STUDY OF EMPLOYEE BENEFITS: 2006 & BEYOND - Prudential

PRUDENTIAL’S GROUP INSURANCE
STUDY OF
EMPLOYEE BENEFITS:
2006 & BEYOND
The Prudential Insurance Company of America
IFS-A122418

Study of Employee Benefits: 2006 and Beyond
Table of Contents
Welcome 1
Study Overview 2
Methodology 3
Theme One: Benefits Matter 5
Theme Two: Teach Them Well 10
Theme Three: Lifestyle Benefits Offer Win/Win Solution 19
Theme Four: Positive Online Outlook 23
Theme Five: The Progressives 28
Summary of Key Findings 37
About Prudential 40

Welcome
The cost of employee benefits is an increasingly important factor affecting each company’s
finances. For many years, U.S. businesses have shouldered the responsibility of providing
employees with much needed financial products. But with healthcare costs continuing
to rise at often double-digit rates, many companies have been forced to find new ways
to support insurance and retirement benefits for current and retired employees.
Yet, despite these economic pressures, the results of this study show U.S. businesses
overwhelmingly view employee benefits as important in competing effectively in today’s
market place, particularly as a means to attract and retain talent. In fact, this study
suggests many plan sponsors are exploring new and innovative ways to better balance
cost containment objectives and maintain a competitive benefits program.
At Prudential, we remain committed to helping companies meet this challenge by providing
affordable group insurance solutions that protect the financial security of employees and
their families—in 2006 and beyond.
Vivian Banta
Vice Chair, Prudential Financial
Our recent research yielded significant insight into the employee benefits marketplace of
the next five years—and we’d like to share it with you.
Of particular interest, we learned about a small but growing segment of plan sponsors
we’ve called “The Progressives” because of their more strategic approach to addressing
benefits challenges. Progressive firms focus on programs that manage risk rather than
chase costs, such as wellness and prevention, disease state management, mental health
counseling, and work/life balance initiatives. Progressive plan sponsors seek to align their
valuable benefits dollars with the financial needs and wants of their employees. Their
benefits programs are designed not only to attract and retain valued employees, but
also help to improve the overall financial security of their workforce.
I hope you’ll find this information helpful as you consider your company’s benefits
strategy now and in the coming years.
Ed Baird
President, Prudential’s Group Insurance
1

Study Overview
For many U.S. businesses, employee benefits have become a balancing act. With health
insurance premiums continually on the rise, some employers have cut back on other
company-paid benefits or shifted a greater share of the cost to their employees. At the
same time, plan sponsors want to help protect the financial security of their employees,
many of whom rely on certain workplace benefits—such as life, disability, and long-term
care insurance—as an important part of their overall financial plan. Furthermore,
employers still recognize that a competitive benefits program is important to attracting
and retaining talent.
The primary objective of Prudential’s “Study of Employee Benefits: 2006 and Beyond”
is to better understand the evolving employee benefits marketplace and provide insight
into the future. This research identifies current and future employee needs and how
employers plan to respond to those needs.
Research Objectives
We surveyed a representative cross-section of plan sponsors and plan participants about
a wide range of topics, including:
What are employees’ top financial and lifestyle concerns?
What role will employee benefits play in the workplace of the future?
Who will be the influential decision makers?
What benefits will be offered and who will pay for them?
Will cost-shifting increase?
Are employees getting the details they need to make informed decisions?
How will technology impact the delivery of services?
Will the growth of work/life balance programs continue?
As the workforce grows more diverse, what impact will this have on employee benefits?
Five Key Themes Emerged from This Research
1. Benefits Matter: Eight in Ten Plan Sponsors Remain Committed to Offering
Competitive Benefits Programs
2. Teach Them Well: Employees Want Greater Support in Understanding and
Using Their Financial Benefits
3. Lifestyle Benefits Offer Win/Win Solution: Healthy Lifestyle Emerges
as a Holistic Desire for Employees and a Cost-Reduction Strategy for Employers
4. Positive Online Outlook: Online Tools Are Popular and Opportunities Exist
to Improve Utilization and Performance
5. The Progressives: A Small But Growing Segment of Plan Sponsors
2

Methodology
This study surveyed a broad cross-section of employee benefit professionals from
companies spanning various industries, company sizes, and geographic regions.
Supplemental interviews were conducted with employees of similar size firms regarding
their financial and lifestyle concerns and attitudes toward addressing those needs at the
workplace. This allows us to compare and contrast opinions of employers and employees
on key benefits issues. All interviews were conducted by GfK NOP, an industry leader
in market research.
Profile of Plan Sponsor Study
Plan sponsor results are based on online surveys conducted in February 2006 of 1,218
benefits decision makers. Respondents include executives, owners, human resources
professionals, and financial management professionals.
The survey sample covers all industries, including government, and is nationally
representative of all U.S. businesses with at least 50 full-time, benefits-eligible employees.
The data shown in this report is weighted to reflect the actual proportion of U.S. businesses
by size and region based on Dun & Bradstreet business counts. The margin of error
is ± 2.0% at the 95% confidence level.
Below is a breakdown of survey respondents by region, company size, industry, survey
participant job function, years in business, and 2005 sales.
Region Number of Employees Industry
31%
South
32%
West
21%
Midwest
16%
Northeast
7%
10,000+
45%
50–99
17%
100–499
19%
1,000–10,000 12%
500–999
7%
Construction
9%
Wholesale
11%
Retail
15%
Other
14%
Financial
26%
Services
18%
Manufacturing
Job Function of Respondents*
Years in Business
2005 Sales or Fee Income
Executive/Owner 36%
Accounting/Finance/Treasury 30%
HR/Employee Benefits 27%
Procurement 3%
Other 14%
10 or less 19%
11–25 29%
26–50 33%
51 or more 19%
Mean 35
Median 26
Less than $50 million 66%
$50 million to
under $200 million 20%
$200 million to
under $500 million 7%
$500 million to
under $1 billion 4%
$1 billion or over 3%
*Multiple responses accepted.
3

