SHRM Survey Findings 2013 Employer Perspectives on Disability

SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income In collaboration with and commissioned by Mass. Mutual September 18, 2013

Introduction • The 2013 Employer Perspectives on Disability Benefits survey, which was commissioned by Mass. Mutual, is a collaboration between the Society for Human Resource Management and Mass. Mutual. • The survey was sent to a randomly selected sample of SHRM members from a variety of industries. A response rate of 10% was achieved with 4, 402 responses. • The main purpose of this research was to gain a better understanding of organizations’ needs and gaps regarding long-term disability and executive benefits. The 2012 data were collected from a sample including small-, medium- and large-staff-size organizations (see slide 19). • The findings are divided in the following topics: Ø Base Group Long-Term Disability Plans Ø Compensation and Buy-Up Coverage Ø Supplemental Plan/Individual Disability Income Ø Carrier Satisfaction/Changes Ø Executive Group Life Benefits 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 2

Introduction (continued) • The results of each question are reported by the overall sample, and then, where applicable, statistically significant differences by organization staff size, industry and region are included. Only statistically significant differences with a sample size of 25 or more were reported. Industries § Accounting/architectural § Computer and electronic products/technology § Energy, gas, oil § Financial services § Health care services § Information services § Law firms and legal services § Manufacturing § Pharmaceutical and medicine § Physician and dental offices § Professional, scientific and technical services § Telecommunications § Utilities § Wholesale and retail trade § Other industries Organization Staff Size § § § 1 to 99 employees 100 to 499 employees 500 to 2, 499 employees 2, 500 to 24, 999 employees 25, 000 or more employees Region § § Midwest Northeast South West • The results are based on respondents who indicated that they were either “extremely knowledgeable, ” “very knowledgeable” or “somewhat knowledgeable” about their organization’s employee benefits plan. The results include respondents from publicly owned for-profit or privately owned for-profit organizations only. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 3

Supplemental Plan/Individual Disability Income 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 4

Key Findings in Supplemental Plan/Individual Disability Income • How many organizations offer an individual disability income program to supplement their group plan? Only 19% of organizations offer supplemental disability income. Ø Among organizations with these plans, the majority (70%) implemented their program three or more years ago. Ø Overall, 76% of organizations reported 50% or more of their employees are eligible for this coverage. Ø The top factors that determine eligibility for this program were employees’ compensation (25%), the number of years employed by the firm (19%) and employee job title (14%). • Will organizations continue to offer a supplemental individual disability income program? Only a small portion of organizations currently offer supplemental disability income. Since many expect the cost of health care to rise and most organizations do not provide this benefit because employees can purchase it by themselves, the burden of attaining supplemental individual disability income will most likely be placed on employees. • What are the reasons why organizations do not offer a supplemental individual disability income program? The top three reasons cited are 1) employees can purchase it on their own (52%), 2) the administrative burden is too high(25%), and 3) organizations are concerned about costs (24%). 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 5

What do these findings mean for HR professionals? • Supplemental disability coverage may be an underutilized benefits offering by organizations. Given the uncertainty of future health care costs, organizations may be cautious about adding additional programs to their overall benefits package. Supplemental disability coverage may be an option for organizations to consider as employees usually pay for the coverage out of their own pockets (71% of organizations reported that employees pay 100% of coverage). The main reason that organizations indicated for not currently providing supplemental disability coverage is that employees can purchase it on their own; however, the likelihood of employees being informed enough to seek out these programs is slight. It may be beneficial for organizations to inform employees about supplemental disability coverage and its potential impact on employees’ financial wellness. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 6

Do you offer an individual disability income program to supplement the group plan? Yes No 19% 81% Note: n = 3, 425. Only respondents whose organizations offer a group long-term disability plan were asked this question. Respondents who answered “don’t know” were excluded from this analysis. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 7

