SBART (Small Business Annual Retirement Trends) Survey for

w w w . h a r r i s i n t e r a c t i v e . c o m

©2007, Harris Interactive Inc. All rights reserved.

SBART (Small Business Annual Retirement Trends) Survey for ShareBuilder

October 2007

2

©2007, Harris Interactive Inc.

H A R R I S I N T E R A C T I V E

Contents

Sections

� Background and Methodology 3

� Executive Summary 6

� Personal Retirement Preparation 13

� Employee Benefit Offerings 18

� 401(k) Plan Details 26

� Importance of Retirement Plan Features 35

� Decision-making for Retirement Plans 41

� Employee Retention 47

� 401(k) Plans and Tax Implications 51

� Social Responsibility and Political Considerations 54

� Respondent Profile 57

3



Background and Methodology

3



4



� ShareBuilder sought to conduct a survey among small business owners to:

– Generate mass market press about the small business retirement crisis, and establish ShareBuilder as the recognized expert in small business retirement trends

– Gain proprietary insights into small business retirement needs and preparedness

� The 2006 Small Business Annual Retirement Trends (SBART) survey served as a benchmark to track:

– Retirement plan penetration

– Influences on demand for retirement benefits

– Attitudes toward 401(k) plans and benefits

– How small business owners are preparing for their own retirement

– Key retirement plan benefits and features that resonate with target segments

– Insights on particular retirement market trends (e.g. auto-enrollment)

� In 2007 Sharebuilder sought to also survey small business employees to gain insights on their experiences and views in retirement preparation, as well as to provide a comparison against the employer point of view.

Background

5



� Harris Interactive conducted an online survey among small business owners and employees between July 26-August 28, 2007

� Qualified respondents:

– US residents, Age 18+

– Employers: Owners/Partners, CEOs/Chairmen or Presidents with 1-50 employees

– Employees: Employed full time at firm with 2-50 employees

� 519 employer interviews were completed

� 1147 employee interviews were completed

� The average interview length was approximately 20 minutes

Methodology – Study Parameters

6



Executive Summary

6



7



Executive Summary

Employer/Employee Comparison: Employers will retire sooner than employees and are more confident in their retirement savings.

� Employers will retire in about 14 years on average, compared to 21 years for employees (p14).� While more than half of employers are very/somewhat confident in their retirement savings, only about 4 in 10

employees report being that confident (p14).� Employers and employees of small business firms are most confident, with more than 7-in-10 employers and half of

employees feeling very/somewhat confident in their retirement savings (p14).

Most employers interviewed do not offer retirement benefit plans.

� More than 6-in-10 employers do not offer retirement benefits (p24).

Yearly Comparison: A similar proportion of employers reported not offering retirement benefit plans in 2006 (65% v. 63% in 2006, p25).

� However, employers of small businesses are much more likely to offer retirement benefits, with nearly 7-in-10 doing so (p24).

Employees are most likely to rely on 401(k) plans to fund their retirement while most employers intend to rely on IRAs and personal investments.

� More than 4-in-10 employees report that the investment product they intend to rely on to fund their retirement is a 401(k) plan (p17).

� More than half of employers are likely to rely on IRAs to fund their retirement and more than 4-in-10 will depend on personal investments through stocks or mutual funds (p17).

Employer/Employee Comparison: Employees will rely on 401(k)s to fund their retirement more so than employers, while employers will depend on IRAs, stocks and mutual funds with greater frequency (p17).

Retirement Benefits Offered and Owned

Personal Retirement Preparation

8



Executive Summary

Employer/Employee Comparison: In general, both employers and employees are not very satisfied with their retirement benefits

� Only one-quarter of employers and employees report being extremely/very satisfied with the retirement benefits offered by their company (p27).

However, satisfaction with retirement benefits increases at larger firms.� Nearly 4-in-10 employers and employees at small businesses are extremely/very satisfied with their retirement

benefits compared to about 20% at micro businesses (p27).

