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The Principal Financial Well-Being Indexsm Executive Summary - First Quarter 2004

Summary of Survey Findings

Workers Believe in Long-Term Investing
Methodology: The Principal Financial Group, the nation's 401(k) leader, commissioned Harris Interactive® to conduct online research with employees (ages 18+) of small and mid-sized U.S. businesses (firm size 10 - 1,000) about their attitudes and perceptions regarding their financial well being. Harris Interactive conducted The Principal Financial Well-Being Index survey of 1,235 employees online from February 16-23, 2004. In theory, with a probability sample of this size, one can say with 95% certainty that the results have a statistical precision of ± 3 percentage points; however, this online sample was not a probability sample. "Propensity score" weighting was used to adjust for respondents' propensity to be online. This is one in a series of quarterly studies to identify and track changes in the workplace of small and mid-sized (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000. In 2002, The Principal also began to conduct a Global Financial Well Being Index.

Benefits Offered at Small and Mid-Sized Businesses (SMBs)
The top benefits offered at SMB firms are health insurance, defined contribution retirement plans, life and disability insurance. When comparing over the same period in the previous two years, there is a decreasing trend for health insurance, and both defined contribution and defined benefit retirement plans. Table 1 demonstrates the trends.

TABLE 1
"What types of benefit programs (excluding vacation/holidays) does your company currently offer you?"
Base: 1,235 U.S. Adults age 18+

Company Sponsored Primary Benefits 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
Health Insurance 90% 92% 94%
Defined Contribution Plans 70% 72% 74%
Life Insurance 69% 68% 74%
Disability Insurance 52% 52% 55%
Defined Benefit Plans 20% 24% 28%
Profit Sharing/Bonus 27% 26% 26%
Stock Options 11% 12% 9%
Free Parking 60% 57% 63%
Tuition Reimbursement 35% 34% 42%
Flex Time 28% 30% 24%
Financial Planning 11% NA NA
Personal Banking Services 8% 10% NA
Legal Services 9% NA NA
Executive Benefits 4% 4% NA
Child Care Subsidies 3% 2% 3%
On-site Day Care 3% 2% 3%
Other 8% 8% 9%
  • Significantly fewer employees of smaller firms (10 to 50 employees - 49%) are offered defined contribution retirement plans than employees of larger firms (51 to 1000 employees, 68-75%).
  • Significantly fewer employees of smaller firms (10 to 50 employees - 81%) are offered health insurance than employees of larger firms (51 to 1000 employees, 89-95%).
  • Significantly fewer employees of smaller firms (10 to 50 employees - 45%) are offered life insurance than employees of larger firms (51 to 1000 employees, 62-82%).

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 retirement plans, defined benefit (46%) and defined contribution (43%), and their life insurance plans (40%). Listed in Table 2 are all the benefits, the percent of employees satisfied, and the average rating.

  • Employee satisfaction with health insurance is greater on average with larger SMB firms (501-1000 employees, 6.6) than smaller firms (10-500 employees, 6.0).

TABLE 2
"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 represents those rating satisfaction as an 8, 9 or 10.
Base: U.S. Adults age 18+ varies by benefit offered

Satisfaction with Benefit 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
Defined Benefit Plans (N=288) 46%
Average - 7.0
54%
Average - 7.1
57%
Average - 7.4
Defined Contribution Plans (N=879)
43%
Average - 6.7
40%
Average - 6.6
50%
Average - 6.9
Life Insurance (N=875)
40%
Average - 6.7
42%
Average - 6.8
50%
Average - 7.1
Disability Insurance (N=647)
38%
Average - 6.6
42%
Average - 6.8
47%
Average - 6.9
Profit Sharing/Bonus (N=299)
38%
Average - 6.5
38%
Average - 6.4
38%
Average - 6.4
Health Insurance (N=1129)
35%
Average - 6.2
39%
Average - 6.4
47%
Average - 6.7
Stock Options (N=112) 32%
Average - 5.8
44%
Average - 6.8
30%
Average - 5.9

Of those employees who are not currently provided all of the benefits they desire, the top noted benefits to add are defined benefit pension plan (22%), and profit sharing/bonus plans. Listed in Table 3 are the specifics, as well as the comparison to previous years.

TABLE 3
"Which one employee benefit do you most with that your company would offer you?"
Base: 1,235 U.S. Adults age 18+

Ranking Benefits 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
1 Defined Benefit Pension Plan 22% 17% 23%
2 Profit Sharing/Bonus Plan 16% 11% 15%
3 Flex Time 13% 11% 13%
4 Tuition Reimbursement 8% 9% 7%
5 Defined Contribution Retirement Plan 7% 7% 4%

Benefit Importance
All employee respondents were asked to rate each benefit in terms of how important is was to them on a 10-point scale with 10 being "Very Important." As noted in Table 2, the levels of satisfaction are in a downward trend, however the benefits are in an upward trend in importance. The top rated benefit in terms of importance is health insurance (92%) and defined contribution retirement plans (74%). Listed in Table 4 are a complete list of benefits, and a comparison to the same period in 2003.

