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Welcome to the Employee Benefits: 2007 & Beyond webinar

To hear the audio portionof this presentation

please dial:1-866-269-9613

PRUDENTIAL’S GROUP INSURANCE

The Prudential Insurance Company of America, Newark, NJIFS-A145817 Ed. 04/2008

Employee Benefits: 2007 & BeyondInsight into the Next Generation of Employee Benefits

Kevin MorganVice President—Client ManagementGene LanzoniVice President—Global Market ResearchJean WiskowskiVice President—Group Insurance Marketing

Client WebinarApril 1, 2008

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Source: Trends in Benefits Web Technology: 2006 Research Among Benefits Plan Sponsors, The Prudential Insurance Company of America, May 2007.

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Introduction

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Industry and General Media Coverage

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prudential.com

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Research Method—Two Distinct Market Surveys

Plan Sponsors Plan ParticipantsApril-May 2007

Online Survey

1,000 Full-Time WorkersAge 18 or Older50+ Employees

Timing April-May 2007

Method Online Survey

1,400 BenefitsDecision-Makers50+ Employees

Sample

Employer Size

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South28%

West23%

Northeast18%

Midwest31%

Region100 - 499

17%50 - 99

45%

500 - 99912%

1,000 - 10,00019%10,000+

7%

# of Employees

Industry

Services26%

Other23%

Construction6%

Wholesale6%

Retail11%

Financial12%

Manufacturing16%

Profile of Plan Sponsors Surveyed

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Less than $50K19%

$100K - $149K23%

$50K - $74K22%

$75 - $99K22%

$150K+14%

West22%

South36%

Midwest23%

Northeast19%

Region

60+4%

30 - 3926%

50 - 5927%

40 - 4930%

Under 3013%

Age

Household Income

Profile of Plan Participants Surveyed

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Themes

1. Benefits Balancing Act—Getting Tougher

2. Closing the Education Gap on Income Replacement

3. Revolutionizing the Benefits Enrollment Experience

4. Benefits Strategy—Going Global

5. Women Seek Greater Value from Workplace Benefits

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Theme 1

Benefits Balancing Act—Getting TougherPlan Sponsors Struggle to Balance Dueling Objectives: Reduce Benefits Costs While Maintaining a Competitive Benefits Program

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43%

51%

Employee Benefits Remain a Priority for Attracting and Retaining Talent, but…

84%

Plan ParticipantsImportance of employee benefits in deciding to stay / take a new job

Highly Important*

Strongly Agree*

Strongly Agree*

Plan SponsorsUpper management sees employee benefits as strategically important

Offer better benefits than competitors to attract / retain talent

*Top two scores on a 7-point scale

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…Plan Sponsors Are Shifting Even More Benefits Costs and Financial Responsibility to Workers

48%

45%

21%

19%

More financialresponsibility

Cost-shifting

Importance of Cost-Containment Strategies—2007 vs. 2012 Percentage of Plan Sponsors Rating Item “Highly Important”

2007

2007

2012

2012

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Cost Is a Top Consideration When Plan Sponsors Are Choosing Benefits Providers

Importance of Benefits Provider Selection Criteria

2007 2012 +/-Cost—not necessarily lowest priced but lower total costs 51 63 12Cost—specifically lowest priced option 46 56 10Financial strength 45 53 8Quality of claims and call center service 44 58 14Quality of account service provided to HR staff 42 56 14Expertise of provider with specific product 42 51 9Flexibility with respect to underwriting / plan design 33 47 14Experience / knowledge of your industry 31 42 11Innovative financial and benefits solutions 30 47 17Reputation, name recognition of provider 30 35 5Local account management team (in your time zone) 29 37 8Effectiveness of employee education / communication 29 49 20Quality of online tools for HR staff 28 50 22Quality of online tools for employees 25 52 27

% Highly Important*$ = Cost-Related Criteria

$$$$

$$

$$$$

*Top two scores on a 7-point scale

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Linkage Between Benefits Strategy and Business Goals Likely to Strengthen by 2012

Extent to Which Benefits Strategy Is Linked to Business GoalsBased on a 7-point “linkage” scale (7 = “completely linked”; 1 = “not linked at all”)

Strong Linkage22%

Low Linkage 24%

Moderate Linkage

54%

2007

Moderate Linkage

44%

Low Linkage 15%

Strong Linkage

41%

2012

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Continued Cost-Shifting and Cutbacks Impact Workers’ Enthusiasm about Their Benefits

Perceived Value of Employee Benefits Among U.S. Workers7-point “value” scale

Moderate Value 40%

Low Value 7%

High Value53%

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Questions?

