55%
Tuition Reimbursement 32% 32% 30%
Flex Time 26% 29% 33%
Profit Sharing/Bonus 23% 23% 25%
Defined Benefit Plans 23%SIG 18% 22%
Stock Options 8% 6% 8%
Personal Banking Services 7% 7% 8%
Legal Services 7% 9% N/A
Financial Planning 7%SIG 10% 11%
Child Care Subsidies 3% 3% 2%
Executive Benefits 2%SIG 5% 3%
On-site Day Care 2% 3% 2%
Other 6% 5% 6%

SIG - varies significantly (95% level) from previous results employee 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 (56%), Defined Contribution plan (52%), Disability insurance (50%) and Life Insurance (50%). In comparing this quarter's results with the previous year, there are significant increases in satisfaction levels for disability insurance and health insurance.

Table 19
"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 Satisfied and "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 3 Qtr 2006 3 Qtr 2005 3 Qtr 2004
Defined Benefit Plans (N=324) 56% 54% 53%
Defined Contribution Plans (N=1003) 52% 50% 53%
Disability Insurance (N=678) 50%SIG 44% 43%
Life Insurance (N=997) 50% 47% 45%
Profit Sharing/Bonus (N=298) 47% 53% 44%
Health Insurance (N=1286) 47%SIG 40% 40%
Stock Options (N=81) 34% 34% 37%

SIG - varies significantly (95% level) from previous results employee 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." Defined Contribution plans were rated as significantly more important this year than last year at this time.

Table 20
"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: 1360 employed U.S. adults in firms of 10-1,000 employees

Benefit Program Importance

3 Qtr 2006

3 Qtr 2005 3 Qtr 2004
Health Insurance 88% 90% 89%
Defined Contribution Plans 70%SIG 66% 68%
Defined Benefit Plans 51% 50% 54%
Disability Insurance 49% 49% 51%
Life Insurance 46% 44% 46%
Profit Sharing/Bonus 36% 38% 39%
Stock Options 12% 13% 14%

SIG - varies significantly (95% level) from previous results employee comparison

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 24%, followed by Profit Sharing/Bonus with 13%. There were no significant changes from last year at this time.

Table 21
"Which one employee benefit do you most wish that your company would offer you (excluding vacation and holidays)?"
Base: varies by benefit not offered by employer

Ranking Benefits 3 Qtr 2006 3 Qtr 2005
1 Defined Benefit plan 24% 25%
2 Profit Sharing/Bonus 13% 15%
3 Flex Time- Flexible Work Schedule 12% 11%
4 Tuition Reimbursement 8% 8%
5 Defined Contribution Plan 7% 8%

SIG - varies significantly (95% level) from previous results employee 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 (41%) and Defined Contribution plans (19%). See table 22 for additional detail.

Table 22
"Which one employee benefit (excluding vacation and holidays) do you most wish that your company would improve upon?"
Base: varies by benefit offered by employer

Benefits 3 Qtr 2006 3 Qtr 2005

Health Insurance

41%SIG 47%

Defined Contribution Plan

19%SIG 16%

Defined Benefit Plan

7%SIG 3%

Profit Sharing/Bonus Plan

5% 5%

Life Insurance

3% 2%

Flex time-flexible work schedule

3% 2%

Tuition Reimbursement

3% 3%

SIG - varies significantly (95% level) from previous results employee comparison

401(k) Deferral

For employees eligible to participate in the 401(k) plan, they were also asked to identify what percent of their annual salary was being deferred into those plans. As shown in Table 23, one-fifth (21%) of all eligible employees said they don't currently defer any of their salary. Twenty-nine percent contribute 1-5 percent of their salary. Thirty-one percent contribute 6 to 10 percent of their salary. Twelve percent contribute 11 percent of their salary or more.

Table 24 shows the percentages employees feel they should be deferring so they could be comfortable in retirement. Almost half (47%) feel they should be deferring eleven percent or more. That's very different than the twelve percent who actually are deferring eleven percent or more currently.

Table 23
"How much of your annual pre-tax salary do you currently defer to your 401(k) retirement plan?"
Base: 1003 employed U.S. adults in firms of 10-1,000 employees that are eligible to participate

Amount of Deferral 3 Qtr 2006 3 Qtr 2004
1% 2%SIG 4%
2% 2%SIG 4%
3% 9% 11%
4% 5% 6%
5% 11% 13%
6% 10% 10%
7% 3% 2%
8% 3% 4%
9% 1% 1%
10% 13% 12%
11% to 15% 8% 7%
16% or more 4% 4%
Not Sure 7%SIG 4%
Don't currently defer 21% 18%
  N=1003 N=707

SIG - varies significantly (95% level) from previous results employee comparison

Table 24
"How much of your annual pre-tax salary do you think you should be deferring to your 401(k) retirement plan to be comfortable in retirement?"
Base: 1003 employed U.S. adults in firms of 10-1,000 employees that are eligible to participate

Amount of Deferral 3 Qtr 2006
1% 1%
2% 1%
3% <1%
4% 1%
5% 4%
6% 4%
7% 2%
8% 4%
9% 1%
10% 34%
11% - 15% 17%
16% or more 30%
  N=1003

Automatic Enrollment

401(k) Automatic Enrollment

Do It For Me Trend - In today's society, people are interested in having others handle their matters for them rather than doing it themselves. This is also true related to retirement planning and investments and the trend has been labeled "do it for me." To examine this trend in the 10 to 1,000 employee marketplace, employees were asked to answer a variety of questions related to this trend.

