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The Principal Financial Well-Being IndexSM Employee Questions - Second Quarter 2007

Benefits Offered at Businesses with 10-1,000 employees

The top benefits offered that are offered at businesses with 10-1,000 employees are health insurance (93%), defined contribution plans (74%), dental insurance (69%), life insurance (66%), free parking (57%). In table 17 below, comparisons can be made with 5 previous year's benefit offerings. Significance testing was done between this quarter's results and the most previous year's results. There are a few significant differences between responses from this most recent quarter and 2nd quarter 2006—indicated with "SIG" below. A significantly larger portion of employees this quarter say they have disability insurance, and financial planning than last year at this time.

Table 17
"What types of benefit programs (excluding vacation/holidays) does your company currently offer you?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Company Sponsored
Primary Benefits
2 Qtr 2007 2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Health Insurance 93% 91% 84% 94% 94% 97%
Defined Contribution Plans 74% 71% 64% 74% 74% 81%
Dental Insurance 69% N/A N/A N/A N/A N/A
Life Insurance 66% 66% 59% 73% 69% 78%
Free Parking 57% 59% 59% 61% 61% 70%
Disability Insurance 45%SIG 40% 46% 56% 54% 63%
Tuition Reimbursement 28% 26% 29% 37% 38% 41%
Flex Time 27% 26% 25% 28% 33% 28%
Defined Benefit Plans 21% 18% 23% 23% 21% 25%
Profit Sharing/Bonus 20% 20% 22% 28% 29% 29%
Financial Planning 7%SIG 5% 10% 11% 8% -
Legal Services 6% 6% 9% 10% 7% -
Stock Options 5%SIG 9% 8% 12% 9% 12%
Personal Banking Services 5%SIG 7% 9% 12% 8% 14%
Child Care Subsidies 3% 3% 3% 4% 4% 3%
Executive Benefits 2% 3% 4% 6% 4% -
On-site Day Care 1% 1% 2% 2% 1% 4%
Other 7% 6% 6% 7% 8% 5%

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 (62%), Defined Contribution plan (56%) and Life insurance (51%). In comparing this quarter's results with the previous year, there are significant differences in satisfaction levels for profit sharing/bonus plans and disability insurance.

Table 18
"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 their satisfaction a 8, 9 or 10.
Base: varies by benefit offered by employer

Satisfaction with Benefit 2 Qtr 2007 2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Defined Benefit Plans (N=232) 62% 66% 54% 55% 49% 51%
Defined Contribution Plans (N=846) 56% 55% 53% 54% 45% 44%
Life Insurance (N=766) 51% 51% 51% 51% 43% 43%
Health Insurance (N=1068) 50% 46% 46% 45% 37% 39%
Profit Sharing/Bonus (N=261) 48%SIG 57% 57% 40% 42% 38%
Dental Insurance (N=810) 46% N/A N/A N/A N/A N/A
Disability Insurance (N=541) 44%SIG 53% 47% 50% 46% 39%
Stock Options (N=70) 39% 37% 33% 45% 28% 35%

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." As seen in Table 19, there are no significant changes from 2nd quarter 2006.

Table 19
"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 a 8, 9 or 10.
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

How important are each benefit program 2 Qtr 2007 2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002
Health Insurance 88% 89% 89% 92% 91% 93%
Defined Contribution Plans 74% 72% 70% 72% 71% 73%
Dental Insurance 70% N/A N/A N/A N/A N/A
Defined Benefit Plans 55% 55% 57% 56% 52% 57%
Disability Insurance 51% 55% 55% 54% 55% 57%
Life Insurance 47% 49% 52% 50% 53% 55%
Profit Sharing/Bonus 40% 43% 42% 47% 44% 40%
Stock Options 17% 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 20%, followed by flex time-flexible work schedule with 14% and Profit Sharing/Bonus with 13%.

Table 20
"Which one employee benefit do you most wish that your company would offer you (excluding vacation and holidays)?"
Top 5 Benefits
Base: employees without certain benefits

Benefits 2 Qtr 2007 2 Qtr 2006 2 Qtr 2005
Defined Benefit plan 20% 23% 19%
Flex Time- Flexible Work Schedule 14%SIG 11% 10%
Profit Sharing/Bonus 13% 14% 14%
Tuition Reimbursement 7% 6% 6%
Defined Contribution Plan 6% 8% 7%

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 (40%) and Defined Contribution plans (17%). This has been consistent for the past three years. See table 21 for additional detail.

Table 21
"Which one employee benefit (excluding vacation and holidays) do you most wish that your company would improve upon?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Benefits 2 Qtr 2007 2 Qtr 2006 2 Qtr 2005
Health Insurance 40% 42% 41%
Defined Contribution Plan 17% 17% 14%
Profit Sharing/Bonus Plan 4% 4% 6%
Defined Benefit Plan 4% 3% 4%
Life Insurance 4% 3% 4%
Disability Insurance 3%SIG 1% 3%
Tuition Reimbursement 3% 3% 3%

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

Long Term Financial Future

Job security had been the item that topped the importance chart when compared to long-term financial future and challenging work in the past. This is the first year that long-term financial future has overtaken job security for the top spot. Compared to the fourth quarter 2006, there was a significant increase in the percentage of employees responding that long-term financial future was the most important item and a significant decrease in the percentage of employees rating job security as the number one ranked item.