Satisfaction with Benefits

Employers of larger firms feel more responsibility to offer retirement plans.

� In fact, approximately half of employers at micro businesses feel no responsibility while three-quarters of employers at small businesses feel they have a strong/some level of responsibility to offer a retirement benefits plan (p28).

Employees feel that their employers have a responsibility to offer retirement plans.� Among employees, a majority feel that employers are strongly/somewhat obligated to provide retirement benefits

plans (64%, p28). � Even more employees from small businesses, more than 7-in-10, feel their employers have this responsibility (p28).

Employer/Employee Comparison: Employees feel that employers are obligated to provide retirement benefit plans more so than employers do (64% of employees v. 50% of employers, p28).

Responsibility and Obligation to Offer 401(k) Plans

9



Executive Summary

Employers/employees report that the most important feature for 401(k) plans is “ease of administration/use”.

Employer/Employee Comparison: In determining the relative importance of various features of a 401(k) plan, “ease of administration” is rated as the most important feature by employers, while the corresponding “ease of use” is rated most important by employees (p42 and p44).

� In fact, among employers who would recommend their 401(k) provider, more than 8-in-10 indicate that the characteristic guiding their recommendation is “easy to administer plan” (p50).

� Online access is also very important to employers with “offers online access to manage 401(k) investments” and “offers online access to administer plan” ranking as the next most important features of 401(k) plans (p42 and p44).

� Offering exchange-traded funds is the least important feature of 401(k) plans for both employers and employees (p42 and p44).

Rating Retirement Plan Features

Employers Who Do Not Offer a 401(k) PlanNearly half of employers who do not offer a 401(k) plan never intend to do so (p32).

Yearly Comparison: The same proportion of employers reported never intending to offer a 401(k) plan in 2006 (47% in both 2007 and 2006, p38).

� The top reason for not offering a 401(k) plan, reported by nearly half of employers who intend to never offer one and about 60% of employers who intend to wait three years, is an inadequate amount of employees to make it worthwhile (p39).

� The financial considerations that prevent employers from offering a 401(k) include an inability to afford a company match, uncertain/unstable business and management fees that are too high (p39).

The leading reason to reconsider offering a 401(k) plan is the incentives provided by tax breaks, reported by more than a quarter of small business employers (26%, p38).

Employers who do not offer a 401(k) expect annual participant fees to be much higher than they really are and nearly half do not know what to expect in the cost of administration fees (p36).

10



Employer/Employee Comparison: Employees are more concerned with benefits than employers and are more likely to consider them crucial in attracting and retaining talent.

� Health insurance, profit-sharing/bonuses, defined contribution plans, free parking, disability insurance, life insurance, pensions, tuition reimbursement, stock options and personal banking services are all more likely to be considered crucial by employees than employers (p21).

In keeping with their preferences, employees are more likely to work at companies which offer these benefits.� The larger the company, the more likely benefits are offered (p21).� Owner-only businesses are the least likely to offer these benefits (p22).

Executive Summary

Benefits Required to Attract Employees

Employee RetentionOn average, it costs about $6,000 to replace an employee (p55).

The greatest cost when replacing an employee is the time to get new hires up to speed (67%, p55).� This cost is even greater at small business where more than 8-in-10 employers report that time spent training new

employees at the expense of driving their business is the main cost in replacing an employee (p55).

But ultimately, employers feel that most employees could not be retained with any form of benefit (p54).� Half of employers feel that no benefit would prevent their employees from leaving (p54). � Only a quarter of employers believe that healthcare benefits and more flextime may prevent employees from leaving

(p54).

About 4-in-10 employees would leave their current job for one that provided a 401(k) plan (p54).

11



Executive Summary

Owner-only Firm DifferencesOwner-only firms are less likely to offer employee benefits.

