Data & Research November 10, 2011

Millennials Most Confident about Benefits Decisions

Millennials are by far the most confident about their ability to make the right benefit decisions, according to The Guardian Life Insurance Company of America.
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Ninety-six percent of Millennials reported they feel “highly confident” versus 66% of Gen Xers and 64% of Baby Boomers.   

The survey also found nearly 80% of employees spend less than a total of two hours evaluating their insurance benefits options, including group medical, dental, life, and disability insurance.    

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Only 32% of all employees described their approach to open enrollment as one that incorporates a “careful review” of their benefits details and options. Millennials are more likely than their older co-workers to say they carefully enrolled in available benefits options (50% vs. 30% of Gen Xers and 31% of Baby Boomers).   

Yet, the research indicates that Millennials may be underinsured. A smaller percentage of Millennials (78%) are currently enrolled in available benefits as compared to their older colleagues (92%), particularly life (48% vs. 71%) and disability insurance (53% vs. 68%). 

While online benefits enrollment has become the new normal—with its use more than doubling in five years to 62%—many of the same communication and engagement challenges still persist, according to research from The Guardian Life Insurance Company of America. A majority of workers, regardless of age or life-stage, say they try to better understand their benefits options by reading their benefits materials (77%) and reviewing their prior year’s selections (66%); however, a minority reported that they have attended benefits meetings (37%), spoken with a benefits adviser (29%), used online planning tools (28%), or spoken with a carrier representative (14%) prior to enrollment.  

While some challenges continue, the research found that online enrollment can help improve employee perceptions of employer benefits communication and education efforts; 61% of workers who used an online benefits enrollment tool and found it to be a very easy process gave top ratings to their employers’ benefits education and communication efforts, compared to 35% of others.    

Full research results can be viewed at http://www.aboutemployeebenefits.com/reports/Research-Reports-Benefits-and-Behavior.html.

Data & Research November 10, 2011

Employers Say Retirement Plan Success Fueled by Tax Deferrals

Eliminating retirement plan tax incentives could have a significant negative impact on retirement security by discouraging savings and reducing the number of plans offered, said small and medium-sized employers in a recent survey.  
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Research from the Principal Financial Group found three-quarters (75%) of employers say current tax deferral incentives are the most attractive retirement plan feature to employees and more than eight in 10 say participation and savings would decrease if the incentives were removed.

Key findings from the 2011 Principal Financial Group Retirement Readiness Survey include:

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•  Ninety-two percent of employers state that retirement tax incentives for workers are important in their decision to offer a 401(k) plan;

•  Nearly two-thirds (65%) say their desire to continue offering a plan would decrease if those incentives were removed; and

•  More than a third (36%) of employers who don’t currently offer a plan say the lack of tax incentives would decrease their desire to start offering one.

“Employers offer retirement plans voluntarily, so it is critically important to understand how proposed changes to the system would impact their decisions,” said Greg Burrows, senior vice president, retirement & investor services at The Principal, in a press release. “It is especially vital to listen to smaller employers because they are the economic backbone of the nation. What we are hearing loud and clear in this survey is that employers value the current voluntary system and they want Congress to preserve retirement savings tax incentives.”

The survey finds that many employers believe that even a reduction in tax incentives would shrink worker participation and contribution levels as well as diminish their own desire to offer a plan. More than half (54%) say tax deferral limits should be raised, not lowered. 

Rethinking and Reinforcing Retirement Readiness

Two out of three employers who offer a plan believe the current 401(k) system is effective in helping workers achieve adequate retirement savings. Most believe employees need to be saving on average at least between 12% and 16%—including employer match—over the course of a career. Many are willing to make changes to their programs if shown research the actions would boost savings.

•  Sixty-six percent of employers who offer a plan would be willing to improve education to promote double-digit savings levels;

•  Twenty-two percent would be more likely to add auto enrollment;

•  Forty percent would consider a 6% or 8% default deferral rate for workers who are auto enrolled in the plan; and

•  Thirty-two percent of employers who use auto enrollment would be willing to combine a 6% deferral rate with a 1% auto increase up to 15% if shown research that participants wouldn't opt out.

Measuring Worker Retirement Readiness: Is the Plan Popular or Successful? 

•  While 75% of employers feel they have a successful defined contribution /401(k) plan, 82% measure success by participation rates;

•  Only 4% of employers who offer a plan measure if their workers are on track to have adequate retirement income; and

•  Only 15% consider retirement income ratios when designing their retirement plan.

The survey was conducted online from May 17-June 17, 2011 by Harris Interactive on behalf of the Principal Financial Group.

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