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Theme 2

Closing the Education Gap on Income ReplacementWorkers Lack Awareness and Knowledge about the Benefits of Disability Insurance

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Workers Need Help Understanding Their Group Disability Benefits

Top Employee Financial Concerns and Extent Employers Are Addressing ThemTop 10 Employee Financial Concerns*

Importance to Employees*

Extent Employers Addressing* Gap

Appropriate health insurance 83% 52% 31

Saving for retirement 76% 42% 34

Flexible, or generous, paid-time-off policies 67% 35% 32

A healthy lifestyle 62% 31% 31

Financial security if can't work due to disability / serious illness 60% 21% 39

A financial plan for achieving major financial goals 53% 18% 35

Advice about making retirement money last as long as you need it to 51% 23% 28

Financial security in the event of a premature death 47% 22% 25

Flexible workplace arrangements to balance work / personal life 47% 27% 20

*Top two scores on a 7-point scale

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Disability Plan Information Is Generally Overshadowed by Other Benefits Communications

Extent to Which Plan Sponsors Address Top Employee Financial ConcernsPercentage Addressing “A Great Deal” (2007 vs. 2012)*

2007 2012 +/-

401(k) investment education (asset accumulation)23% 41% 18

401(k) education about disbursement of retirement plan assets (payout)23% 40% 17

Provide employees access to general financial advisors 17% 28% 11

Help employees understand their long-term care insurance needs8% 22% 14

Help employees understand their disability insurance needs 12% 22% 10

Help employees understand their life insurance needs 9% 21% 12

Making available a 529 plan or other initiatives for college funding8% 18% 10

*Top two scores on a 5-point scale

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Workers Focus on Their Medical and Retirement Benefits and Gloss Over Disability Insurance

How Plan Participants Would Allocate Benefits Time & Money

$4.63

$4.84

$6.26

$7.50

$7.53

$19.49

$49.74

Vision

Disability

Life

LTC

Dental

Medical

Retirement

4%

5%

6%

8%

10%

31%

36%

LTC

Disability

Vision

Life

Dental

Retirement

Medical

How Employees Would Allocate $100 for Employee Benefits

Percentage of Time Employees Spend on Benefits Decision-Making During Open Enrollment

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Questions?

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Theme 3

Revolutionizing the Benefits Enrollment ExperienceCurrent Communication, Education, and Enrollment Efforts Fall Short of Helping Workers Make the Best Benefits Choices to Meet Their Financial Needs

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Improving Benefits Communication and Education Is Increasingly Important to Many Plan Sponsors

Perceived Effectiveness of Benefits Communication EffortsPlan Participants vs. Plan Sponsors

Percentage Rating Benefits Communications “Highly Effective”

21%

35%41%

26%20% 25%

35%

40%35%

27%

50 - 499 500 - 1,999 2,000 - 9,999 10,000+

Plan Participants

Plan Sponsors

By Size of Employer

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Workers Are More Likely than Their Employers to See Value in Tailored Benefits Communications

Receptivity to Targeted Benefits CommunicationsPlan Participants vs. Plan Sponsors

Plan Participants Plan Sponsors

Tailor benefits communications and information to better meet employee's / family's situation and needs

70% (% High Interest)

26% (% High Importance)

Permit employer to use select personal information to more effectively tailor benefits offerings and communications

45% (% High Willingness)

25% (% High Willingness)

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Plan Participants Seek Professional Help in Benefits Decision-Making

Plan Participant Sources of Benefits InformationUsage vs. Helpfulness

Benefits Information Sources (Ranked by Usage) Sources UsedMost Helpful

Sources Gap

Benefits manuals / materials 90% 64% -26

Colleagues / friends 68% 38% -30

HR / Benefits department staff 57% 42% -26

Web calculators 54% 34% -20

Enrollment meetings 47% 42% -5

Financial professional outside workplace 28% 39% +11

Financial professional on-site during enrollment period 18% 36% +18

Financial professional via 800-number 15% 27% +12

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Many Employees Feel Pressured for Time During Their Annual Open Enrollment Period

Adequacy of Amount of Time for Benefits Decision-MakingPlan Participants vs. Plan Sponsors

Percentage Who “Strongly Agree” that Time is Adequate

45%

48%60%

55%

44%

46%

47%

56%48%

38%

50-499 500-1,999 2,000-9,999 10,000+

Plan Participants

Plan Sponsors

By Size of Employer

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Giving Employees Adequate Time to Make Benefits Decisions Translates into Higher Satisfaction

Benefits Satisfaction & Having Adequate Decision-Making Time

11% 20%

55%31% 40%

73%

Disagree Moderately Agree Strongly Agree

That Time for Benefits Decision-Making Was Adequate at Last Enrollment

Percentage of Plan Participants Who …Rate Benefits Communications as Highly Effective Highly Value Their Benefits Program

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Polling Results

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Theme 4

Benefits Strategy—Going GlobalMultinational Companies Increasingly Recognize the Importance of a Global Benefits Strategy to Manage Costs and Improve Effectiveness

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More Companies Anticipate Growth in Their Overseas Employment

Anticipated Trends in Overseas Employment: 2007 – 2012By Company Size

Percentage of Plan Sponsors With Employees Based Outside the U.S.