� In particular, owner-only firms are least likely to offer health insurance, flex time, profit-sharing/bonuses, defined contribution plans, free parking, life insurance, tuition reimbursements, legal services and personal services (p22).

Owner-only firms are least likely to offer 401(k) plans (8% offer them compared to 51% of small business firms, p25).� Additionally, over 7-in-10 owner-only firms do not offer retirement benefit plans (p25).

Owner-only firms have different experiences in the selection and administration of their retirement benefits plans.� While about half of employers at owner-only firms rely on themselves to select a retirement benefits plan provider, on par

with larger firms, they are less likely to rely on financial advisors, CPAs, lawyers, other business owners, insurance brokers and employees (p48).

� When selecting a 401(k) plan provider, owner-only firms are least likely to describe ease of administration/use as a critical criteria in their selection (p52).

� Owner-only firms are most uncertain of the costs of administration fees (62% v. 48% and 38% for micro and small business firms respectively, p37).

12



Detailed Findings

12



Key

Owner-only firm: 1 employer (no employees)Micro business: 2-25 employeesSmall business: 26-50 employees

+/ - Statistically significant increase/decrease compared to 2006 at the 95% confidence level

▲/▼ Statistically higher/lower result at the 95% confidence level when compared to total employers or total employees

▲/▼ Statistically higher/lower result for total employers at the 95% confidence level when compared to total employees

Note:When comparing results among the employer and employee segments, owner-only firms are omitted to make results more comparable. When employer data is trended, owner-only results are presented to allow comparison to the previous year’s results.

13



Personal Retirement Preparation

13



14



53%

52%

72%

41%

39%

50%

Total Employer (N=361)

Micro Business (N=260)

Small Business (N=101)

Total Employee (N=1147)



BASE: ALL RESPONDENTSQ510 How long until you personally plan to retire?

Q505 Now considering your future retirement, how confident are you that you are saving enough for retirement?

Confidence in Retirement Savings

Top 2 Box % – Very/Somewhat Confident

▲

▲

▲

20.5Total Employee (N=1147)

15.1Small Business (N=101)

19.1Small Business (N=432)

20.9Micro Business (N=715)

13.7Micro Business (N=260)

13.7Total Employer (N=361)

Average Years Until Retirement

� On average, employers expect to retire sooner than employees (in about 14 years for employers v. 21 years for employees).

� Employers are more confident in their retirement savings than employees (53% of employers v. 41% of employees).

� Employers and employees from larger firms are most confident in their retirement savings (72% for employers from small business firms v. 53% for total and 50% for employees from small business firms v. 41% for total).

Time Until Retirement and Confidence in Retirement Savings

Years

15



16

15

16

13

15

16

12

18

35

38

30

29

36

42

60

47

2007 (N=519)

2006 (N=507)

2007 (N=158)

2006 (N=151)

2007 (N=260)

2006 (N=254)

2007 (N=101)

2006 (N=102)

Very confident Somewhat confident

Small Business

Micro Business

Owner-only

Total Employer

Employers' Confidence in Their Retirement SavingsBase: Employers

BASE: ALL RESPONDENTSQ510 How long until you personally plan to retire?

Q505 Now considering your future retirement, how confident are you that you are saving enough for retirement?

51%

53%

52%

58%

64%

72%

42%

46%

(N=102)

(N=254)

(N=151)

(N=507)

(N=101)

(N=260)

(N=158)

(N=519)

14.2 Yrs14.9 YrsOwner-only

20062007Average Years Until RetirementBase: Employers

15.1 Yrs

13.7 Yrs

14.2 Yrs

16.5 YrsSmall Business

12.9 YrsMicro Business

13.4 YrsTotal Employer

� Employers at owner-only firms expect to retire along a similar timeline with employers from micro businesses and small business firms.

� Confidence in retirement savings has remained stable compared to 2006.

Trending: Time Until Retirement and Confidence in Retirement Savings

▲▲

16



BASE: ALL RESPONDENTSQ505 Now considering your future retirement, how confident are you that you are saving enough for retirement?

