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1 Welcome to the Employee Benefits: 2007 & Beyond webinar To hear the audio portion of this presentation please dial:

2 PRUDENTIAL S GROUP INSURANCE Employee Benefits: 2007 & Beyond Insight into the Next Generation of Employee Benefits Kevin Morgan Vice President Client Management Gene Lanzoni Vice President Global Market Research Jean Wiskowski Vice President Group Insurance Marketing Client Webinar April 1, 2008 The Prudential Insurance Company of America, Newark, NJ IFS-A Ed. 04/2008 Dial-in Number for Audio Portion: Source: Trends in Benefits Web Technology: 2006 Research Among Benefits Plan Sponsors, The Prudential Insurance Company of America, May 2007.

3 Introduction Dial-in Number for Audio Portion:

4 Industry and General Media Coverage Dial-in Number for Audio Portion:

5 prudential.com Dial-in Number for Audio Portion:

6 Research Method Two Distinct Market Surveys Plan Sponsors Timing April-May 2007 Plan Participants April-May 2007 Method Sample Employer Size Online Survey 1,400 Benefits Decision-Makers 50+ Employees Online Survey 1,000 Full-Time Workers Age 18 or Older 50+ Employees Dial-in Number for Audio Portion:

7 Profile of Plan Sponsors Surveyed # of Employees South 28% Region Midwest 31% West 23% Northeast 18% 1,000-10,000 19% 10,000+ 7% % % % Retail 11% Financial 12% Manufacturing 16% Industry Wholesale 6% Construction 6% Services 26% Other 23% 7

8 Profile of Plan Participants Surveyed Age Region % % Household Income South 36% Midwest 23% West 22% Northeast 19% % Under 30 13% 60+ 4% $75 - $99K 22% $100K - $149K 23% $150K+ $50K - $74K 14% 22% Less than $50K 19% 8

9 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 9

10 Theme 1 Benefits Balancing Act Getting Tougher Plan Sponsors Struggle to Balance Dueling Objectives: Reduce Benefits Costs While Maintaining a Competitive Benefits Program 10

11 Employee Benefits Remain a Priority for Attracting and Retaining Talent, but Plan Participants Importance of employee benefits in deciding to stay / take a new job Highly Important* 84% Plan Sponsors Upper management sees employee benefits as strategically important Strongly Agree* 51% Offer better benefits than competitors to attract / retain talent Strongly Agree* 43% *Top two scores on a 7-point scale 11

12 Plan Sponsors Are Shifting Even More Benefits Costs and Financial Responsibility to Workers Importance of Cost-Containment Strategies 2007 vs Percentage of Plan Sponsors Rating Item Highly Important Cost-shifting % 45% More financial responsibility % 48% 12

13 Cost Is a Top Consideration When Plan Sponsors Are Choosing Benefits Providers Importance of Benefits Provider Selection Criteria % Highly Important* $ = Cost-Related Criteria /- Cost not necessarily lowest priced but lower total costs $ Cost specifically lowest priced option $ Financial strength Quality of claims and call center service Quality of account service provided to HR staff Expertise of provider with specific product Flexibility with respect to underwriting / plan design Experience / knowledge of your industry Innovative financial and benefits solutions $ Reputation, name recognition of provider Local account management team (in your time zone) Effectiveness of employee education / communication Quality of online tools for HR staff $ Quality of online tools for employees *Top two scores on a 7-point scale $ 13

14 Linkage Between Benefits Strategy and Business Goals Likely to Strengthen by 2012 Extent to Which Benefits Strategy Is Linked to Business Goals Based on a 7-point linkage scale (7 = completely linked ; 1 = not linked at all ) Strong Linkage 22% Moderate Linkage 54% Strong Linkage 41% Moderate Linkage 44% Low Linkage 24% Low Linkage 15% 14

15 Continued Cost-Shifting and Cutbacks Impact Workers Enthusiasm about Their Benefits Perceived Value of Employee Benefits Among U.S. Workers 7-point value scale High Value 53% Moderate Value 40% Low Value 7% 15

16 Questions? 16

17 Theme 2 Closing the Education Gap on Income Replacement Workers Lack Awareness and Knowledge about the Benefits of Disability Insurance 17

18 Workers Need Help Understanding Their Group Disability Benefits Top Employee Financial Concerns and Extent Employers Are Addressing Them Top 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 18

19 Disability Plan Information Is Generally Overshadowed by Other Benefits Communications Extent to Which Plan Sponsors Address Top Employee Financial Concerns Percentage Addressing A Great Deal (2007 vs. 2012)* /- 401(k) investment education (asset accumulation) 401(k) education about disbursement of retirement plan assets (payout) Provide employees access to general financial advisors Help employees understand their long-term care insurance needs Help employees understand their disability insurance needs Help employees understand their life insurance needs Making available a 529 plan or other initiatives for college funding 23% 41% 18 23% 40% 17 17% 28% 11 8% 22% 14 12% 22% 10 9% 21% 12 8% 18% 10 *Top two scores on a 5-point scale 19

