Perceived Value of Employee Benefits Improving

Most employees (79%) see their employers as a trustworthy source to help them grow and protect their money, according to Prudential.  

The perceived value of employee benefits has also been trending upward, from 43% in 2010 to 59% in 2012. Fifty-one percent of employees believe they are being offered a wide array of benefits, up from 38%. Employers are also reporting greater satisfaction with their benefits—37% in 2012, compared with 27% in 2011.  

The effectiveness of benefit communications has also improved, from 36% in 2011 to 42% in 2012. The majority of employees report reading their benefit enrollment material—82% this year, up seven points from 2011—and most agree they prefer benefits communications they can read on their own time. 

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Employers’ interest in making benefits strategies a main focus is up 17% from the 2010 study, Prudential reports. In addition to shifting ownership and the cost of benefits to employees, employers’ top strategies in order of priority are: 

  • Expanding wellness, preventive and work/life balance initiatives; 
  • Improving the effectiveness of benefits communications; 
  • Cost-sharing with employees; 
  • Giving more financial responsibility to employees; and 
  • Increasing employee benefits education and financial advice. 

“We are seeing two positive trends pointing to the successful evolution of employee benefit strategies,” Pelletier said. “Employers are well positioned to shift ownership of benefits to employees. At the same time, employees are taking on more responsibility for the benefits selection process and are expressing greater confidence in the benefits they are selecting.”  

“Sharpening the Focus on Benefits Strategy” is the first in a series of five research briefs that will provide highlights from Prudential’s seventh annual “Study of Employee Benefits: Today and Beyond.” Research for the study was conducted via the Internet during July 2012, and consisted of three distinct surveys of plan sponsors, plan participants and broker/consultant audiences.  

Russell Shows How to Evaluate In-Plan Annuities

Russell has developed new research offering guidance about how plan sponsors can overcome selection ambiguity when evaluating in-plan guaranteed income solutions.

Divided into two parts, the research paper’s first section provides background about the current state of the industry and discusses the appeal of in-plan guaranteed income solutions through the description of two available product types: variable annuities with guaranteed lifetime withdrawal benefits (GLWB) and fixed life annuities. The second section presents an income framework for comparing in-plan guaranteed income solutions through a case study analysis and provides a comprehensive checklist of how plan sponsors can apply this guidance.   

“We focus on how to quantify and compare alternative solutions in terms that matter to participants—income terms and remaining account values — in order to better align the selection process with what participants want,” said Josh Cohen, defined contribution (DC) practice leader at Russell Investments. “Currently most research on guaranteed products compares the features of various offerings but lacks a practical, quantitative framework for plan sponsors to use in evaluating the expected benefits of available options in different market environments.”  

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In applying this framework, Russell’s research also dispels some of the often-touted benefits of the GLWBs, in particular the ability for the level of income received to increase over time as the market increases. The research indicates that this boost will likely occur only in the most optimistic market environments and that traditional life annuities are likely to generate higher guaranteed income in most markets. However, GLWBs still provide longevity protection and offer the key advantage of allowing participants to tap into their account for liquidity at any time.  

The research report can be downloaded from here.

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