Which of the following are reasons why your organization does not offer an individual income program to supplement the group plan? Employees can purchase it on their own 52% The administrative burden is too great 25% Organization is concerned about costs associated with the offering 24% Organization is concerned about enrollment activity 16% Organization is unaware that programs are available 8% Existing coverage plan is adequate enough* 1% Will offer/consider to offer in the future* 1% Other 8% Note: n = 1, 929. Only respondents whose organizations offer a group long-term disability plan but do not offer an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. An asterisk (*) indicates that this response option was developed from open-ended responses. Percentages do not total 100% due to multiple response options. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 8

Which of the following are reasons why your organization does not offer an individual income program to supplement the group plan? Smaller staff-size organizations are more likely than larger organizations to be unaware that individual income programs are available. Larger staff-size organizations compared with smaller organizations are more likely to be concerned about the costs associated with offering an individual income program. Comparison by organization demographics Organization is unaware that programs are available Organization is concerned about costs associated with the offering Note: Only statistically significant differences are shown. 1 to 99 employees (12%) > 500 to 2, 499 employees (5%) 2, 500 to 24, 999 employees (30%) > 100 to 499 employees (21%) 25, 000 or more employees (41%) > 1 to 99 employees (25%) 100 to 499 employees (21%) 500 to 2, 499 employees (22%) 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 9

In what year was the supplemental disability income program implemented? Less than one year ago 9% One year to less than three years ago Three years to less than five years ago Five years to less than 10 years ago 20% 21% 26% 10 years ago or longer 23% Note: n = 522. Only respondents whose organizations offer a group long-term disability plan and an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. Percentages do not total 100% due to rounding. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 10

What percentage of your employees are eligible for the supplemental disability income coverage? Less than 10% 11% 10% to 19% 4% 20% to 29% 4% 30% to 49% 5% 50% or more 76% Note: n = 548. Only respondents whose organizations offer a group long-term disability plan and an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 11

Which of the following items is a factor in determining eligibility for the supplemental disability income program? Employee's compensation 25% number of years employed by the firm 19% All employees are eligible* 19% Employee's job title 14% Executive carve out 11% Employee's status (e. g. , full-time)* 11% Probation period/hire date* Other 4% 10% Note: n = 494. Only respondents whose organizations offer a group long-term disability plan and an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. An asterisk (*) indicates that this response option was developed from open-ended responses. Percentages do not total 100% due to multiple response options. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 12

What percentage of eligible employees have purchased supplemental disability income coverage? Less than 20% 62% 20% to 29% 18% 30% to 49% 10% 50% or more 9% Note: n = 468. Only respondents whose organizations offer a group long-term disability plan and an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. Percentages do not total 100% due to rounding. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 13

How much, if any, of the supplemental disability income coverage is paid for by the employee? 0% 1% to 24% 25% to 49% 50% to 74% 75% to 99% 100% 18% 4% 3% 3% 1% 71% Note: n = 546. Only respondents whose organizations offer a group long-term disability plan and an individual disability income program were asked this question. Respondents who answered “don’t know” were excluded from this analysis. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 14

How much, if any, of the supplemental disability income coverage is paid for by the employee? Organizations located in the Midwest are more likely than organizations in the South to require employees to pay 100% of their supplemental disability income coverage. Comparison by organization demographics 100% Note: Only statistically significant differences are shown. Midwest (78%) > South (63%) 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 15

Demographics 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 16

Approximately what percentage of regular, full-time and part-time employees are eligible for employee benefits at your organization? Less than 25% to 49% 50% to 59% 60% to 69% 70% to 79% 80% to 89% 90% to 99% 100% Full-time Employees (n = 4, 182) 1% 1% 2% 4% 12% 78% Part-time Employees (n = 3, 470) 66% 3% 5% 1% 2% 3% 4% 16% 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 17

Which of the following is closest to your job title? Manager 32% Generalist Director 23% 19% Chief Human Resource Officer Vice President Administrator Supervisor 9% 6% 2% 1% Associate Director Specialist 1% Associate Vice President Senior Vice President 1% 1% 1% Analyst 1% Chief Executive Officer 0% President 0% Chief Human Capital Officer 0% Senior Executive Vice President 0% Other 3% n = 4, 394 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 18