Methodology
Profile of Employee Study
Employee results are based on a nationally representative sample of 400 consumers age
18 or older who work full-time for a company with at least 50 employees. All surveys
were conducted by telephone in March 2006.
The margin of error is ± 9.0% at the 95% confidence level.
Below is a breakdown of survey respondents by marital status, household income, age,
region, gender, ethnic/racial background, and education level.
Marital Status Household Income Age
22%
Single-Previously
Married
25%
Single-Never
Married
53%
Married
15%
$75k–$125k
9%
$125k+
32%
$40k–$75k
44%

Benefits Matter
Eight in Ten Plan Sponsors
Remain Committed to Offering
Competitive Benefits Programs
1
Over the next five years, even though employers expect to face higher
medical insurance costs and increased pressure on expenses, most feel
it is important to offer a competitive benefits package AND subsidize
as much of the cost as possible in order to attract and retain employees.
In fact, many plan sponsors want to do more to help their employees
better understand and manage their benefits to improve their financial
security. For other companies, however, the downward pressure on
benefits-related costs is forcing them to make difficult choices and
many are looking at creative ways to offer valued financial and
lifestyle benefits while asking employees to accept a greater share
of the financial responsibility.
As benefits costs continue to increase as a percentage of payroll, the
benefits decision-making process is becoming more complex with a
widening pool of internal and external influencers.
5

Benefits Matter
Offering Competitive Benefits Remains Important
Nearly eight in ten (78%) employers say it’s important to offer and subsidize a
wide range of employee benefits. Twice as many companies believe it is “highly
important” (44%) compared to those who feel it is “less important” (22%).
PLAN SPONSOR COMMITMENT TO EMPLOYEE BENEFITS PROGRAM
Less important: Important: Highly important:
22% 34% 44%
“It is not at all
important that we
offer any benefits
to our employees.”
0%
2%
6%
14%
34%
27%
17%
“It is extremely
important to offer
our employees a
wide range of benefits
and pay for most
or all of the cost.”
1 2 3 4 5 6 7
6

Commitment to Benefits Spans Most Company Size Segments
More than half of all employers with 500+ employees remain “highly” committed
to benefits. Commitment is also noticeable among smaller employers.
Employers who feel that offering competitive benefits is “not important” may be
faced with financial constraints, or the nature of their business makes it impractical
to offer and subsidize a wide range of employee benefits. These companies tend to
have the following characteristics:
■ Fewer than 100 employees
■ Retail and sales/trade industries
■ Located in the mid-west region
Larger employers are somewhat more likely to rate their benefits as “generous.”
Due to their size and economic power, they are able to offer a wider variety of
programs and shoulder a greater share of the cost.
COMMITMENT TO BENEFITS BY COMPANY SIZE
47%
56%
57%
51%
Highly important to
offer generous benefits*
40%
Not important to
offer benefits †
* 6–7 responses on 7-point scale
† 1–3 responses on 7-point scale
28%
6%
4%
3%
2%
50–99 100–499 500–4,999 5,000–9,999 10,000+
7

Benefits Matter
Benefits Cost Sharing Expected to Double by 2010
To maintain their current benefits offerings and coverage levels, more plan sponsors
will reluctantly shift costs to employees over the next five years. In fact, twice as
many employers expect to increase employee cost sharing by 2010. Among their
top cost-sharing strategies are:
■ Asking employees to shoulder a greater proportion of contributory benefits
costs, and
■ Offering more voluntary benefits, where the employee pays 100% of the cost
While cost sharing is an important expense reduction strategy and is gaining
momentum in the marketplace, it represents only a minority of all firms surveyed.
New Cost-Reduction Solutions Emerging
Innovative cost-reduction initiatives gaining popularity include consumer-driven health
plans and integrated health and disability management. While these programs are
still relatively new and unproven, many more plan sponsors expect to implement
these programs in the next five years.
In addition, plan sponsors may show greater interest in flexible plans, such as
low-cost, employer-paid “starter” plans with basic levels of coverage that could
be supplemented by employee-paid voluntary plans.
Ultimately, giving employees greater education and incentives to be effective
partners in managing the cost of their benefits will be critical to the success of
these cost-reduction strategies.
EMPLOYEE BENEFITS COST REDUCTION INITIATIVES
Cost shift to employees
via contributory benefits
Implement consumerdirected
health plan
Offer wider array of
voluntary benefits
Integrate healthcare/
disability management
Doing in 2006 Plan to do by 2010
19%
37%
24%
41%
16%
31%
19%
34%
Multiple Increase
2006-2010
+2.0X
+1.7X
+1.9X
+1.8X
8

Benefits Decision Making Is Increasingly Complex with More
Constituencies Having a Voice
The primary benefits decision makers remain the CEO/president/owner (especially in
firms with less than 100 employees), and other traditional sources of influence, such
as human resources and the benefits department.
Since benefits costs represent a significant portion of corporate expenses and
employee compensation, the decision process has become more critical and more
complex, particularly for larger firms. As a result, finance along with risk management
and procurement functions are playing a larger role in helping organizations evaluate
and negotiate for the most cost-effective benefits solutions.
Build It and They Will Come
To ensure benefits are achieving the desired result and satisfying employee needs,
more companies are also soliciting employee input in deciding not only which benefits
to offer, but which providers employees have confidence using. As benefit choices
become more complex for employees, and employees shoulder more of the expense,
benefit providers must be able to meet their needs for information, responsiveness,
and trust.
External guidance from benefits brokers/consultants and insurance carriers remains
strong as these experts are called upon to help build the right solutions.
STRONG INFLUENCERS ON EMPLOYEE BENEFIT DECISIONS
2006 2010
Traditional Influencers New Influencers Important Outside Influencers
15%
15%
24%
28%
21%
24%
25%
27%
63%
63%
25%
27%
47%
48%
45%
46%
40%
40%
CEO/
President/
Owner
Finance
Human
Resources
Employee
Benefits
Area
Company's
Employees
Risk
Management
Procurement
Benefits
Broker/
Consultant
Insurance
Company
Rep/Agent
9