Table 22
"Please rank the following items in terms of how important it is to you."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Respondent Ranked Item #1 2 Qtr 2007 4 Qtr 2006 4 Qtr 2005 4 Qtr 2004
Long-Term Financial Future 49%SIG 41% 36% 35%
Job Security 39%SIG 45% 52% 47%
Challenging Work 12% 14% 12% 19%
  N=1137 N=1197 N=1,213 N=1,736

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

High Deductible Health Plans

To understand the level of knowledge regarding High Deductible Health Plans and Health Savings Accounts (HSA), employees and retirees 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?" The percentage of employees who say they have heard of an HSA has increased significantly since the last time this question was asked.

Table 23
"Prior to this survey, had you ever heard of a Health Savings Account?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Health Savings Account 2 Qtr 2007 3 Qtr 2006 2 Qtr 2005
Retiree EE Retiree EE EE
Yes 48%sig 67%SIG 45% 62% 48%
No 52%sig 33%SIG 55% 38% 52%
  N=548 N=1137 N=721 N=1360 N=1112

SIG – varies significantly (95% level) from previous results employee comparison
sig – varies significantly (95% level) from retiree and 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 24 shows a relatively small percentage of people are currently enrolled.

Table 24
"Are you currently enrolled in a High Deductible Health Plan with a Health Savings Account?"
Base: 779 employed U.S. adults in firms of 10-1,000 employees who have heard of an HSA

Yes/No 2 Qtr 2007 3 Qtr 2006 2 Qtr 2005
Yes, through my current employer 13% 14% 9%
Yes, through a source other than my current employer 4% 3% 3%
No 83% 84% 89%
  N=779 N=910 N=559

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

Employees who are currently enrolled in a Health Savings Account were asked how they intend to use their savings. 44% plan to use it as a savings account to fund current and future medical expenses.

Table 25
"If you are currently enrolled in a Health Savings Account, how do you intend to use your savings?"
Base: employed U.S. adults in firms of 10-1,000 employees who have heard of an HSA and are currently enrolled in one

Intend to use savings 2 Qtr 2007
As a savings account to fund current medical expenses 29%
As a savings account to fund future medical expenses 27%
Both as a savings account to fund current and future medical expenses 44%
  N=113

Respondents who are not currently enrolled were asked if they had ever considered enrolling. There have been significant changes since third quarter 2006. More employees this quarter have considered enrolling in a health savings account than in third quarter 2006. Table 26 shows the results.

Table 26
"Have you ever considered enrolling in a High Deductible Health Plan with a Health Savings Account?"
Base: 666 employed U.S. adults in firms of 10-1,000 employees who have heard of an HSA but aren’t currently enrolled in one

Yes/No 2 Qtr 2007 3 Qtr 2006 2 Qtr 2005
Yes, my employer currently offers it, but I’ve decided not to enroll 12%SIG 8% 9%
Yes, I’ve looked at options outside my current employer and decided not to enroll 16%SIG 11% 11%
No, I’ve never considered it 72%SIG 81% 81%
  N=666 N=799 N=490

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 then asked how likely they would be to consider enrolling in the next 12 months. The majority (75%) of respondents are somewhat or very unlikely to enroll within the next 12 months. The percentage of employees who are very unlikely to consider enrolling has declined significantly since 2005. Table 27 shows the results.

Table 27
"Within the next 12 months, how likely are you to consider enrolling in a High Deductible Health Plan with a Health Savings Account?"
Base: N=666 U.S. Adults age 18+ employees not enrolled in an HSA

Enrolling 2 Qtr 2007 2 Qtr 2005
Very Likely 1% 2%
Somewhat Likely 5% 4%
Neither Likely Nor Unlikely 19%SIG 13%
Somewhat Unlikely 19%SIG 14%
Very Unlikely 56%SIG 66%
  N=666 N=490

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

Roth 401(K) and 403(b) Plans

Roth 401(k)’s and Roth 403(b)’s are an option employers can provide to their employees if they choose. Employees were asked a series of questions to help us better understand public awareness, availability and perception of the Roth 401(k) and Roth 403(b). As seen in Table 28, almost two-thirds of employees (65%) have heard of a Roth 401(k) or 403(b) prior to this survey.

Thirteen percent of employees say their companies with 10-1000 employees are offering it this year; however 31% of the respondents are unsure if their employer offers it or not. 52% of the employees whose company offers the Roth 401(k) or 403(b) are participating in such plans.

Table 28
"Beginning January 1, 2006, participants can designate a portion of their elective deferral contributions to a 401(k) or 403(b) plan as after-tax Roth elective deferral contributions that are includable in gross income. At qualified distribution, the Roth contributions, including earnings, are tax-free. It is up to your employer to decide whether or not to offer the Roth 401(k) or 403(b) option.