Demographics: Organization Staff Size 1 - 99 employees 25% 100 - 499 employees 33% 500 - 2, 499 employees 18% 2, 500 - 24, 999 employees 25, 000 or more employees 17% 7% n = 4, 382 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 19

Demographics: Organization Profit Status Privately owned forprofit Publicly owned for-profit 72% 28% n = 4, 402 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 20

Demographics: Organization Region Midwest 35% South West Northeast 26% 22% 17% n = 4, 106 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 21

Demographics: Organization Industry Percentage Manufacturing 16% Wholesale and Retail Trade 14% Financial Services A 10% Professional, Scientific and Technical Services 8% Energy, Gas, Oil B 6% Telecommunications 6% Accounting / Architectural C 4% Computer and Electronic Products/Technology D 4% Health Care Services E 4% Utilities 4% Information Services F 3% Pharmaceutical and Medicine G 2% Law Firms and Legal Services 2% Physician and Dental Offices 1% Other industries 16% Includes Banks, Insurance Companies, Securities and Commodities, Other Finance and Insurance Services categories. Includes Energy Extraction and Refining, Gas and Oil, and Other Oil, Gas, and Energy Extraction and Refining categories. C Includes Accounting, Tax, Payroll Services and Architectural, Engineering categories. D In the survey labeled as Manufacturing: Computer and Electronic Products/Technology. E Includes Hospitals and Other Health Care Services categories. F Includes Publishing, Motion Picture, Broadcasting (except Internet) and Other Information Services categories. G In the survey labeled as Manufacturing: Pharmaceutical and Medicine category. A B n = 4, 402 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 22

Demographics: Other Does your organization have U. S. -based operations (business units) only, or does it operate multinationally? U. S. -based operations only 66% Multinational operations 34% n = 4, 387 Single-unit organization: An organization in which the location and the organization are one and the same. 26% Multi-unit organization: An organization that has more than one location. 74% n = 4, 398 What is the HR department/function for which you responded throughout this survey? Corporate (companywide) 74% Business unit/division 15% Facility/location 11% n = 3, 407 Is your organization a single-unit organization or a multi-unit organization? For multi-unit organizations, are HR policies and practices determined by the multi-unit headquarters, by each work location or by both? Multi-unit headquarters determines HR policies and practices 64% Each work location determines HR policies and practices 4% A combination of both the work location and the multi-unit headquarters determines HR policies and practices 33% Note: n = 3, 410. Percentages do not equal 100% due to rounding. 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 23

SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income In collaboration with and commissioned by Mass. Mutual Survey Methodology • Response rate = 10% • 4, 402 HR professional respondents from a randomly selected sample of a variety of industries in SHRM’s membership • Margin of error +/- 2% • Survey fielded: July 10, 2012 to August 3, 2012 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 24

About Mass. Mutual Founded in 1851, Mass. Mutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, Mass. Mutual has paid dividends to eligible participating policyholders every year since the 1860 s. With whole life insurance as its foundation, Mass. Mutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term. Disability and Executive Benefits Survey ©SHRM 2012 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 25 25

About SHRM The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human resource management. Representing more than 250, 000 members in over 140 countries, the Society serves the needs of HR professionals and advances the interests of the HR profession. Founded in 1948, SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China and India. Disability and Executive Benefits Survey ©SHRM 2012 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 26 26

About SHRM Research • For more survey/poll findings, visit www. shrm. org/surveys • For more information about SHRM’s Customized Research Services, visit www. shrm. org/customizedresearch • Follow us on Twitter @SHRM_Research Disability and Executive Benefits Survey ©SHRM 2012 2013 Employer Perspectives on Disability Benefits—Supplemental Plan/Individual Disability Income ©SHRM 2013 In collaboration with and commissioned by Mass. Mutual 27 27