Teach Them Well
Employees Want Greater Support
in Understanding and Using
Their Financial Benefits
2
Employees express concern about having adequate medical insurance
and retirement income, but many are also concerned about their family’s
financial security in the event of their premature death, a disability, or the
need for extended care following an illness or injury.
Unfortunately, many don’t fully understand or appreciate how their
employers’ benefit plan offerings can better prepare them financially for
these unforeseen events. Furthermore, a majority of plan sponsors are
currently either unaware or unable to address their employees’ need for
financial education and advice.
An increase in voluntary benefits, defined contribution plans, and
consumer-directed health plans will place even greater responsibility
on employees to select and pay for the benefits that best meet their
family’s needs. Consequently, benefits education and communication
will be increasingly valued at the workplace.
10

The Gap Among Top Financial Concerns Is Surprising
When employees are asked to rate the importance of various financial concerns,
retirement-related issues are, of course, high on the list and most employers well
recognize the importance.
Interestingly, many employees are also concerned about having adequate insurance
protection for themselves and their families. As insurance programs have become
more complex with a broader range of traditional benefits and options, employees
express great interest in obtaining needed insurance at the workplace. However,
the benefits priorities for many employers are elsewhere and the gap in employers
recognizing these employee needs/concerns is surprisingly large.
EMPLOYEES’ TOP FINANCIAL CONCERNS
Employer perceptions of importance to employees
Employee actual importance
Point
Difference
Having financial plan
LTC insurance needs
Life insurance needs
Disability insurance needs
Saving for retirement
Saving for college
Obtaining financial advice
Education on retirement
34%
80%
39%
77%
46%
79%
52%
83%
58%
86%
44%
67%
36%
57%
60%
72%
-46
-38
-33
-31
-28
-23
-21
-12
11

Teach Them Well
Employers Plan to Do More to Help Employees Meet Their Financial Needs
Beyond providing access to insurance and retirement benefits, most plan sponsors
today offer limited advice or guidance in making benefits and other financial decisions.
However, over the next five years, employers hope to do more to assist their employees
in all categories studied, especially retirement planning, which has become a focus
for many companies given the country’s demographic and savings trends.
Unfortunately, employees’ need for non-medical insurance coverage is expected to
remain underserved over the next five years. Only about one-fourth of employers expect
to address their employees’ life, disability, and long-term care insurance needs by 2010.
These findings suggest an opportunity for plan sponsors to build employee satisfaction
and loyalty by providing the right benefits along with the appropriate educational
support. More guidance can enable their workforce to make better benefits choices
and become more financially secure.
EMPLOYEE FINANCIAL NEEDS/CONCERNS ADDRESSED BY PLAN SPONSORS
Doing in 2006 Plan to do by 2010
Education on saving
for retirement
Education on managing
retirement income
Disability insurance needs
Financial advice
Life insurance needs
Long-term care
insurance needs
College money/529 plan
33%
48%
30%
43%
20%
26%
21%
27%
18%
23%
16%
21%
12%
17%
2006–2010
Change
+15
+13
+6
+6
+5
+5
+5
12

Voluntary Benefits on the Rise, But Require Even Greater
Educational Support
Many employers expect to compliment basic insurance benefits with a wider array of
supplemental voluntary insurance benefits. Insurance coverage needs and options are
more complex and voluntary benefits broaden the capacity of employers to provide
coverage access.
As employees are expected to select and pay for more of their benefits going forward,
the success of these voluntary programs will depend upon employees receiving the
necessary information and decision support tools to make the right decisions for
themselves and their families.
In addition, the brand and reputation of benefits providers will be increasingly important
as employees decide whether or not to participate in voluntary plans based on their
familiarity and image of a carrier. Often, employees may prefer to deal with companies
they know and trust.
PROJECTED INCREASE IN SPECIFIC VOLUNTARY BENEFITS OFFERED
2006 currently offer Total expect offering in next 18 months
Disability insurance
Life insurance
LTC insurance
35%
47%
39%
48%
16%
25%
Expected
Change
+12
+9
+9
13

Teach Them Well
Benefits Education/Communication Needs to be More Effective
In general, plan sponsors feel there is considerable room for improving the effectiveness
of their employee benefits education and communication materials. According
to employers, the education/communication materials for their medical, dental, and
defined contribution plans—arguably more complicated benefits—are more effective
than those for life, disability, and long-term care plans.
In fact, one in five rate their current communication materials for their non-medical
insurance programs as “ineffective,” while four in ten rate the effectiveness as no
better than “moderate.” With the increased complexity and options for insurance
products, education and information must catch up.
Benefits providers who can develop education/communication campaigns that motivate
and educate employees can provide a much needed service. Special attention should
be paid to pre-enrollment communications, which can be used to convey the value
of the employer’s benefit package and help boost participation rates.
PLAN SPONSOR ASSESSMENT OF THE EFFECTIVENESS OF BENEFITS EDUCATION
Ineffective
19%
17%
18%
11%
13%
11%
Moderately effective
Highly effective
39%
41%
44%
33%
37%
37%
42%
42%
38%
56%
50%
52%
Disability
Life
LTC
Medical
Dental
401k
14

Most Plan Sponsors Do Not Require Carriers to “Step Up”
to Assist with Benefits Education/Communication
Often, benefits providers are experts at communicating all aspects of an employee
benefit program. They should be well versed on all legal issues and have experienced
associates able to provide effective written and verbal communications. While many
plan sponsors may desire to customize or fine-tune the final materials, benefits
providers should be able to create an effective foundation of information.
However, among plan sponsors who are dissatisfied with their existing materials,
most are not “highly interested” in obtaining assistance from benefits providers,
especially for group life and disability plans. By comparison, 47% rely on providers
for help communicating 401(k) plans. Yet fewer require the same provider assistance
for disability, life, or long-term care insurance benefits.
More effective communication may help employees better understand and appreciate
the real value of these programs, as well as help educate employees about how these
benefits can provide needed protection for themselves and their families.
INTEREST IN CARRIER HELP WITH BENEFITS EDUCATION/COMMUNICATIONS
AMONG EMPLOYERS WHO RATE THEIR EDUCATION/COMMUNICATION EFFORTS “INEFFECTIVE”
74%
71%
65%
57%
67%
53% Not highly interested
(1–5 of 7 point scale)
Highly interested
(6–7 of 7 point scale)
43%
47%
26%
29%
35%
33%
Disability
Life
LTC
Medical
Dental
401k
15

