2012 Workplace Benefits Report

2012 Workplace Benefits Report

The State of Workplace Benefits in 2012 Workplace benefits integral to company performance and vital to employees’ lifelong financial security I’m pleased to share with you the highlights and observations of this year’s Workplace Benefits Report. Once again, the results will be of great value to employers who use these insights to build better and more strategic benefits programs. In turn, employees will ultimately benefit as recipients of improved offerings. As a top provider of workplace benefits committed to both markets, Bank of America Merrill Lynch continues to view this study as an opportunity to inform and better serve all of our clients. The overriding finding in 2012 was that financial benefit plans continue to play a critical role in effectively attracting and retaining talented employees for companies of all sizes. This coincides with a rapidly shifting demographic and economic landscape that makes workplace benefits more important than ever for employees as they prepare for long-term financial wellness and retirement readiness. Organizations that make the effort to understand and act on these parallel trends are most apt to thrive in the global marketplace.

Kevin Crain Head of Institutional Retirement & Benefit Services

2012 Workplace Benefits Report Review Make more of your benefit plans. For your company and your employees. This year’s insights bring greater understanding of employer motivators when selecting workplace benefits, and employee motivators for taking advantage of them. For both groups, financial benefits are proving to be more important than ever, which leads to an interesting dynamic that provides potential advantages for all. ■■

T oday, employers are feeling a greater sense of responsibility for their workforce, specifically in helping them prepare for retirement.

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In the current competitive market, employee loyalty is essential for companies to retain their talent.

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T hrough financial benefits, employers are given an opportunity to foster that loyalty and provide employees guidance for their transition into retirement.

Highlights of key findings 2 Financial benefits are key to employers’ talent management strategies 4 Employer concern for employees’ long-term financial security drives benefit decisions 6 Rising health care costs are on the radar for both employers and employees 8 Demand for personalized financial advice in the workplace is on the rise 10 Lack of communication limits employee awareness and satisfaction

In our opinion, this is how benefits should be viewed in this day and age — as investments a company makes to optimize employee performance, ability and loyalty; provide opportunities for employees to succeed financially; and ultimately, gain a sustainable competitive advantage for the company.


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Financial Benefits Key to Employers’ Talent Management Strategies Employers generally attuned to employees’ increasing reliance on financial benefits

Attaining and retaining top talent This year’s study found that nine out of 10 employers believe that financial benefits are equally or more important to potential hires today than they were five years ago — with half believing benefits such as 401(k)s, HSAs, financial advice and education are more important than ever. Confirming this, nearly 80% of employees surveyed view these benefits as a key factor when considering or accepting a new position. In fact, when asked, the majority of employees indicated they were willing to give up a significant portion of their current salary for guaranteed retirement income.

Employees’ desire for guaranteed retirement income over current income:

Compared to five years ago, how important do you think benefits are to employees? ● More important ● Same ● Less important

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82% willing to give up more than 5% of current salary

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Creating a loyal workforce These and other findings lead to our belief that a company culture that supports investments in employees’ professional growth as well as their long-term financial well-being will attract top talent and foster a more productive and loyal workforce. In turn, this workforce will be more deeply invested in the company’s success.

Plan usefulness and quality of service trump cost in selection process Reasons employers offer financial benefits

Employee well-being becoming a core company value

Employee financial well-being

Possibly a surprise in this day and age of competition and big business, employers’ number-one reason this year for offering financial benefits is “Employee financial well-being.” Therefore, it makes sense that offering benefits, which intuitively supports employees’ wellness and financial security, was cited by 81% of plan sponsors as being part of their company’s core values.

To retain existing talent Part of company’s core values To attract new talent Help employees be more productive To meet regulatory requirements

Of course, employers today still recognize the importance of a robust financial benefits offering as an effective talent management strategy to “retain existing talent” (84%) and “attract new talent” (68%).

hen considering financial benefits W in the workplace, employers place significant importance on a plan’s usefulness to employees (88%) and the quality of service their employees will receive (86%), followed closely by a plan’s cost (80%). The flexibility of the plan to support a demographically diverse workforce is also an important consideration (72%).

Competitors do


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Employer Concern for Employees’ Financial Security Drives Benefit Decisions Responsibility employers feel for sustaining employee assets throughout retirement

Need for greater focus on retirement readiness Although employers have made strides in recent years to help put employees in a better position to achieve financial wellness — with 57% of employees citing that their employer offers a company-wide wellness program – this study reveals a need for greater focus on retirement readiness and future health care costs.