Gender Differences: Confidence in Retirement Savings

51%

41%

58%

39%

41%

43%


Male (N=332)

Female (N=187)


Male (N=523)

Female (N=624)

Confidence in Retirement Savings

Top 2 Box % – Very/Somewhat Confident

▲

▼

▲

� Male business owners are most confident in their retirement savings (58%).

� Among employees, confidence in retirement savings is similar between genders.

17



Funding for Retirement

BASE: ALL RESPONDENTSQ515 Which of the following investment products do you currently own that you

plan to use at least in part to fund your retirement? Select all that apply.

� Employees are most likely to use 401(k) accounts to fund their retirement (45%) while employers are most likely to use IRAs and personal investments in stocks and mutual funds (51%, 47% and 44% respectively).

� Employers and employees from larger firms are most likely to rely on 401(k)s.

None

Money market funds

401(k) account

Mutual funds

Stocks

IRA

Profit-sharing plan

Annuity

Bonds

Certificates of Deposit

RE invest. (not home)

Other

Exchange-traded funds

%Micro Business

%%%%%Small BusinessTotal EmployeeSmall BusinessMicro BusinessTotal Employer

51

47

44

34

32

35

28

17

16

6

2

13

11

50

46

43

32

32

34

28

17

16

5

2

13

12

59

63

56

55

38

44

29

23

14

19

5

15

3

39

23

25

45

17

10

17

9

8

9

1

11

18

42

22

25

38

16

10

17

9

6

9

1

10

20

33

25

24

68

18

10

17

9

12

12

1

14

12N=361 N=1147 N=715N=260 N=432N=101

▲

▲

▼

▼

▲

▲

▲

▲

▲

▲

▲

▼

▲

▲

▲

▲

▲

▼

▼

▼

▲

▲

▲

Employers Employees

18



Trending: Funding for Retirement

BASE: ALL RESPONDENTSQ515 Which of the following investment products do you currently own that you plan to use at least in part to

fund your retirement? Select all that apply.

Investment Products Employers' Currently Own that They Plan to Use to Fund Their Retirement

Bonds



Money market funds

401(k) account

Mutual funds

Stocks

IRA

Other


None

Profit-sharing plan

Annuity

Small BusinessMicro BusinessOwner-onlyTotal Employer

51%

45%

43%

33%

31%

30%

24%

17%

15%

6%

3%

12%

13%

48%

44%

39%

25%

33%

32%

26%

16%

13%

5%

4%

12%

15%

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

51%

41%

41%

31%

30%

22%

16%

17%

13%

6%

4%

10%

16%

44%

38%

36%

23%

26%

21%

21%

13%

13%

4%

4%

12%

21%

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

50%

46%

43%

32%

32%

34%

28%

17%

16%

5%

2%

13%

12%

49%

45%

40%

24%

36%

36%

27%

15%

12%

4%

3%

12%

13%

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

59%

63%

56%

55%

38%

44%

29%

23%

14%

19%

5%

15%

3%

49%

66%

54%

59%

42%

48%

45%

35%

26%

23%

11%

9%

1%

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

20072006

2007 N=5192006 N=507

2007 N=1582006 N=151

2007 N=2602006 N=254

2007 N=1012006 N=102

� As in 2006, IRAs remain the top investment product to fund retirement among employers.

� Employers are more likely to own 401(k)s to help fund their retirement compared to 2006 (33% v. 25%).

� Employers from owner-only firms are less likely to rely on real estate investments and Certificates of Deposits.

----

----

++++ ++++

▼

▼

▲

▲

▲

▲

▲

▲

▲

▼

Employers

19



Gender Differences: Funding for Retirement

BASE: ALL RESPONDENTSQ515 Which of the following investment products do you currently own that you

plan to use at least in part to fund your retirement? Select all that apply.

� Male business owners are more likely to own a 401(k) plan than female employers (38% v. 25%).