Automatic enrollment is a program that some employers put into place to aid in retirement plan participation and to encourage employees to save for the future. In automatic enrollment, the employer enrolls all eligible employees into their retirement plan and starts the deferral process by imposing a minimum deferral rate, usually between 1 and 3% of annual salary. To identify what the penetration of automatic enrollment is, employees were asked if their employer had automatic enrollment - 19% offer it. Table 25 shows the penetration of automatic enrollment by firm size. Firms of 10-50 employees are significantly more likely to auto enroll than firms of 501-1000 employees.

Table 25 - Presence of Automatic Enrollment - 10-1,000 Employee Firms
"Does your employer automatically enroll all employees in their 401(k) retirement plan with a set deferral rate percentage (e.g. 1-3% of annual salary)?"
Base: 1003 employed U.S. adults in firms of 10-1,000 employees

Employer Automatic Enrollment 3rd Qtr 2006 Total 3rd Qtr. 2005
Total
3rd Qtr. 2004
Total
2006 Firm Size
10-50 51-100 101-200 201-500 501-1,000
Automatic Enrollment 19% 18% 18% 27% 16% 17% 21% 14%
No Automatic Enrollment 69% 72% 72% 62% 72% 76% 65% 71%
Not Sure 12%SIG 9% 10% 11% 12% 7% 13% 15%

SIG - varies significantly (95% level) from previous results employee comparison

Knowing that 19% of 10-1,000 employee firms currently offer automatic enrollment of employees in their retirement plan, a follow-up question was asked to determine if employees would consider enrolling in a program that would automatically increase their 401(k) deferral rate by 1% each year. Over half (52%) of the employees are willing to consider enrollment in this type of plan and 22% express an unwillingness to do so. Table 26 shows the specific breakdowns.

Table 26 Agree With Automatic Deferral Increases
"Please indicate the extent to which you agree or disagree with the following statement. If offered, I would enroll in a program that would automatically increase my 401(k) deferral rate 1% each year."
Base: 1003 employed U.S. adults in firms of 10-1,000 employees

Auto Enroll Agreement l 3rd Qtr 2006 Employee 3rd Qtr. 2005 Employee 3rd Qtr. 2004
Employee
Completely/Somewhat Agree 52% 49% 46%
Neither Agree/Disagree 25%SIG 33% 28%
Completely/Somewhat Disagree 22% 19% 26%

SIG - varies significantly (95% level) from previous results employee comparison

Managing Investments

Employees in firms of 10 - 1,000 employees were asked to identify how they prefer to make investment decisions regarding their retirement plan. Over half (53%) prefer to select investment funds/ accounts on their own. Results were very similar between different age groups. There were significant differences in the percentage of males who prefer to select their own investment funds/accounts when compared to females. Table 27 shows the specific breakdowns.

Additionally, those respondents who noted they prefer to have someone manage their investments were also asked if they preferred lifestyle funds handled by a fund manager or fee-based financial advisors acting on their behalf. Consistent with last year's results, the largest proportion of employees (56%) preferred lifestyle funds. See Table 28 for details.

Table 27 - Investment Choice Preference
"Which of the following statements best describes how you prefer to make investment choices in your company-sponsored retirement plan?"
Base: US Adults age 18+ with a Defined Contribution Plan

Investment Preferences 3rd Qtr. 2006 Employee 3rd Qtr. 2005
Employee
3rd Qtr. 2004
Employee
3rd Qtr. 2006 Gender
Male Female

I prefer to select investment funds/accounts on my own.

53%

55%

53%

57%

48%

I prefer to have someone manage my investments for me.