Teach Them Well
Demographic and Social Trends Will Strongly Influence
Future Benefit Offerings
Thirty years ago, workplaces were treated as mostly homogeneous and companies
struggled to make any benefits package available. Employers did not have the luxury
or need to develop benefits solutions by employee segment.
Today, the rapidly changing workforce is a reflection of our changing world and its
economic forces. The pre-retiree and even retiree populations (from former “primary”
careers) work alongside other generations. Multicultural and multilingual employees
who are so important to our future, also have special benefits needs. Dual working
parents, single parents, and empty nesters (no children at home) often require special
consideration as well.
Today, savvy companies and their HR functions seek to develop benefits programs
that meet the needs of various employee segments to keep workforce retention and
production high. Benefits providers must be effective partners, capable of developing
benefits features and communications that meet the challenges of a modern 21st
century workforce.
IMPACT OF DIVERSITY TRENDS ON BENEFITS OFFERINGS
STRONG INFLUENCE — TOP 2 POINTS OF 7-POINT SCALE
Doing in 2006 Plan to do by 2010
Mature employees
age 50+
Multigenerational
workforce
Multilingual/multicultural
workforce
Workforce
education/income gap
Dual working couples
Single working parents
Same sex partners
26%
47%
23%
33%
25%
33%
17%
24%
19%
26%
27%
33%
12%
16%
2006–2010
Change
+21
+10
+8
+7
+7
+6
+4
16

Plan Sponsors and Participants Are Receptive
to Targeted Communications
The complexity of insurance and retirement products and the challenge of reaching
financial goals cause many employees to prefer more tailored, personalized benefits
communication. A surprising four in ten employees are willing to share personal
information to receive more effective and customized benefits offerings and advice.
Plan sponsors who are frustrated by low participation in certain voluntary benefits
are testing various communication and enrollment strategies. Among these emerging
strategies is life-stage or life-event marketing, offering more customized benefit
communications to select employee segments based on personal information the
employer has obtained willingly from its employees (e.g., “permission marketing”).
This allows a plan sponsor or its benefits provider to target the right benefits options
to the right employees at the right time.
WILLINGNESS TO SHARE PERSONAL INFORMATION
FOR PERSONALIZED BENEFIT OFFERINGS/COMMUNICATIONS
61%
64% Not very willing
to share
personal information
Very willing
to share
personal information
39%
36%
Employers
Employees
17

Lifestyle Benefits
Are a Win/Win Solution
Healthy Lifestyle Emerges as a
Holistic Desire for Employees and a
Cost-Reduction Strategy for Employers
3
The availability of lifestyle programs, which help employees manage
their health and balance the demands of work and family, will increase
over the next five years.
Lifestyle programs are a win-win solution—employees get access to
essential services and employers often benefit from higher productivity
and lower medical expenses.
18

Employee Concerns Extend Beyond Financial Needs
Overtime, travel, and e-mail all require more time and commitment from employees.
The quid pro quo of this more demanding “just-in-time” society is employees asking
for consideration with more flexible and paid time off when possible. Employers and
employees have done well working together to meet each other’s needs in these areas.
Quite surprising, and likely a function of our very stressful and often confusing
environment, 52% of employees would value more mental health counseling. Today,
we know most employees will face one or more difficult periods during their career,
and the range of potential situations across a given employee population is vast.
Well understood by retail product markets, but not yet fully appreciated by employers,
83% of employees are trying to achieve an overall holistic sense of a healthy lifestyle.
This broader definition of wellbeing will likely necessitate continued evaluation
of environment, workplace systems, and benefits to meet employee needs and
maximize effectiveness.
TOP LIFESTYLE CONCERNS
Employer perceptions of importance to employees
Employee actual importance
Point
Difference
Flexible/generous
paid time-off policies
Flexible workplace
arrangements
Mental health counseling
Healthy lifestyle
61%
66%
46%
57%
30%
52%
36%
83%
5
11
22
47
19

Lifestyle Benefits Are a Win/Win Solution
Healthy Lifestyle Benefits Are Catching On
The food/beverage, travel, fitness, nutrition, cosmetics, and other industries have
capitalized on marketing the healthy lifestyle to great success and profits. They
are tapping in to a growing need and emerging mindset in our advanced society.
Employers are also beginning to catch up and will eventually double programs
designed to create a healthier workforce. Still, with only 40% addressing this need
by 2010, the gap is well below the current need expressed by 83% of employees.
Employers may show a greater interest in providers who will coordinate medical and
disability insurance programs with wellness/EAP programs.
PLAN SPONSOR ACTIVITY TO ADDRESS EMPLOYEE LIFESTYLE NEEDS/CONCERNS
Doing in 2006 Plan to do by 2010
Healthy lifestyle
Mental health counseling
Flexible workplace
arrangements
22%
40%
25%
33%
21%
34%
20

Interest in Lifestyle Benefits Varies Widely by Region, Size, and Industry
Plan sponsors in the northeast are most likely to offer flexible workplace arrangements,
while those in the south and west are the most likely to be implementing healthy
lifestyle programs.
Across all size segments, more plan sponsors are working toward addressing employee
concerns about living a healthy lifestyle and expect to implement programs over the
next 10 years. While larger companies (5,000+ employees) can provide a wider array
of benefits in general, many smaller firms are making strides in promoting healthy
lifestyle programs and work/life balance.
Financial and services firms are among the most receptive to flexible workplace
arrangements, since the work is conducive to such arrangements in these industries.
Companies in manufacturing, sales, and heavy industry have less opportunity to
offer flexible hours and paid time off so they appear to be focusing on healthy
lifestyle programs.
EMPLOYER INTEREST IN ADDRESSING EMPLOYEE LIFESTYLE NEEDS—BY REGION
38%
43%
50%
51%
66%
30%
24%
31%
34%
83%
57%
41%
25%
29%
34%
52%
36%
32%
32%
39%
Highly important
to employees
Expect to address by 2010:
Northeast
Midwest
South
West
Healthy Lifestyle Flex/Generous PTO Flexible Workplace Counseling
21