� Male employers are also more likely to own other investments to fund their retirement (IRAs, stocks, mutual funds and real estate).

None

Money market funds

401(k) account

Mutual funds

Stocks

IRA

Profit-sharing plan

Annuity

Bonds



Other


%Male

%%%%%FemaleTotal EmployeeFemaleMaleTotal Employer

51

45

43

33

31

30

24

17

15

6

3

12

13

55

53

49

38

34

36

23

19

16

8

3

13

11

44

32

32

25

26

21

25

14

12

2

3

11

16

39

23

25

45

17

10

17

9

8

9

1

11

18

43

26

27

46

18

10

20

11

8

9

1

11

16

33

17

22

45

14

9

12

7

7

10

11

22N=519 N=1147 N=523N=332 N=624N=187

Employers Employees

<1%

▼

▼

▼

▼

▼

▼

▲

▲

▲

▲

▲

▲

▲

▲

▲

▼

▼

▼

▲

▲

▲

▲

▲

▲

▲

▼

▼

▼

▼

20



Employee Benefit Offerings

20



21



Employee Benefits: Crucial v. Offered

Personal banking srvcs

Legal services

Executive benefits

Child-care subsidies

Free parking

Defined contrib. plan

Profit-sharing/Bonus

Flex time

Health insurance

Stock options

Tuition reimbursement

Pension

Life insurance

Disability insurance

Financial planning

On-site day care

%Micro Business

%%%%%Small BusinessTotal EmployeeSmall BusinessMicro BusinessTotal Employer

66

52

38

35

27

26

24

18

12

8

8

10

9

7

4

3

34

46

25

19

40

10

15

4

9

2

4

7

1

7

3

5

BASE: ALL RESPONDENTS Q950 Which of the following benefits do you feel are crucial for an employer to offer to attract and retain employees? Select all that apply.

Q955 Which of the following benefits are offered to employees at your company? Select all that apply.

65

53

38

35

27

26

23

19

12

8

9

10

9

7

5

3

32

46

24

17

39

9

13

4

8

2

4

7

1

6

4

5

81

45

34

44

29

30

30

12

17

8

4

9

9

18

8

9

74

50

37

42

69

35

44

7

16

7

4

9

6

14

4

10

86

57

52

57

35

41

38

37

26

14

9

11

11

11

6

7

68

41

27

36

61

27

35

13

13

5

2

4

2

6

6

4

85

58

53

54

37

42

35

37

24

14

10

12

11

11

7

7

63

39

24

29

62

20

27

12

9

4

3

4

2

6

6

3

89

55

50

69

30

40

49

39

34

13

6

11

10

10

5

8

85

46

36

60

58

48

59

16

27

8

7

1

7

8

4

Crucial Offered

<1%

N=361 N=1147 N=715N=260 N=432N=101

� Employees find health insurance, defined contribution plans, flex time and profit-sharing/bonuses most crucial for an employer to offer to attract employees. These benefits are also among the most likely to be offered.

� Employers describe health insurance and defined contribution plans as crucial far more often than they actually offer them to employees (the disparities are 32% and 16% respectively).

� Employees deem profit-sharing/bonuses, pension plans and defined contribution plans as crucial more often than they’re offered (25%, 24% and 21%).