Employers and employees feel weight of responsibility Nearly 70% of employers feel at least somewhat responsible for helping employees understand the assets needed to sustain them later in life. However, workers nearing this stage often find themselves on their own when it comes to transitioning into retirement. For instance, just two out of five (39%) employers surveyed offer retiring employees guidance on what to do with their 401(k) assets, while only one out of five (20%) helps to educate employees on such issues as preparing for future health care costs or understanding when to take Social Security as they approach traditional retirement age.

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Extremely Responsible (5) (4) (3) (2) Not at all Responsible (1)

Retirement savings incentives

More employees anticipate “working” in retirement

401(k)s still top employee need

This may be part of the reason why less than half of employees indicated they are on track to financially support their desired lifestyle in retirement, and another 22% have no idea whether they’re on track to do so or not. Plus, 73% of those surveyed see themselves working into their 70s.

When asked which one benefit is the most critical in helping to reach financial success in retirement, employees responded:

Perhaps this is the precursor to another developing or increasing benefit: 54% of employers are now offering part-time or consulting opportunities to employees as they reach or surpass traditional retirement age. This trend may be welcome news to the 50% of employees who expect to work part- or full-time at that stage in their life, and another 23% who believe they will cycle between work and leisure.


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401(k) Plan (91%)

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Defined Benefit Plan (78%)

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Equity Plans (68%)

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Nonqualified Deferred Compensation Plan (63%)

When asked what would encourage them to contribute more in their 401(k) plans, employees said: ■■

Higher company match (89%)

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ore affordable health care M benefits (73%)

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ore education, advice and M guidance about plan (53%)

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igher maximum contribution H amount (46%)

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Health Care Costs Are on the Radar for Both Employers and Employees Employers’ sense of responsibility for employees’ understanding of retirement health care needs and costs

Employers increasingly feel responsible for raising awareness While approximately half of employers said they feel at least somewhat responsible for helping employees understand their retirement health care needs and costs, few actually offer their employees education about the extensive health care costs they are likely to face in retirement. In fact, 21% of employers surveyed indicated that they currently provide education about the increasing and likely health care demands for retirees.

EMPLOYERS' PERSPECTIVE ● ● ● ● ●

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Extremely Responsible (5) (4) (3) (2) Not at all Responsible (1)

An opportunity for differentiation

Health care is a top priority Despite minimal workplace education on this topic, employees understand that health care will be one of the biggest expenses they will face during retirement, with more than half viewing a Health Savings Account as an important component to their overall success. So, even though the 401(k) plan is still viewed by employees as the most important vehicle for success in retirement, assistance with health care costs has risen as a top priority. Employers appear in sync with this need. Even though few employers reported that they are likely to add benefits in 2012, if one were to be added our findings conclude that it would most likely be a Health Savings Account.


Addressing health care costs through Health Savings Accounts Already we’re seeing that Health Savings Accounts have grown in popularity as a tool to address health care costs during an employee’s retirement years. What we learned from our respondents was that 30% of employers offer Health Savings Accounts today, and of that group, 48% provide a match, with 72% integrating their Health Savings Accounts into their overall financial benefits platform.

There is an opportunity today for employers to differentiate themselves by filling a major gap in helping employees, particularly older workers, prepare for and transition into retirement. To remain competitive and keep up with employee expectations, we see employers moving toward more flexible benefit programs that deliver greater value to — and more effectively address — the longer-term financial security of their employees. One way to achieve this may be through the addition of Health Savings Accounts.

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Demand for Personalized Financial Advice Is on the Rise Advice and tools employers currently offer

Workplace-sponsored financial advice Last year’s study found that four out of five (79%) surveyed employers anticipated greater demand among employees for investment advice regarding their benefit plans. In light of this, it was not surprising to find in this year’s survey results that 56% of companies now offer access to professional advice in the workplace. Larger companies (those with greater than $100 million in 401(k) assets) were the least likely to provide this benefit currently, but a healthy 29% indicated they would like to.

Advice may increase loyalty Among employees without access to a financial advisor, 50% would like their employer to offer this service — and 43% even indicated that the availability of financial education and advice services at work increases their loyalty to their employer.