20 Workers Focus on Their Medical and Retirement Benefits and Gloss Over Disability Insurance How Plan Participants Would Allocate Benefits Time & Money How Employees Would Allocate $100 for Employee Benefits Percentage of Time Employees Spend on Benefits Decision-Making During Open Enrollment Retirement $49.74 Medical 36% Medical $19.49 Retirement 31% Dental $7.53 Dental 10% LTC $7.50 Life 8% Life $6.26 Vision 6% Disability $4.84 Disability 5% Vision $4.63 LTC 4% 20

21 Questions? 21

22 Theme 3 Revolutionizing the Benefits Enrollment Experience Current Communication, Education, and Enrollment Efforts Fall Short of Helping Workers Make the Best Benefits Choices to Meet Their Financial Needs 22

23 Improving Benefits Communication and Education Is Increasingly Important to Many Plan Sponsors Perceived Effectiveness of Benefits Communication Efforts Plan Participants vs. Plan Sponsors Percentage Rating Benefits Communications Highly Effective By Size of Employer Plan Participants Plan Sponsors 21% 35% 35% 27% 40% 35% 41% 20% 25% 26% ,999 2,000-9,999 10,

24 Workers Are More Likely than Their Employers to See Value in Tailored Benefits Communications Receptivity to Targeted Benefits Communications Plan 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) 24

25 Plan Participants Seek Professional Help in Benefits Decision-Making Plan Participant Sources of Benefits Information Usage vs. Helpfulness Benefits Information Sources (Ranked by Usage) Sources Used Most Helpful Sources 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 Gap 25

26 Many Employees Feel Pressured for Time During Their Annual Open Enrollment Period Adequacy of Amount of Time for Benefits Decision-Making Plan Participants vs. Plan Sponsors Percentage Who Strongly Agree that Time is Adequate By Size of Employer Plan Participants 48% 48% 46% 56% 55% 60% Plan Sponsors 45% 44% 38% 47% ,999 2,000-9,999 10,

27 Giving Employees Adequate Time to Make Benefits Decisions Translates into Higher Satisfaction Benefits Satisfaction & Having Adequate Decision-Making Time Percentage of Plan Participants Who Rate Benefits Communications as Highly Effective Highly Value Their Benefits Program 11% 31% 20% 40% 55% 73% Disagree Moderately Agree Strongly Agree That Time for Benefits Decision-Making Was Adequate at Last Enrollment 27

28 Polling Results 28

29 Theme 4 Benefits Strategy Going Global Multinational Companies Increasingly Recognize the Importance of a Global Benefits Strategy to Manage Costs and Improve Effectiveness 29

30 More Companies Anticipate Growth in Their Overseas Employment All Firms ,000-1,999 2,000-4,999 5,000-9,999 10,000+ Anticipated Trends in Overseas Employment: By Company Size Percentage of Plan Sponsors With Employees Based Outside the U.S. 15% 20% 12% 17% 16% 21% 30% 35% 40% 48% 41% 43% 52% 56% 84% 84% All Firms ,000-1,999 2,000-4,999 5,000-9,999 10,000+ Percentage of Plan Sponsors Employees Based Outside the U.S. 4% 6% 4% 5% 3% 5% 9% 11% 11% 13% 10% 13% 15% 20% 23% 28% 30

31 More than One-Third of Multinational Companies Have a Global Benefits Strategy Plan Sponsor Approach to Benefits for Overseas Employees Global, Holistic Strategy 38% Domestic, Country-by- Country Approach 62% 31

32 Firms with Fewer Employees in Fewer Countries Are More Likely to Have a Global Benefits Strategy Plan Sponsor Approach to Benefits for Overseas Employees By Company Size (Total Employees Worldwide) Global View Country-by-Country View % 51% % 64% % 78% 1,000-1,999 30% 70% 2,000-4,999 24% 76% 5,000-9,999 32% 68% 10, % 74% 32

33 The Need for Non-English Benefits Communications Is Even Greater Among Multinational Firms Plan Sponsors Need for Non-English Language Benefits Communications by 2012 No Employees Outside the U.S. Employees Outside the U.S. More 32% Same 66% More 42% Same 55% Less 2% Less 3% 33

34 Theme 5 Women Seek Greater Value from Workplace Benefits Women Have Unique Financial and Lifestyle Needs and Look to Their Employers for Support 34

35 Women Express Greater Concern than Men about Financial and Lifestyle Needs Importance of Employee Financial & Lifestyle Concerns Percentage 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 35

36 For Women, Financial and Work / Life Balance Needs Are More Pressing Concerns than Retirement Importance of Employee Benefits in Job Decisions Percentage 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% 36

37 Women Prefer to Receive Advice about Their Benefits from a Financial Professional Helpfulness of Information Resources in Benefits Decision-Making Percentage of Women & Men Selecting Items as Most Helpful Financial Professional Outside Workplace 62% 73% Benefits Enrollment Meetings 53% 63% Women Benefits Manual 35% 48% Men Web Calculator 28% 41% 37

38 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% -36 Saving for retirement 78% 43% -35 Advice about how to invest retirement money (asset accumulation) 56% 22% -34 Financial security in the event of a premature death 50% 21% -29 A 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%

39 Questions & Answers 39

40 Industry Research from Prudential 40