Lifestyle Benefits Are a Win/Win Solution
EMPLOYER INTEREST IN ADDRESSING EMPLOYEE LIFESTYLE NEEDS—BY SIZE
Highly important
to employees
Expect to address by 2010:
50–99
100–499
500–4,999
83%
43%
49%
54%
58%
58%
66%
27%
31%
33%
45%
43%
57%
29%
30%
35%
46%
40%
52%
30%
38%
47%
55%
50%
5,000–9,999
10,000+
Healthy Lifestyle Flex/Generous PTO Flexible Workplace Counseling
EMPLOYER INTEREST IN ADDRESSING EMPLOYEE LIFESTYLE NEEDS—BY INDUSTRY
Highly important
to employees
83%
Expect to address by 2010:
66%
Heavy Industry
Manufacturing
Sales/Trade
Financial/Ins/
Real Estate
50%
52%
41%
44%
44%
22%
22%
23%
36%
31%
57%
25%
23%
23%
34%
34%
52%
26%
27%
25%
36%
37%
Services
Healthy Lifestyle
Flex/Generous PTO
Flexible Workplace
Counseling
22

Positive Online Outlook
Online Tools Are Popular
and Opportunities Exist to
Improve Performance
4
Development and installation of online systems for plan sponsors and
employees have increased at a rapid pace over the past five years.
Availability of benefits web tools will continue to grow over the next five
years; however, utilization is trailing provider efforts to expand functionality.
To increase utilization, plan sponsors would like to see improvements
in ease of use, site navigation, training, and quality of information.
23

Positive Online Outlook
Benefits Administrators Use Online Systems to Increase Effectiveness
In the past decade, HR teams have been asked to do more with often substantially
reduced staffs. During this time, the need for information to support analysis and
projections for management has increased dramatically.
As benefits providers launched and expanded online capabilities, benefits administrators
were quick to use these systems and help to continue to refine these systems to better
meet their needs.
Current availability is high for basic functionality, including reporting, but benefit
administrators expect to greatly expand their usage of online tools by 2010 for key
transactions such as claims submission, billing, and eligibility processing.
ONLINE TOOLS AVAILABLE FOR BENEFITS ADMINISTRATORS
Doing in 2006 Plan to do by 2010
2006–2010
Change
Submit claims
35%
56%
+21
High Current Usage Future Growth
Pay bills
Obtain eligibility updates
Obtain billing info
Integrate payroll processing
Process employee eligibility info
Handle enrollment
Check claim status
Access claims forms
Access reports
40%
56%
43%
59%
44%
60%
41%
55%
45%
59%
51%
64%
48%
58%
52%
61%
54%
61%
+16
+16
+16
+14
+14
+13
+10
+9
+7
24
Review/process D.C. deferrals
57%
63%
+6

Web Technology is Empowering Employees
Online tools to serve employees help to provide easy access to information, legal protection,
and consistent information while freeing up limited HR resources for higher value activities.
Benefits web technology designed for employee self service has been well received
by plan sponsors. The most common functionality available in the marketplace is for
managing retirement plans, accessing claims information and forms, and for financial
planning. The market is quickly evolving toward more transactional and decision
support tools to help employees effectively manage their own benefits and make
benefits selections that best meet their individual needs.
Interestingly, about twice as many employers expect to be deploying employee web tools
for accessing PTO information, as well as enrollment and claims submission by 2010.
ONLINE TOOLS AVAILABLE FOR EMPLOYEES
Doing in 2006 Plan to do by 2010
2006–2010
Change
Access PTO info
22%
52%
+30
Handle enrollment
34%
62%
+28
Submit claims
Update beneficiary
Update personal info
Verify eligibility
Access financial info/tools
Check claim status
Access ins. & ret. plan info
Obtain forms
35%
60%
41%
65%
43%
64%
39%
59%
50%
65%
50%
65%
54%
66%
63%
68%
+25
+24
+21
+20
+15
+15
+12
+5
Future Growth High Current Usage
Manage D.C. plan
70%
70%
–
25

Positive Online Outlook
Adoption Rates for Web Technology Vary
Most firms (56%) are either trying to keep pace with technology or follow the
market in adopting proven technologies. However, almost one-third (29%) believe
their company is either “at the forefront” or “somewhat ahead” of other companies
when it comes to adopting new technology.
Financial services (19%) and other service industries (17%) are more likely to be early
adopters of technology, likely because their industries use technology in so many areas
of their businesses. Heavy industry and manufacturing is extremely competitive—more
than half strive to stay ahead of or equal to their market competitors.
The sales/trade industry is least willing to be early adopters of new technology.
Providing technology for commission-based and geographically dispersed sales
associates is challenging and benefits providers need to consider how to better
meet this need.
Adoption of online technology is highly correlated to company size. Over 50% of
employers with 5,000 – 10,000 employees consider themselves ahead of the market
when it comes to adopting new technologies.
Four in ten employers (41%) take a “wait and see” approach and either rely on
legacy technologies or adopt new technologies only after they have proven effective.
PLAN SPONSOR WILLINGNESS TO ADOPT NEW TECHNOLOGY
BY INDUSTRY
13%
3%
4%
9%
19%
17%
16%
20%
20%
8%
20%
14%
30%
31%
34%
16%
34%
32%
28%
29%
26%
39%
20%
26%
13%
13%
12%
23%
6%
9%
At the Forefront
of technology
Somewhat Ahead
of the market in adopting
new technologies
Keep Pace
with the market in adapting
new technologies
Tend to Follow
the market and only adopt
proven technologies
Rely on Legacy
technologies
26
All Employers Heavy Industry Manufacturing Sales/Trade Financial/Ins/Real Estate Services
% of Total Sample: 13% 16% 30% 28% 13%