● currently offers

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● would like to offer

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Access to one-on-one relationship with financial advisor

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Online tools

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Products/tools to help manage near-term expenses

Life-stage-specific advice may encourage greater utilization Employees use advice on a range of topics

Track/monitor progress to goals 401(k) plan advice Prepare for retirement Stock options/equity plans Basic investing Current health care expenses

Obstacles to utilizing advice Employees who do not take full advantage of the advice offered to them say that they are too busy (41%) or perceive it to be too complicated (35%). However, 72% of employers think it is because their employees do not view the advice as relevant to them.

“Offering employees access to meaningful financial advice and education tailored to their life stage and personal situation can empower them to take greater control of their financial lives. This is also likely to increase ongoing employee utilization of and appreciation for such benefits.” — Kevin Crain Head of Institutional Retirement & Benefit Services

Retirement health care expenses Day-to-day budgeting Withdrawing money in retirement Saving for children’s college


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Lack of Communication Limits Employee Awareness and Satisfaction More effective communication needed Today, more than half (55%) of employers communicate with employees about their financial benefit plans once a year, or less. This may be one of the reasons why 30% of employees don’t feel they are taking full advantage of the financial benefits offered to them and — when asked why — a large number of employees (35%) pointed to not knowing how to take advantage of what’s available or even what their company offers (10%). This lack of communication could be a contributing factor to a relatively high dissatisfaction rate with benefits offered — 48% of those surveyed answered that they are currently less than satisfied with the benefits available to them today.

are less than satisfied with the benefits offered to them today. When asked why they’re not taking full advantage of the financial benefits offered, 35% of employees said they didn’t know how to. 10% said they didn’t know what was offered.

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Using communications as a way to create loyalty One of the important things we learned from this study is that communications are key to employee awareness and usage of benefits provided. We also confirmed that benefits are an effective way of creating loyalty, which is key to a successful human capital strategy. Companies that bridge these two opportunities by using communications to raise awareness of benefits available will get the greatest return on their investment: a loyal workforce.

More meaningful communications desired

Effective factors in creating loyalty*

Employers and employees cite communications improvement Both employers and employees agree that much more can — and should — be done to improve benefits communications. The majority of employers cited the need to: ■■

Discuss the broader advantages of each benefit plan (80%)

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Providing access to financial professionals for advice (79%)

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Increase the number of communication methods (69%)

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Increase the frequency of communications (66%)

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Target communications to specific employees (63%)

Employees cited the following areas of improvement regarding communication: ■■

ccess to a financial professional A who could advise them (73%)

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F urther discussion of the broader advantages of each benefit plan (70%)

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ore targeted communications to M specific employees (56%)

* Reflects responses from employees.


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Methodology Boston Research Group interviewed a national sample of 1,000 401(k) employers and 1,000 employees from January 2012 through March 2012 on behalf of Bank of America Merrill Lynch. To qualify for the survey, employers currently offer their employees an active 401(k) plan and the final sample was weighted to representative proportions based on plan size as follows: 800 small companies (< $5M in 401(k) plan assets); 100 mid-sized companies ($5M to < $100M in 401(k) plan assets); 100 large companies ($100M + in 401(k) plan assets). Similarly, employees had to be enrolled in a 401(k) plan and the final sample was weighted to representative proportions based on small companies (employer has < 100 employees); core companies (employer has 100 to < 1,000 employees); mega companies (employer has 1,000 + employees).

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For more information about how we can help your company and its employees with workplace benefits, contact your Bank of America Merrill Lynch representative or call 1.877.902.8730. Visit us online at benefitplans.baml.com or email us at [email protected].

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© 2012 Bank of America Corporation. All rights reserved. | ARP3E2V2 | BRO-03-12-2389 | 06/2012

About Workplace Benefits Report Bank of America Merrill Lynch’s Workplace Benefits Report is an annual study focused on the role financial benefit plans play in employers’ talent management strategies — and in the overall financial wellness of their employees. This year, the scope of the study was expanded to examine both employer and employee perspectives on the quality of benefits offered and the usefulness of financial advice and education provided. Understanding the ever-evolving retirement landscape, as well as how changing demographics and priorities affect employers and employees continues to be a top priority for Bank of America Merrill Lynch. By monitoring and keeping abreast of these key indicators and opinions, we can more confidently empower plan sponsors to stay ahead of the curve while helping meet the varied needs of their plan participants.