Health Insurance Still Tops Benefits List

December 13, 2005 ( - Employees still rank health insurance as the most important benefit, according to the Principal Financial Group's Well-Being Index.

Ninety percent of respondents ranked health insurance high in importance, the same number as in 2004, according to the survey (see Americans Still Fretful about Financial Future ). A distant second was defined contribution plans, cited by 71%, with defined benefit (55%), disability insurance (55%), and life insurance (51%) benefits rounding out the top five ranked by importance.

According to the survey, the top benefit offered by firms with 10 to 1,000 employees is health insurance (88%), followed by life insurance (65%), defined contribution retirement plans (64%), free parking (57%), and disability insurance (48%). However, the research found a significant drop in the ranking of DC and disability insurance offerings from last year (72% and 53% in 2004, respectively).

Sixty-two percent of employees were most satisfied with their employer’s defined benefit pension plan, while 54% were most satisfied with their employer’s DC plan benefit, however, the index showed a drop in satisfaction with life insurance benefits. Fifty-one percent of respondents gave this benefit a high satisfaction rating in 2004, compared with 45% in this year’s survey.

Among benefits they wished their employer offered, but didn’t, a defined benefit plan (18%) and a profit sharing/bonus plan (12%) were the top two selections.

Respondents would like to see their health insurance benefit (45%) and DC plan (14%) improved, more than other benefits. Thirty-seven percent of employees reported increased co-pays for their health insurance and 31% reported increased employee deductibles, while 16% said they were given reduced medical benefit coverage options in 2005.

Performance Anxieties

The number of employees who said a good benefits plan encourages them to perform better has dropped from 70% in 2004 to 65% in 2005. The number of employees who feel their employer is concerned about their long-term financial future also dropped, from 33% in 2004 to 25% in 2005.

The majority of employees are very concerned about their financial future (73%), and only about a quarter (29%) said they were extremely happy about their current financial state. One-fourth of employees said they had not yet planned for their retirement savings or security. Job security is a top priority for respondents – 52% ranked it as the most important, compared with 36% who ranked long-term financial future with top importance and 12% who ranked challenging work as such.

On the issue of retirement savings, the index found that 77% of employees who have retirement savings are not making changes to how their investments are invested while 23% are – 15% shifting to more stable investments, and 9% to a more volatile mix. There was a significant decline in the proportion of people moving money from volatile investments to stable investments for this year when compared to last year (21% in 2004) and a significant increase in the people not making any changes (77% in 2004).

Forty-five percent of survey respondents reported being very/somewhat satisfied with the tools provided by their employer for saving for the future. Thirty percent said they were very/somewhat dissatisfied.

Finally, an impressive 72% of respondents said they would be interested in the new Roth 401(k)/403(b) option, but 59% said they were not sure their employer would be offering it. Of those who did know their employer would be offering it, 69% said they plan to participate.

Harris Interactive conducted The Principal Financial Well-Being Index survey of 1,213 employees from November 7-17, 2005.