Prior to this survey, had you ever heard of a Roth 401(k) or a Roth 403(b)?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Yes/No 2 Qtr 2007 1 Qtr 2006 4 Qtr 2005
Yes 65%SIG 56% 58%
No 35%SIG 44% 42%
  N=1137 N=1374 N=1213

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

Table 29
"Is a Roth 401(k) or Roth 403(b) something your employer is offering in 2007?"
Base: N=1137 employed U.S. adults in firms of 10-1,000 employees

Yes/No 2 Qtr 2007 1 Qtr 2006
Yes 13%SIG 10%
No 56% 53%
Not Sure 31%SIG 37%

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

Table 30
"Did you participate in the Roth 401(k) or Roth 403(b)?"
Base: 143= employed U.S. adults in firms of 10-1,000 employees whose employer offered Roth 401(k) or 403(b) in 2007

Yes/No 2 Qtr 2007 1 Qtr 2006
Yes 52% 62%
No 48% 38%
  N=143 N=121

Managing Investments

Employees in firms of 10 – 1,000 employees were asked to identify how they prefer to make investment decisions. Half prefer to select investment funds/ accounts on their own. When compared with fourth quarter 2006, a significantly larger percentage of employees responded they would prefer to have someone manage their investments for them (41% vs. 35%). Employees located in the South and the West regions of the United States are significantly more likely than those in the Midwest and East regions to prefer to select investment funds/accounts on their own. Male employees are also significantly more likely than female employees to say they prefer to select their investment accounts/funds on their own (60% vs. 38%).

Additionally, those respondents who noted they prefer to have someone manage their investments were also asked if they preferred target date funds handled by a fund manager, target risk funds handled by a fund manager or fee-based financial advisors acting on their behalf. Forty-six percent preferred target risk funds handled by a fund manager. See Table 32 for details.

Table 31
"Which of the following statements best describes how you prefer to make investment choices?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

How you prefer to make investment choices 2 Qtr 2007
EE
4 Qtr 2006
EE
I prefer to select investment funds/accounts on my own. 50% 54%
I prefer to have someone manage my investments for me. 41%SIG 35%
Other 9% 11%
  N=1137 N=1197

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

Table 32
"Which of the following approaches would you select if you had someone manage your investments for you?"
Base: N= employed U.S. adults (based on those who prefer to have someone manage his/her assets)

Managed Investment Choices 2 Qtr. 2007 EE 4th Qtr. 2006 EE
Select lifecycle/target risk funds that are handled by a fund manager based upon my preferred level of risk (e.g., aggressive, moderate or conservative). 46% 44%
Select professionally managed accounts – fee-based financial advisor making investment choices on my behalf 27% 24%
Select lifecycle/target date funds that are handled by a fund manager based upon my estimated retirement year 19% 23%
None of these 8% 9%
  N=489 N=445

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

Job Security

Employees were asked about their level of concern with their own job security. Just under half (47%) said they were not at all concerned. A follow up question was asked to see if feelings of job security are causing employees to make changes in their future career. One in five (22%) said yes.

Table 33
"What is your level of concern with your own, personal job security?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Extremely Concerned 2 Qtr 2007
EE
3%
Very Concerned 5%
Concerned 14%
Somewhat Unconcerned 31%
Not at all concerned 47%

Table 34
"Are your feelings about job security causing you to make any changes in your future career?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Job Security 2 Qtr 2007
EE
Yes 22%
No 78%
N=1137

Concerns about Current Company

Employees were given a list of potential things that could happen to a company and asked to select any that were concerns for them about their company. The majority (61%) responded that they have no concerns about the future of their company. The most frequently chosen concern (22%) was their company will reduce the number of employees. This concern was significantly greater (34%) for employees in the Midwest region of the United States than any other region.

Table 35
"Which of the following concerns do you have about your company in the next year? Please select all that apply."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Concerns 2 Qtr 2007
EE
My company will reduce the number of employees. 22%
My company will go out of business. 8%
My company will be acquired by or merge with a larger company. 7%
Other 11%
I have no concerns about the future of my company. 61%
N=1137

New Job

Four out of ten employees responded they would be willing to relocate to keep their job if their company was purchased by another company. Significantly more employees in the South region of the United States (51%) said they would be willing to relocate than employees in any other region.

When considering whether to accept a new job, the most important item from a provided list was salary chosen by three out of four employees (74%) as the item ranked number one. Health Coverage came in second with 17% followed by retirement savings plan with 5%.

Table 36
"If your company was purchased by another company, would you be willing to relocate to keep your job?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Yes/No 2 Qtr 2007
EE
Yes 40%
No 60%
N=1137

Table 37
"When considering whether to accept a new job, please rank the following in terms of how important it is to you."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Respondent Ranked Item #1 2 Qtr 2007
Salary 74%
Health Coverage 17%
Retirement Savings Plan 5%
Vacation/sick days 3%
Life Insurance 1%
N=1137

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