39%

41%

42%

37%

42%

Other

8%SIG

5%

5%

6%

10%

SIG - varies significantly (95% level) from previous results employee comparison

Table 28 - Investment Choice Preference
"Which of the following approaches would you select if you had someone manage your company-sponsored retirement plan investments for you?"
Base: Employees who prefer to have someone manage his/her investments

Managed Investment Choices 3rd Qtr. 2006 Employee 3rd Qtr. 2005 Employee 3rd Qtr. 2004
Employee
Select lifestyle/target date funds that are handled by a fund manager based upon my estimated retirement year 56% 55% 52%
Select professionally managed accounts - fee-based financial advisor making investment choices on your behalf 26%SIG 36% 27%
Neither of these 18%SIG 10% 21%
  N=397 N=320 N=359

SIG - varies significantly (95% level) from previous results employee comparison

Dealing with Employee Benefits Issues in the Workplace

Employees were asked how often they have to take some time at work to deal with employee benefits. Males are significantly more likely than females to deal with employee benefits at the work place at least once a month or at least once every three months. Females are significantly more likely to only deal with them at least once a year. See Table 29 for specific breakdowns.

Table 29
"On average, how often do you take some time at work to deal with your employee benefits?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees

Time at work with benefits 3 Qtr 2006 3 Qtr 2006
Males Females
At least once a day 1% 2% 1%
At least once a week 4% 5% 3%
At least once a month 16% 19% 12%
At least once every three months 17% 20% 13%
At least once every six months 19% 17% 21%
At least once a year 44% 37% 50%
  N=1360 N=693 N=667

Health Savings Accounts

To understand the level of knowledge regarding High Deductible Health Plans and Health Savings Accounts (HSA) employees were given a description of a High Deductible Health Plan and also a Health Savings Account (HSA). They were asked, "Prior to this survey, had you ever heard of a Health Savings Account?" Significantly more employees have heard of an HSA (62% vs. 48%) than when this question was last asked in second quarter of 2005. Also, males are significantly more likely to have heard of an HSA than females (69% vs. 54%). There were no significant differences based on size of firm.

Table 30
"Prior to this survey, had you ever heard of a Health Savings Account?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees

Heard of Health Savings Account 3 Qtr 2006
EE
2 Qtr 2005
EE
3 Qtr 2006 EE
Males Females
Yes 62%SIG 48% 69% 54%
No 38%SIG 52% 31% 46%
  N=1360 N=1112 N=693 N=667

SIG - varies significantly (95% level) from previous results employee comparison

Employees who had heard of a Health Savings Account were asked some follow up questions. One question is whether or not they are currently enrolled in a High Deductible Health Plan with a Health Savings Account. Table 31 shows a relatively small percentage of people are currently enrolled but significantly more than in second quarter 2005.

Table 31
"Are you currently enrolled in a High Deductible Health Plan with a Health Savings Account?"
Base: 910 employed U.S. adults in firms of 10-1,000 employees who have heard of an HSA

Enrolled in HDHP with HSA 3 Qtr. 2006 2 Qtr 2005
Yes, through my current employer 14%SIG 9%
Yes, through a source other than my current employer 3% 3%
No 84%SIG 89%
  N=910 N=559

SIG - varies significantly (95% level) from previous results employee comparison

Respondents who have heard of a Health Savings Account and are not currently enrolled were asked if they had ever considered enrolling. There have been no significant changes since second quarter 2005. Table 32 shows the results.

Table 32
"Have you ever considered enrolling in a High Deductible Health Plan with a Health Savings Account?"
Base: 799 employed U.S. adults in firms of 10-1,000 employees who have heard of an HSA but aren't currently enrolled in one

Considered HDHP with HSA 3 Qtr 2006 2 Qtr 2005
Yes, my employer currently offers it, but I've decided not to enroll 8% 9%
Yes, I've looked at options outside my current employer and decided not to enroll 11% 11%
No, I've never considered it 81% 81%
  N=799 N=490

Respondents who have heard of a Health Savings Account and are not currently enrolled were then asked if they would consider enrolling in the next 12 months. The majority (70%) of respondents are somewhat or very unlikely to enroll within the next 12 months. Table 33 shows the results.

Table 33
"Within the next 12 months, how likely are you to consider enrolling in a High Deductible Health Plan with a Health Savings Account?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees

Enrolling in HDHP with HSA in 12 months 3 Qtr 2006
Very Likely 4%
Somewhat Likely 6%
Neither Likely Nor Unlikely 20%
Somewhat Unlikely 17%
Very Unlikely 53%
  N=1360

About Harris Interactive

Harris Interactive is the 12th largest and fastest-growing market research firm in the world. The company provides research-driven insights and strategic advice to help its clients make more confident decisions which lead to measurable and enduring improvements in performance. Harris Interactive is widely known for The Harris Poll, one of the longest running, independent opinion polls and for pioneering online market research methods. The company has built what could conceivably be the world's largest panel of survey respondents, the Harris Poll Online. Harris Interactive serves clients worldwide through its United States, Europe and Asia offices, its wholly-owned subsidiary Novatris in France and through a global network of independent market research firms. The service bureau, HISB, provides its market research industry clients with mixed-mode data collection, panel development services as well as syndicated and tracking research consultation. More information about Harris Interactive may be obtained at www.harrisinteractive.com.

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