The Principal Financial Well-Being Index^SM Executive Summary - Second Quarter 2001

Overview:
Harris Interactive, Inc. conducted The Principal Financial Well-Being Index following second quarter 2001. This is the third in a series of quarterly studies to identify and track trends in the workplace. Harris was commissioned by the Principal Financial Group, the nation's 401(k) leader, to conduct an online survey of employees of small and mid-sized U.S. businesses (10 - 1,000 employees) about their attitudes and perceptions regarding their financial well-being and their current employee benefits.

Methodology:
The study was conducted through Harris Interactive's QuickQuery omnibus research product, which is fielded to a random subset of a panel of more than 7 million cooperative respondents via the Internet. More than 1,200 full- and part-time employees of small and mid-sized companies (size range: 10 - 1,000 employees) were interviewed. Results have been weighted by Harris to reflect the national small to mid-sized business employee population. This study has a 95% confidence level with a range of error of + 3%. For the first survey conducted in the Fourth Quarter 2000, the respondents were employed within companies with 10 to 499 employees. However in order to increase the sample size of the survey and represent a larger portion of small and mid-sized businesses, a change was made in the First Quarter 2001 Well-Being Index to include employees within businesses with 11 to 1,000 employees. The current survey includes employees of companies ranging in size from 10 to 1,000 employees.

Executive Summary:
After holding tight in the previous quarter, small and midsize company employees are having mixed reactions to the disappointing economy. Some employees with retirement savings reported they have shifted to more stable investments. Other respondents, nearly one-third, plan to increase contributions to their retirement accounts, based on the new legislation raising annual contribution limits.Overall, there is still much concern among small business employees regarding their long-term financial future, suggesting the need for continued education on retirement benefits. In fact, one-third of respondents have not yet planned for retirement, up from the previous Index. The majority of the respondents of said a good benefits plan would encourage them to stay at their current companies, as well as work harder and perform better. Respondents also indicated an interest in taking a sabbatical or mid-career retirement. In fact, almost half of the respondents indicated they would like to take a sabbatical, but cannot do so because of financial reasons, employer's unwillingness to allow it, or other reasons. Another ten percent have taken or plan on taking one. Overall, respondents generally remain satisfied with their benefits. Defined benefit retirement plans registered highest satisfaction level. The benefits workers most requested their companies improve continue to be health insurance and defined benefit plans. Health insurance remains the most common benefit offered, with defined contribution plans and free parking the second most common.

Major Findings:

Employee Financial Future and Well-Being

• 28 percent of respondents who indicated that they have retirement savings investments said they have changed how their retirement savings are invested (moving from volatile to more stable investments), as a result of the disappointing stock market this year, up from 14 percent in the last quarter.

• 80 percent of small and mid-size company employees are "very concerned" about their financial future. This is similar to the two previous Indices, at 74 percent in fourth quarter 2000 and 84 percent in first quarter 2001.

• 34 percent of the respondents agree that they have not yet planned for retirement or security, up from 27 percent in the last quarter. However, the research shows that employees of 10-500 employee-sized businesses are less likely to have begun planning for retirement than their counterparts at 500-1,000 employee-sized businesses.

• Only 47 percent of employees agreed with the following statement, "I am extremely happy with my financial well-being." However, the research revealed that only 39 percent of the female respondents are happy with their current financial well-being, as opposed to 54 percent of their male counterparts.

• When asked to rank their overall importance, an equal number of respondents ranked job security and their long-term financial future first (44 percent). In the previous two Indices, a higher number of respondents had ranked job security first. An additional 13 percent ranked challenging work first, down from 21 percent in the previous quarter.

• 24 percent of the respondents, overall, agreed with the statement "My company is concerned with my (and my family's) long-term financial future" while 48 percent disagreed with the statement.

• 65 percent of the respondents think about their financial future at least once a month, a percentage that is consistent with previous quarters.

Employees Response to New Legislation

• 30 percent surveyed stated that they planned to contribute more to their retirement accounts (employer-sponsored retirement accounts and/or individual retirement accounts), due to recent legislation that raised the amount employees may contribute tax deferred. However, 33 percent of respondents didn't feel the new legislation would impact them currently.

• As a result of the legislation, male respondents plan to contribute more to both their individual retirement accounts (22 percent versus 11 percent) and employer-sponsored retirement accounts (22 percent versus 14 percent) than their female counterparts.

Employees Taking Sabbaticals or Mid-Career Retirements

• 10 percent of those surveyed have taken (5 percent) or plan to take (5 percent) a sabbatical or mid-career retirement. Another 47 percent of respondents indicated they would like to take a sabbatical, but cannot do so because of various factors, such as financial reasons or their employer's unwillingness to allow it.