Percentage of Plan Sponsors’ Employees Based Outside the U.S.

84%

56%

43%

48%

35%

21%

17%

20%

84%

52%

41%

40%

30%

16%

15%

12%

10,000+

5,000 - 9,999

2,000 - 4,999

1,000 - 1,999

500 - 999

100 - 499

50 - 99

All Firms

20072012

28%

20%

13%

13%

11%

5%

5%

6%

23%

15%

10%

11%

9%

3%

4%

4%

10,000+

5,000 - 9,999

2,000 - 4,999

1,000 - 1,999

500 - 999

100 - 499

50 - 99

All Firms

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More than One-Third of Multinational Companies Have a Global Benefits Strategy

Plan Sponsor Approach to Benefits for Overseas Employees

Domestic, Country-by-

Country Approach

62%

Global, Holistic Strategy

38%

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Firms with Fewer Employees in Fewer Countries Are More Likely to Have a Global Benefits Strategy

Plan Sponsor Approach to Benefits for Overseas EmployeesBy Company Size (Total Employees Worldwide)

26%

32%

24%

30%

22%

36%

49%

74%

68%

76%

70%

78%

64%

51%

10,000+

5,000 - 9,999

2,000 - 4,999

1,000 - 1,999

500 - 999

100 - 499

50 - 99

Global View Country-by-Country View

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The Need for Non-English Benefits Communications Is Even Greater Among Multinational Firms

Plan Sponsors’ Need for Non-English Language Benefits Communications by 2012

Same66%

Less2%

More32%

Same55%

Less3%

More42%

Employees Outside the U.S.No Employees Outside the U.S.

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Theme 5

Women Seek Greater Value from Workplace BenefitsWomen Have Unique Financial and Lifestyle Needs and Look to Their Employers for Support

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Women Express Greater Concern than Men about Financial and Lifestyle Needs

Importance of Employee Financial & Lifestyle ConcernsPercentage of Men & Women Rating Items “Highly Important”

Employee Financial / Lifestyle Concerns Men Women +/-More flexible, or generous, paid-time-off policies 57% 75% +18

Advice about how to invest retirement money (asset accumulation) 43% 56% +13

Appropriate health insurance 77% 89% +12

A healthy lifestyle 55% 67% +12

Flexible workplace arrangements & work / life balance 40% 52% +12

A trusted source to provide financial advice 32% 43% +11

Access to counseling for mental health / emotional well-being 16% 24% +8

Financial security if out of work due to a disability or serious illness 54% 61% +7

Financial security if require long-term care 34% 41% +7

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For Women, Financial and Work / Life Balance Needs Are More Pressing Concerns than Retirement

Importance of Employee Benefits in Job DecisionsPercentage of Men & Women Rating Items “Highly Important”

Most Important Benefits to MEN % Highly Important Most Important Benefits to WOMEN % Highly

Important

Salary 75% Salary 73%Medical Benefits 63% Medical Benefits 66%Retirement Benefits 47% Paid Time Off 61%Paid Time Off 44% Retirement Benefits 52%Other Insurance (e.g., Life, Dental, Disability) 31% Job Flexibility 35%Job Flexibility 30% Other Insurance Benefits (e.g., Life, Dental, Disability) 34%Bonus 24% Bonus 24%

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41%

48%

53%

62%

28%

35%

63%

73%

Web Calculator

Benefits Manual

Benefits EnrollmentMeetings

Financial ProfessionalOutside Workplace

Women Prefer to Receive Advice about Their Benefits from a Financial Professional

Women

Men

Helpfulness of Information Resources in Benefits Decision-MakingPercentage of Women & Men Selecting Items as “Most Helpful”

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Can Plan Sponsors Do More to Address Women’s Financial and Lifestyle Concerns?

Importance of Financial / Lifestyle Concerns and Extent to Which Employers Are Addressing Them

Percentage of Women Rating Items “Highly Important” or “To a Great Extent”

Womens' Top Financial / Lifestyle Concerns Importance Extent Addressing +/-

More flexible, or generous, paid-time-off policies 75% 26% -49

Financial security if out of work due to disability/serious illness 61% 21% -40

A financial plan for achieving major financial goals 54% 16% -38

Appropriate health insurance 89% 52% -37

A healthy lifestyle 67% 31% -36Saving for retirement 78% 43% -35Advice about how to invest retirement money (asset accumulation) 56% 22% -34Financial security in the event of a premature death 50% 21% -29A trusted source to provide financial advice 43% 17% -26

Flexible workplace arrangements and work / life balance 52% 26% -26

Financial security if require long-term care 41% 16% -25

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Questions & Answers

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Industry Research from Prudential