Plan Sponsors Want Enhanced Performance from Online Tools
Despite great progress, the potential value of online technology has yet to be fully
realized. Most plan sponsors feel that current online tools have not adequately met
their expectations regarding cost/time savings, data quality, and convenience.
When asked to compare the importance of various online tools with the actual
performance, the largest gaps were in:
■
■
■
■
Reducing costs
Allowing HR staff to focus on strategic initiatives
Improving the quality of information available to employees
Reducing errors
Employers have issues with the quality of the information provided online, saying
it is too general (not personalized), not available 24/7, and not current. In addition,
employers saw no reduction in time spent on plan administration by benefit
administrators.
Carriers should strive to offer enhanced services designed to match user needs, better
training, increased user support, and greater “proof” of system effectiveness.
IMPACT OF WEB TECHNOLOGY IN BENEFITS ADMINISTRATION
High performance High importance Delivery
Shortfall
Reduce costs
24%
63%
-39
Enable HR to focus on
strategic initiatives
21%
53%
-32
Improve quality of
info for employees
33%
62%
-29
Reduce errors
34%
63%
-29
Personalized employee info
26%
52%
-26
More up-to-date info
36%
60%
-24
Access 24/7
33%
55%
-22
27

The Progressives
A Small But Growing Segment
of Plan Sponsors
Companies approach benefits differently. There is no one “rule” for
success. Gauging employees’ needs and contributions to the company,
the competitive environment, and the ability to subsidize expenses must
all be carefully weighed to tune a benefit program. To effectively meet each
firm’s goals, understanding the breadth of approaches can be helpful in
developing a business strategy.
5
From the study participant responses, a continuum of plan sponsor
“progressiveness” in terms of vision and strategy was developed to serve
as a starting point for plan sponsors in gauging the relative orientation
of their firm toward employee benefits as a strategy for attracting and
retaining talent.
28

Criteria for Progressive Plan Sponsors
Currently offer benefits that are competitive within their industry/size segment.
Understand employees’ greatest financial and lifestyle concerns.
Highly interested in helping employees address their needs AND planning to do so
by 2010, particularly in maintaining a healthy lifestyle, providing access to mental
health counseling, retirement planning, and work/life balance programs.
The Number of “Progressives” Will Increase By 2010
On average, 11% of employers (about 68,000 businesses nationwide) consider
themselves “progressive.”
Another 31% consider themselves “above average,” meaning they have a progressive
benefit philosophy, but take a slightly more conservative approach in adopting new
programs, communication strategies, technology, and outsourcing.
Across plan sponsors in the research, the percent of progressive and forward-thinking
companies will be increasing by 2010 to more than 50% of all employers.
THE PROGRESSIVE CONTINUUM OF PLAN SPONSORS
U.S. BUSINESSES WITH 50+ EMPLOYEES
46%
11%
22%
31%
36%
Progressives Forward Looking Followers Status Quo
29

The Progressives
Progressive Employers Come in All Sizes
Interestingly, every employer segment by company size has a substantial share of
both progressives and forward-thinkers.
Employers with 5,000-9,999 employees comprise the largest share of progressives
at 34%. Companies in this segment might have achieved the financial ability to offer
stronger benefits, but likely also feel advanced benefits programs are key to attracting
and retaining talent as they seek to reach the next level.
The largest employers (10,000+) are solidly positioned as forward-thinkers. Their
resources, success, brand names, and other factors are strong tools for attracting
and retaining talent. Yet, most are unwilling to allow their competition to surpass
them in terms of benefits offerings.
Forward-thinkers is the largest segment of employers in the broad mid-size (and
emerging large) market of 500-5,000 employees. As these firms gain success and
increase the ranks of longer-term employees in whom they’ve invested, benefits
become an important tool.
Employers with less than 1,000 employees have a healthy distribution of progressives
and forward-thinkers. Given their size and other priorities, some firms’ “status quo”
approach to benefits is not surprising. Even so, smaller companies tend to watch
market trends closely and adjust when necessary.
PROGRESSIVE EMPLOYERS BY COMPANY SIZE
9%
14%
19%
13%
15%
14%
19%
21%
20%
14%
21%
14%
23%
23%
14%
22%
28%
24%
33%
34%
30%
29%
34%
39%
42%
46%
45%
41%
30
50-99
100–499
500–999
1,000–1,999 2,000–4,999 5,000–9,999
10,000+
Progressives Forward-Thinkers Followers Status Quo

Progressives Are More In Sync with Employee Financial and Lifestyle Needs
In the next five years, progressive employers plan to assist their employees with both
financial and lifestyle needs at significantly higher rates than other employers.
TOP BENEFIT INITIATIVES TO BE ADDRESSED BY 2010
% Rating “highly important” Progressives All Firms Point Difference
Programs to promote healthy lifestyle 98% 40% +58
Tailored benefits for aging workforce 83% 29% +54
Assistance with return to work 93% 39% +54
Employee education on disability plan 80% 26% +54
Flexible workplace arrangements 82% 33% +49
Integrated healthcare/disability management 82% 33% +49
Access to mental health counseling 81% 32% +49
Education on retirement plan payout 91% 43% +48
Retirement investment education 93% 48% +45
Consumer-Directed health plans 81% 41% +40
Progressives Are More Responsive to Diversity Trends
On many issues, progressives are twice as likely as other employers to say diversity
has an influence on employee benefits. And, not only are progressive employers
doing more to accommodate diversity now, they plan to do more in the future.
Progressive firms may be better positioned to attract and retain their top talent.
EXPECTED INFLUENCE OF DIVERSITY TRENDS ON BENEFITS PROGRAMS BY 2010
% Rating “highly important” Progressives All Firms Point Difference
Balancing work and personal life 75% 29% +46
Workforce education and income gaps 68% 24% +44
Multigenerational workforce 77% 33% +44
Single working parents 67% 33% +34
Multilingual/multicultural workforce 64% 33% +31
Dual working couples 57% 26% +31
Same sex couples 47% 16% +31
Growing number of employees age 50+ 75% 47% +28
31