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Employers Employees

22



Micro Business


Legal services

Executive benefits

Financial planning




Flex time

Health insurance

Stock options


Pension

Life insurance

Free parking


On-site day care

Are Offered to Employees Crucial for an Employer to Offer

%Owner-only

%%%%%%

Small BusinessTotal

Small Business

Micro BusinessOwner-onlyTotal Employers Only



2007 2006

15

18

9

11

6

16

5

3

3

1

4

1

5

3

0

1

14

15

7

9

5

17

6

3

1

3

1

0

2

0

2

0

68

52

40

39

27

27

24

21

15

11

10

9

9

8

5

3

78

43

34

44

26

25

17

19

13

10

11

11

5

5

3

2

73

50

46

48

29

28

25

28

20

16

14

10

8

9

4

2

82

46

34

54

36

27

15

29

14

15

15

15

7

7

3

2

65

53

38

35

26

27

23

19

12

8

9

9

10

7

5

3

75

42

34

38

21

24

17

12

11

6

9

9

4

4

2

1

81

45

34

44

30

29

30

12

17

8

4

9

9

18

8

9

85

36

34

66

28

27

32

35

22

21

11

13

14

11

10

6

28

37

20

16

9

33

12

4

7

2

4

1

6

5

3

4

31

28

18

17

9

31

14

4

7

3

5

1

4

3

2

2

32

46

24

17

9

39

13

4

8

2

4

1

7

6

4

5

36

34

22

17

10

37

15

4

8

2

7

1

4

3

2

32007 N=5192006 N=507

2007 N=5192006 N=507

N=158N=151

N=158N=151

N=260N=254

N=260N=254

N=101

N=102

N=101

N=102

74

50

37

42

35

69

44

7

16

7

4

6

9

14

4

10

68

34

32

55

23

44

40

24

18

10

4

9

6

11

6

4

� The top benefits found crucial to attract/retain employees according to employers (health insurance, flex time, profit-sharing/bonus and defined contribution plan) and the benefits most offered (flex time, free parking and health insurance) remain unchanged compared to 2006.

� Within this top tier, there has been movement with flex time (52% v. 43% in 2006) and profit-sharing/bonuses (40% v. 34% in 2006) deemed more crucial and flex time offered more (37% v. 28% in 2006).

� Owner-only firms offer less benefits than larger firms.

Trending: Employee Benefits- Crucial v. Offered

++++

++++

++++

----

----

----

----

----

----

++++

++++

++++

++++

++++

++++

++++

++++++++

++++

++++

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23



Gender Differences: Employee Benefits Crucial v. Offered

� Female employers and employees rate more benefits as crucial than their male counterparts.

� Males and females describe defined contribution plans as similarly crucial (nearly 40% for employers and 60% among employees).


Legal services

Executive benefits


Free parking



Flex time

Health insurance

Stock options


Pension

Life insurance


Financial planning

On-site day care

%Male

%%%%%FemaleTotal EmployeeFemaleMaleTotal Employer

68

52

40

39

27

27

24

21

15

11

10

9

9

8

5

3

28

37

20

16

33

9

12

4

7

2

4

6

1

5

3

4



64

47

42

38

22

27

23

18

13

11

6

8

7

10

3

3

31

35

22

18

28

9

13

4

7

2

2

7

1

6

3

4

76

59

37

41

37

28

25

27

18

11

18

11

14

5

8

2

24

41

16

13

40

8

10

2

6

2

8

5

2

4

2

3

86

57

52

57

35

41

38

37

26

14

9

11

11

11

6

7

68

41

27

36

61

27

35

13

13

5

2

4

2

6

6

4

83

52

52

57

31

41

36

35

23

13

5

10

8

12

6

6

68

36

28

34

55

26

33

11

14

5

5

1

6

5

3

Crucial Offered

N=519 N=1147 N=523N=332 N=624N=187

Employers Employees

<1%

▲

▼ ▲

▲

▲

▲

▼ 90

66

52

57

42

41

42

41

31

16

15

14

16

9

7

9

70

48

26

40

71

28

37

16

12

5

6

4

3

6

8

5

▲

▲

▲

▲ ▲

▲

▲

▲

▲

▲

▲▲

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

▼

24




Other


None

Profit-sharing plan

Other self-funded plan

Pension plan

401(k) plan


51%

6%

11%

23%

3%

31%

16%

4%

16%

10%

2%

62%

Retirement Benefit Plans Offered and Owned


Other

Pension plan

Profit-sharing plan

401(k) plan

Small BusinessMicro BusinessTotal Employee

Employees

Currently offered by employer

Currently have with employer

39%

14%

13%

10%

5%

31%

10%

9%

8%

6%

BASE: ALL RESPONDENTS

Q535 Now, thinking about [your/the

business]/[the company at which you currently

work], which of the following

retirement benefit plans do you currently offer/does your

employer offer? Select all that apply.