Life insurance is significantly more important on average to employees with children in the household (7.6) than those without (7.2).

Disability insurance is significantly more important on average to employees age 35 and above (7.7 to 8.0) than to employees age 18 to 34 (7.1).

TABLE 4
"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."
Base: 1,235 U.S. Adults age 18+

  1 Qtr 2004 1 Qtr 2003
Health Insurance 92%
Average - 9.3
88%
Average - 9.2
Defined Contribution Plans 74%
Average - 8.3
70%
Average - 8.2
Disability Insurance 58%
Average - 7.6
56%
Average - 7.6
Defined Benefit Plans 59%
Average - 7.5
57%
Average - 7.5
Life Insurance 53%
Average - 7.3
54%
Average - 7.4
Profit Sharing/Bonus 47%
Average - 6.7
41%
Average - 6.5
Stock Options 20%
Average - 4.8
18%
Average - 4.6

Benefits for Recruit & Retention
SMB firms offer employee benefits to aid in the recruiting and retaining of quality employees. To measure how employees react to the presence of good employee benefits. Just over 70% said that good benefits encourages them to work harder and perform better, and 60% said they would keep working for their current company. See Table 5.

TABLE 5
"Please indicate the extent to which you agree or disagree with the following statements…"
Base: 1,235 U.S. Adults age 18+

  Completely/ Somewhat Agree Neither Agree/ Disagree Completely/ Somewhat Disagree
Having a good employee benefits plan encourages me to work harder and perform better. 71% 20% 9%
Having a good employee benefits plan keeps me working for my current company. 60% 21% 19%
My company is concerned about my long-term financial future. 25% 25% 50%

When looking back at how respondents over the past 4 years have responded to this question - there is a an upward trend in the number of employees agreeing with the statement that good benefits encourages them to work harder and perform better. There is a decreasing trend with the number of employees agreeing with the statement that a good employee benefits plan keeps them working for their current company. See Table 6 for details.

  • Employees of larger firms (500-1000 employees) agreed more to the statement 'good employee benefits plan keeps me working for my current company' on average (3.8) than those in smaller firms (10-500 employees) (3.4).

TABLE 6
"Please indicate the extent to which you agree or disagree with the following statements…"
Base: 1,235 U.S. Adults age 18+

Trending Comparison
(% of respondents agreeing completely or somewhat)
1 Qtr 2004 1 Qtr 2003 2 Qtr 2002 1 Qtr 2001
Having a good employee benefits plan encourages me to work harder and perform better. 71% 64% 61% 59%
Having a good employee benefits plan keeps me working for my current company. 60% 62% 70% 75%
My company is concerned about my long-term financial future. 25% 26% 28% 28%

Employee Perception of Financial Well Being
In measuring employees' attitudes and perceptions about their financial well-being, a series of different questions were asked of them. First they were asked to identify how much they agreed with some statements relating to how concerned they are about their long-term financial future and how happy they are about their current well-being. According to Table 7, roughly 3 out of 4 employees are very concerned about their long-term financial future and only 1 out of 3 employees are extremely happy with their current well-being.

TABLE 7
"Please indicate the extent to which you agree or disagree with the following statements…"
Base: 1,235 U.S. Adults age 18+

  Agree (Rate 4, 5) Neutral(Rate 3) Disagree(Rate 1, 2) Average on 5-pt scale
I am very concerned about my long-term financial future. 76% 13% 11% 4.0
I am extremely happy about my current financial well-being. 34% 21% 45% .2.8

TABLE 8
"Please indicate the extent to which you agree or disagree with the following statements…"
Base: 1,235 U.S. Adults age 18+

Completely/Somewhat Agree 1 Qtr 2004 4 Qtr 2003 1 Qtr 2003
I am very concerned about my long-term financial future. 76%
77% 76%

I am extremely happy about my current
financial well-being.

34% 31% 27%

FINANCIAL OUTLOOK FOR 2004

SMB employees were asked to share their financial outlook for 2004, and the just under half (48%) said they were very or somewhat optimistic. About 1 in 4 (27%) said their outlook was very or somewhat pessimistic. Chart 9 shows a graphic representation.

  • Significantly fewer employees with less than $35,000 in household income (26%) said they were optimistic about their outlook than employees with greater than $35,000 in household income (46%).