The Progressives
Progressives Are Tech Savvy
More than half of progressive employers (54%) consider themselves at the forefront
of technology or somewhat ahead of the market in adopting early technology.
EMPLOYER PHILOSOPHY TOWARD BENEFITS TECHNOLOGY
Progressives All Firms Point Difference
At the forefront of benefits technology 29%
54%
13% +16
Keep pace with the market in adopting new technology 22% 30% +12
Somewhat ahead of the market in adopting new technology 25% 16%
72%
+9
Tend to follow the market and only adopt proven technologies 20% 28% -8
Rely on legacy technologies 2% 14% -12
Online Services for Employees Are More Popular Among Progressive Firms
Progressive firms make online tools available to increase enrollment, help employees
manage transactions, provide guidance on financial and retirement planning, and
ultimately, reduce costs.
CURRENT AVAILABILITY OF WEB TECHNOLOGY FOR EMPLOYEES
Progressives All Firms Point Difference
Handle enrollment 61% 34% +27
Access PTO info 48% 22% +26
Access financial planning tools 76% 50% +26
Access retirement plan info 79% 54% +25
Obtain forms 83% 63% +20
Update personal info 62% 43% +19
Update beneficiary info 58% 41% +17
Submit claims 50% 35% +15
Manage retirement plan 81% 70% +11
Verify eligibility 49% 39% +10
Check claims status 57% 50% +7
32

Progressives Also Outpace Other Companies in Planned Future Use
of Online Tools for Employees
By 2010, benefit administrators at progressive firms will be more likely to use the
web to process bills, check claim status, process 401(k) deferrals, obtain forms, and
update eligibility processing.
Employees at progressive firms will continue to use self-service tools that allow
them to manage their 401(k), update information, enroll for coverage, and access
educational information.
EXPECTED AVAILABILITY OF WEB TECHNOLOGY FOR EMPLOYEES BY 2010
Progressives All Firms Point Difference
Access PTO info 79% 52% +27
Update personal info 90% 64% +26
Handle enrollment 87% 62% +25
Access financial planning tools 89% 65% +24
Access retirement plan info 89% 66% +23
Update beneficiary info 87% 65% +22
Verify eligibility 81% 59% +22
Manage retirement plan 91% 70% +21
Obtain forms 86% 68% +18
Submit claims 74% 60% +14
Check claims status 76% 65% +11
33

The Progressives
Progressive Employers Expand Web Tools for Benefits Administrators
Transactional tools such as billing, managing retirement plans, and claims inquiry
are more likely to be used by progressive employers and will be even more widely
available by 2010.
EXPECTED AVAILABILITY OF WEB TECHNOLOGY FOR EMPLOYERS BY 2010
Progressives
All Firms
2006 2010 2006 2010
Access billing info 58% 78% 44% 60%
Review/Process DC plan deferrals 69% 77% 57% 63%
Check claims status 57% 76% 48% 58%
Access claims forms 65% 73% 52% 61%
Handle enrollment 57% 71% 51% 64%
Process employee eligibility info 63% 70% 45% 59%
Receive updated eligibility info 57% 69% 43% 59%
Access reports 58% 68% 54% 61%
Submit claims 50% 64% 35% 56%
Pay bills 48% 63% 40% 56%
Integrate payroll processing 48% 62% 41% 55%
34

Progressive Employers Value Personalized Communications
Most progressive employers (94%) say it’s important to tailor benefits information
to individual employees.
Progressive employers (63%) are also more willing to share employee information
to enhance communications.
EMPLOYER ATTITUDES TOWARD PERSONALIZED EMPLOYEE COMMUNICATIONS
Progressives All Firms Point Difference
Providing personalized communications is “highly important” 94% 52% +42
Willingness to share/use employee information for 63% 39% +24
personalized communications
Progressives Are More Likely to Outsource
More than half of progressive employers (58%) plan to outsource their
medical/pharmacy and non-medical insurance programs by 2010.
Almost seven in ten progressive employers (67%) plan to outsource their
retirement programs.
EMPLOYERS EXPECTING TO INCREASE ADMINISTRATION OUTSOURCING ACTIVITY BY 2010
Progressives All Firms Point Difference
Retirement plans 67% 37% +30
Non-medical group insurance plans 58% 40% +18
Medical/Pharmacy plans 58% 43% +15
35

Summary of Key Findings
The themes uncovered in Prudential’s “Study
of Employee Benefits: 2006 and Beyond”
provide valuable insight into the evolving
trends shaping the employee benefits
landscape.
By providing a look into the future, this research can assist plan sponsors,
brokers/consultants, third-party administrators, and other key stakeholders
in developing their strategic business plans.
37

Summary of Key Findings
Theme One: Benefits Matter
Eight in Ten Plan Sponsors Remain Committed to Offering Competitive Benefits Programs
An unexpected finding, considering recent press coverage on benefits cutbacks,
suggests that plan sponsor commitment to offering a competitive employee benefits
package remains quite strong—even in a challenging economic environment. This trend
is true among companies of all size categories, but particularly for larger firms. As plan
sponsors look to balance employee needs with the bottom line, many will reduce their
benefits expenses by increasing employee cost-sharing on contributory plans, offering a
wider range of voluntary benefits, and introducing more flexible plan designs. To further
reign in costs, finance and procurement are increasingly influential in benefits decisions
in larger companies, where the decision process is becoming more complex.
Theme Two: Teach Them Well
Employees Want Greater Support in Understanding and Using Their Financial Benefits
This research highlights gaps between employees’ greatest financial and lifestyle
concerns and employer priorities in terms of addressing those needs. However, many
plan sponsors want to do more and expect to do so in the next five years, to better
meet their employees’ needs. As consumers rely on the workplace for a growing share
of their insurance and savings products, effective benefits communication and education
are becoming more essential. However, many plan sponsors agree that their current
education/communication efforts are lacking, particularly for benefits such as group life,
disability, and long-term care insurance. Over the next five years, more employers will be
tailoring benefits offerings as well as personalizing benefits communications to better
address the diverse needs and life stages of their changing workforce.
Theme Three: Lifestyle Benefits Offer Win/Win Solution
Healthy Lifestyle Emerges as a Holistic Desire for Employees and a Cost-Reduction
Strategy for Employers
As the lines continue to blur between their work and personal lives, employees are feeling
stressed and desire better balance in their lives. A more balanced, healthier lifestyle is
an aspiration for many workers and increasingly, they are turning to their employers for
help in the form of flexible work arrangements and paid time off policies. But lifestyle
issues are equally important for plan sponsors because a healthier workforce leads to
lower medical and disability costs, as well as improved morale and productivity. As more
employers see value in offering employee assistance programs, wellness programs,
disease management, and mental health counseling, access to such plans is expected
to grow significantly by 2010.
38