• Assuming respondents were to take a sabbatical, the top employee benefits they would most want to maintain during their break in employment were health insurance (85 percent), life insurance (28 percent), defined contribution retirement plan (27 percent), and disability insurance (18 percent).

Employee Attitudes Towards Benefits

• Consistent with first quarter 2001 results, 77 percent of the respondents agreed with the statement "having a good benefits plan would keep me working for my current company."

• 69 percent of the respondents said a good benefits package would keep them at their current companies, up 10 points from last quarter.

• For the third quarter in a row, health insurance remains the most common benefit small and mid-size companies offer to their employees (83 percent). Defined contribution retirement plans came in second at 64 percent. Health insurance and defined contribution plans were also ranked as the two most important benefits to employees.

• Health insurance and defined contribution plans were also ranked as the benefits employees wish their company would most improve. 37 percent of the respondents wished for healthcare plan improvements and 18 percent wished for defined contribution plan improvements.

• Ranking on a scale of 1 to 10, with 10 being very satisfied and 1 being not satisfied at all, employees were most satisfied with their defined benefit retirement plans, with an average ranking of 7.1. This ranking has remained consistent during the past two quarters. Employees gave an average ranking of 6.7 to their defined contribution retirement plans, which is also consistent with first quarter 2001.

• For the second quarter in a row, the additional benefits employees wished their companies would offer are defined benefit plans (19 percent) and profit sharing/bonuses (14 percent).

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Detail of Major Findings:

Employee Attitudes Toward Benefits

1. Types of employee benefit programs that current company offers:

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Health Insurance	77%	89%	83%
Free Parking	70%	61%	64%
Defined Contribution Retirement Plans (401(k), etc)	63%	76%	64%
Life Insurance	58%	67%	61%
Disability Insurance	48%	55%	49%
Defined Benefit Retirement Plans - Pension	33%	32%	25%
Flex Time	25%	33%	28%
Tuition Reimbursement	25%	42%	31%
Profit Sharing/Bonus	19%	25%	24%
Stock Options	14%	15%	15%
Child Care Subsidies	4%	8%	2%
On-site Day Care	2%	2%	3%
Other	6%	10%	7%
None	7%	3%	8%

 

2. Average satisfaction level with current employee benefits (scale of 1 to 10; 10 being very satisfied, 1 being not satisfied at all)

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Defined Benefit Retirement Plan - Pension	7.6	7.5	7.1
Defined Contribution Retirement Plans (401(k), etc)	7.0	6.4	6.7
Life Insurance	6.7	6.9	6.8
Health Insurance	6.2	6.7	6.7
Profit Sharing/Bonus	7.3	5.7	6.9
Stock Options	6.1	4.9	6.5
Disability Insurance	6.7	6.3	6.7

  

3. Average rating of most important benefits, according to employees (scale of 1 to 10; 10 being very important; 1 being not important at all)

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Health Insurance	8.6	9.2	9.2
Defined Contribution Retirement Plans (401(k), etc.)	7.7	8.5	8.3
Life Insurance	7.1	8.0	7.6
Defined Benefit Retirement Plan - Pension	7.3	8.2	7.7
Profit Sharing/Bonus	7.0	7.0	6.9
Disability Insurance	7.4	7.9	7.7
Stock Options	5.1	5.3	5.2

 

4. Top benefits that employees wish their company would improve:

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Health Insurance	34%	40%	37%
Defined Contribution Plans (401(k), etc)	15%	25%	18%
Defined Benefit Plan - Pension	8%	4%	6%
Profit Sharing	8%	9%	8%
Life Insurance	4%	2%	3%
Disability Insurance	3%	1%	2%
Stock Options	3%	0%	2%
Flex Time	0%	2%	3%
Child Care Subsidies	0%	0%	-
On-site Day Care	0%	0%	-
Free Parking	0%	1%	-
Tuition Reimbursement	0%	1%	2%
None	19%	15%	17%

  

5. Of the benefits not currently offered, employees noted the top benefits they want their current company to offer:

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Profit Sharing / Bonus	18%	13%	14%
None	13%	9%	5%
Flex Time	12%	10%	10%
Stock Options	9%	9%	5%
On-site Day Care	8%	2%	7%
Defined Benefit Retirement Plan - Pension	8%	24%	19%
Tuition Reimbursement	7%	8%	8%
Health Insurance	6%	5%	4%
Defined Contribution Retirement Plans (401(k), etc)	5%	6%	10%
Disability Insurance	5%	2%	4%
Free Parking	0%	4%	2%
Child Care Subsidies	0%	3%	3%
None		9%	9%
Life Insurance	0%	0%	3%

 

Employee reaction to statements about their financial future, benefits and retirement