Chart 9 - Outlook for 2004
"Which of the following best describes your financial outlook for the year 2004?"
Base: 1,235 U.S. Adults age 18+

Very Optimistic
10% Outlook for 2004
Somewhat Optimistic 38%
Neither 25%
Somewhat Pessimistic 21%
Very Pessimistic 6%

Job Security
Job security continues to top the importance chart when compared to long-term financial future and challenging work. In the most recent study, 52% rated job security as number one in importance to them followed by long-term financial future and challenging work.

  • The proportion of employees who rated job security as number on in importance was significantly higher for those with children in the household (57%) than those without (49%).

TABLE 10
"Please rank the following items in terms of how important it is to you."
Base: 1,235 U.S. Adults age 18+

Respondent Ranked Item #1 1 Qtr 2004 4 Qtr 2003 1 Qtr 2003 1 Qtr 2002
Job Security
52%
48%
49%
50%
Long-Term Financial Future 31% 33% 35% 32%
Challenging Work 17% 19% 16% 17%

Investment Changes
As the economy is in a fluctuating state, respondents were split into two random groups. One group was asked an identify question to last year to allow tracking of previous measures, and the second group was asked a question as to whether they had moved their money to more stable or more volatile investments. See Charts 11 and 12 below for details.

CHART 11
"Given the current stock market and economic conditions, have you made changes in how you have your retirement savings invested - moving from volatile investments to more stable investments."
Base: 596 U.S. Adults age 18+

Chart 11 1st Quarter 2004
Of those respondents with retirement savings, 34% have made changes in how their retirement savings are invested – 66% have not. N=596

Relatively unchanged from 1st Quarter 2003 – with 35% making changes and 65% not. N=1,111

CHART 12
"Given the current stock market and economic conditions, have you made changes in how you have your retirement savings invested?" Base: 639 U.S. Adults age 18+

Chart 12 1st Quarter 2004
Of those respondents with retirement savings, 27% have made changes in how their retirement savings are invested – 19% moved to stable and 8% to volatile investments. N=639

Satisfaction With Employer Sponsored Savings Tools
Employees were asked to rate how satisfied they are with their employer sponsored benefit program in providing them with the tools they need to save for the future, 45% are very or somewhat satisfied - down from 4th quarter 2002. Table 13 shows the details.

TABLE 13
"Overall, how satisfied are you with your employer sponsored benefit program in providing you with the tools you need to save for your future?"
Base: 1,235 U.S. Adults age 18+

Total

  1 Qtr 2004 4 Qtr 2002
Satisfied (*net) 45% 54%
Neither Satisfied/Dissatisfied 21% 18%
Dissatisfied (*net) 34% 28%

SECURE ABOUT FINANCIAL WELL-BEING
SMB employees were asked to describe how secure they felt about their financial well-being in today's economy. Based on their feedback, less than 1 out of every 3 employees (30%) feel secure about their financial well-being in today's current economy. Chart 1 depicts how employees rated their security levels.

Chart 14 - Security
Question - "Which of the following best describes how secure you feel about your financial well-being in today's current economy?" Base: 1,235 U.S. Adults age 18+

Very Secure 4%
Outlook for 2004
Somewhat Secure 26%
Neither 26%
Somewhat Insecure 31%
Very Insecure 13%

CHANGE TO OVERALL SPENDING
SMB employees were asked to describe how the current economy has impacted their overall spending in the past two months - 16% said they had increased their overall spending versus 37% that said they had decreased their spending. Two times as many said they had decreased their spending versus increased.

Chart 15 - Overall Spending
"Which of the following best describes how the current economy has impacted your overall spending in the past two months?" Base: 1,235 U.S. Adults age 18+

Greatly increased 4%
Outlook for 2004
Increased a little 26%
About the same 26%
Reduced a little 31%
Greatly reduced 13%

2004 PRESIDENTIAL CANDIDATES
According to SMB employees - George W. Bush and John Kerry tied with 25% noting they would be the best at ensuring the availability of healthcare to all Americans.

Table 16 - Presidential
"Which of the following 2004 presidential candidates do you believe would do the best at…"
Base: U.S. Adults age 18+

2004 Presidential
Candidates
…ensure availability of affordable healthcare to all Americans?
George W. Bush 25%
John Kerry 25%
Other Candidates
11%
Not Sure 39%
  N=1,199

Harris Interactive® (www.harrisinteractive.com) is a worldwide market research and consulting firm best known for The Harris Poll®, and for pioneering the Internet method to conduct scientifically accurate market research. Headquartered in Rochester, New York, Harris Interactive combines proprietary methodologies and technology with expertise in predictive, custom and strategic research. The Company conducts international research from its U.S. offices and through wholly owned subsidiaries-London-based HI Europe (www.hieurope.com), Paris-based Novatris and Tokyo-based Harris Interactive Japan-as well as through the Harris Interactive Global Network of independent market- and opinion-research firms.

 

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