Theme Four: Positive Online Outlook
Online Tools Are Popular and Opportunities Exist to Improve Utilization and Performance
The increase in benefits-related web technology during the past five years has been
an important trend and one the research indicates will continue through 2010. Thanks
to the availability of more transactional functionality, plan sponsors are shifting many of
their paper-based processes and administrative tasks to the web as a means of controlling
benefits costs and increasing self-service options for their employees. However, the
desired benefits of these online tools—saved time/money, improved data quality and
access—have not yet been fully realized. For many employers, utilization of online
technology is lagging, in part because performance is falling short of expectations.
Regardless, more plan sponsors and employees anticipate using them in the future.
Benefits providers can improve utilization and satisfaction with web tools by focusing on
ease of use and site navigation, as well as providing increased training and user support.
Theme Five: The Progressives
A Small But Growing Segment of Plan Sponsors
Finally, our study looked at employers who are taking a progressive approach to benefits.
Rather than limit benefit availability, these employers have expanded their employees’
access to a wide range of financial and non-financial benefits and consider it critical
to offer and subsidize a generous benefits package. The number of progressive
businesses—68,000 or 11% of the market—creates an interesting segment for
comparison. These progressive employers believe their actions are long-term solutions
that will contribute to their companies’ success.
Looking Forward Through 2006 and Beyond
The employee benefits industry is more dynamic than ever given the various economic,
demographic, social, legal/regulatory, and competitive forces at work. As plan sponsors
look ahead and consider the role of benefits within their organizations, more significant
change is likely in store. Benefits will continue to be a critical tool for attracting and
retaining talent but the range of benefits offered, how they are funded, and the ways
in which they are communicated and delivered will evolve as the composition of the
workforce experiences even greater change.
39

About Prudential Financial
Currently Prudential’s Group
Insurance statistics include:
■ More than $1 trillion in group
life insurance coverage 1
■ Over $3.5 billion of group
insurance reported premiums,
policy charges, and fee income 2
■ Over $131 million in long-term
care premiums 3
■ Solid financial strength ratings: 4
■ A.M. Best A+
■ Standard & Poor’s AA-
■ Moody’s Aa3
■ Fitch
AA
■ 2nd largest carrier of group
life insurance and a leading
disability and long-term care
insurance carrier 5
■ Over 12,000 group life clients
insuring more than 15 million lives 1
Prudential Financial companies, with approximately $547 billion in total assets under
management as of March 31, 2006, serve individual and institutional customers
worldwide and include The Prudential Insurance Company of America, one of the
largest life insurance companies in the United States. These companies offer a variety
of products and services, including life insurance, mutual funds, annuities, pension
and retirement-related services and administration, asset management, banking and
trust services, real estate brokerage franchises, relocation services, and, through a
joint venture, retail brokerage services.
Prudential Financial’s distinctive Rock logo and the Prudential name are among the most
enduring brands in U.S. corporate history. The company’s long history is a testament
to the quality of service it has provided its customers. In addition to the level of service,
Prudential Financial is today recognized for the breadth of products and services it
provides and continues to be a recognized company of quality financial services at
home and abroad.
About Prudential’s Group Insurance Business Unit
Our Group Insurance business segment manufactures and distributes a full range of
group life, long-term and short-term group disability, long-term care, and corporate and
trust-owned life insurance in the U.S. to institutional clients primarily for use in connection
with employee and membership benefits plans. Prudential’s Group Insurance also sells
accidental death and dismemberment and other ancillary coverages and provides plan
administrative services in connection with its insurance coverages.
■ Over 4,000 long-term disability
clients covering more than
2 million lives 6
■ Over 2,800 short-term disability
clients covering almost 1 million
lives 6
■ 98% overall client satisfaction
rate 7
■ 90 years group life, 55 years
disability, and 20 years long-term
care insurance experience
For the latest statistics, please visit
www.investor.prudential.com.
40

1 2005 Statutory Annual Statement of Prudential (Blue Book).
2 Prudential Financial, Inc., Quarterly Financial Supplement, Fourth Quarter 2005.
3 LIMRA, 2005 Annual Group LTC & Individual LTC Sales and Inforce Studies.
4 As of March 2006. A.M. Best ratings range from A++ (Superior) to F (In Liquidation); Standard & Poor’s ratings range from AAA (Extremely Strong) to CC (Extremely Weak);
Moody’s ratings range from Aaa (Exceptional) to C (Lowest Rated); Fitch ratings range from AAA (Exceptionally Strong) to D (Distressed).
5 LIMRA, 2005 Annual Surveys of U.S. Group Life, Group Disability, and Group Long-Term Care Insurance.
6 JHA, Inc., The 2005 JHA U.S. Group Disability Market Survey.
7 The Prudential Insurance Company of America, 2006 Group Insurance Client Satisfaction Study.
© 2006. The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ 07102-3777. All rights reserved. Prudential Financial and the Rock logo are registered
service marks of The Prudential Insurance Company of America and its affiliates. www.prudential.com
42 IFS-A122418 Ed. 0806 101624-0906-5M