1. "My company is concerned about my (and my family's) long-term financial future."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree Completely	5%	7%	5%
Agree Somewhat	16%	21%	19%
Neither Agree or Disagree	25%	21%	28%
Disagree Somewhat	24%	13%	21%
Disagree Completely	30%	39%	28%

  

2. "I am very concerned about my (and my family's) long-term financial future."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree Completely	47%	58%	51%
Agree Somewhat	27%	26%	29%
Neither Agree or Disagree	13%	6%	11%
Disagree Somewhat	7%	8%	6%
Disagree Completely	6%	2%	3%

 

3. "Having a good benefits plan encourages/would encourage me to work harder and perform better."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree Completely	32%	32%	30%
Agree Somewhat	35%	27%	39%
Neither Agree or Disagree	21%	26%	21%
Disagree Somewhat	5%	10%	5%
Disagree Completely	8%	5%	6%

 

4."I have not yet planned for retirement savings/security."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree completely	16%	8%	14%
Agree somewhat	16%	19%	20%
Neither Agree or Disagree	14%	19%	13%
Disagree somewhat	27%	21%	24%
Disagree completely	27%	33%	29%

 

5. "Having a good employee benefits plan keeps me/would keep me working for my current company."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree completely	38%	38%	38%
Agree somewhat	37%	37%	39%
Neither Agree or Disagree	14%	21%	14%
Disagree somewhat	6%	3%	5%
Disagree completely	5%	2%	4%

 

6. "I am extremely happy with my current financial well-being."

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Agree completely	8%	3%	7%
Agree somewhat	21%	21%	21%
Neither Agree or Disagree	17%	17%	20%
Disagree somewhat	29%	33%	30%
Disagree completely	26%	26%	23%

 

7. Please rank how important the following three things are to you (percentages are number one rankings):

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Job Security	43%	42%	44%
Long-term Financial Future	38%	37%	44%
Challenging Work	19%	21%	13%

 

8. How often do you think about your long-term financial future?

	Fourth Quarter 2000	First Quarter 2001	Second Quarter 2001
	10-499	11-1,000	10-1,000
Once a year or less	11%	11%	7%
Two to 11 times a year	29%	25%	28%
One to six times a month	36%	32%	35%
Seven or more times a month	24%	33%	30%

 

9. "Given the down-turn in the stock market this year, have you made changes in how you have your retirement savings invested (moving from volatile investments to more stable investments)?" (This question was not asked in the Fourth Quarter 2000 survey).

	First Quarter 2001	Second Quarter 2001
	11-1,000	10-1,000
No, I have not made changes	68%	54%
Yes, I have made changes	11%	21%
I do not have retirement savings	21%	25%

 

The following questions were new topics added to the Second Quarter 2001 Index.

10. "In June, President Bush signed a tax relief act into law. This law raises the maximum annual amount of money you can contribute to your employer-sponsored retirement plan (i.e. 401k, 403b, or 457 accounts) and your individual retirement accounts (IRAs). How will these limit increases affect the way you plan for retirement, if at all?"

	Second Quarter 2001
	10-1,000	10-500	501-1,000
I plan to contribute even more to my employer-sponsored retirement plan	17%	15%	27%
I plan to contribute even more to my individual retirement account	18%	19%	14%
I do not plan to increase my current annual contributions to my retirement accounts	37%	36%	41%
This new legislation does not apply to me at this time	33%	35%	23%

 

11. "Some individuals temporarily leave the workforce for 4 months or longer to pursue personal interests. These temporary breaks in employment have been described as "sabbaticals" or "mid-career retirements". Have you ever taken, or do you plan to take, a sabbatical or mid-career retirement from your professional career?"

	Second Quarter 2001
	10-1,000	10-500	501-1,000
I have taken a sabbatical from my career	5%	6%	3%
I have not yet taken a sabbatical from my career, but plan to do so in the future	5%	5%	4%
I would like to take a sabbatical but cannot do so because I cannot afford it	28%	27%	33%
I would like to take a sabbatical but cannot do so because my employer would not allow me to take the time off	12%	12%	11%
I would like to take a sabbatical but cannot do so for some other reason	7%	8%	3%
I have not taken, nor would like to take, a sabbatical from my career	43%	42%	46%

 

12. "Assuming you were to take a sabbatical from your professional career, which of the following employee benefits would you most want to maintain during your temporary break in employment, even if they were at a cost to you?"

	Second Quarter 2001
	10-1,000	10-500	501-1,000
Health Insurance	85%	85%	84%
Life Insurance	28%	27%	30%
Defined Contribution Retirement Plan (401(k), etc.)	27%	26%	32%
Disability Insurance	18%	18%	20%
Defined Benefit Retirement Plan - Pension	11%	12%	7%
Profit-sharing/bonus	6%	7%	4%
Stock Options	4%	4%	5%
Other	3%	3%	3%
None	5%	5%	7%