Q537 Which of the following retirement benefit plans do you

currently have through your current employer?

Select all that apply.

32%

12%

12%

10%

5%

24%

8%

8%

9%

5%

65%

20%

16%

8%

7%

54%

17%

11%

6%

7%

Currently offered to employees

Retirement Benefit Plan Currently OfferedBase: Employers

Retirement Benefit Plan Currently Offered/OwnedBase: Employees

N=1147 N=715 N=432

� A majority of employers report not offering retirement benefit plans (62%).

� 401(k) plans are the most offered and owned retirement benefit plans among employees (39% are offered and 31% own a 401(k)).

� Employees from larger firms are most likely to be offered and own 401(k) plans.

▼

▲

▲

▲

▲

14%

4%

17%

9%

2%

64%

▲

▼

▼

▼

▼

▼

▼

▲

Employers

▲

25



Other

Profit-sharing plan


None

Pension plan

401(k) plan


13%

4%

15%

8%

2%

65%

14%

4%

18%

9%

2%

63%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007 N=5192006 N=507

8%

4%

13%

5%

1%

72%

6%

2%

18%

1%

2%

76%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

14%

4%

17%

9%

2%

64%

15%

4%

17%

10%

2%

61%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

51%

6%

11%

23%

3%

31%

52%

24%

27%

30%

1%

19%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

Trending: Retirement Benefit Plans Offered

BASE: ALL RESPONDENTSQ535 Now, thinking about [your/the business]/[the company at which you currently work],

which of the following retirement benefit plans do you currently offer/does your employer offer? Select all that apply.

Retirement Benefit Plan Currently Offered

N=158N=151

N=260N=254

N=101N=102

� Smaller firms are more likely to not offer retirement benefit plans (72% and 64% for owner-only and micro business firms v. 31% of small business firms).

� Small business employers indicate a decline in the amount of pension plans (6% v. 24%) and other self-funded plans (11% v. 27%) compared to 2006.

----

----

++++

++++

▼ ▲

▲

26



Female (N=624)

Other

Male (N=523)

None

Profit-sharing plan


Pension plan

401(k) plan


40%

15%

9%

14%

5%

38%

39%

11%

10%

14%

6%

39%

39%

13%

10%

14%

5%

39%

Female (N=187)

Other

Male (N=332)

None

Profit-sharing plan


Pension plan

401(k) plan


9%

1%

13%

4%

2%

73%

16%

6%

17%

11%

2%

61%

13%

4%

15%

8%

2%

65%

Gender Differences: Retirement Benefit Plans Offered and Owned

BASE: ALL RESPONDENTS

Q535 Now, thinking about [your/the

business]/[the company at which you currently

work], which of the following

retirement benefit plans do you currently offer/does your

employer offer? Select all that apply.

Currently offered to employees

Retirement Benefit Plan Currently OfferedBase: Employers

� Female employers are more likely to not offer a retirement benefit plan.

� 401(k) plan offerings are similarly low among male and female employers.

Employers

Currently offered by employers

Retirement Benefit Plan Currently OfferedBase: Employees

Employees

▲

▼

▲

▼▲

▲▼

▼

▼

▼

27



Satisfaction with Benefits

BASE: ALL RESPONDENTS Q960/Q965 How satisfied are you with the retirement/healthcare benefits offered by your company?

Satisfaction with Retirement Benefits

Top 2 Box % – Extremely/Very satisfied

25%

24%

37%

25%

21%

36%







� Satisfaction with retirement benefits is low (only one-quarter of employers and employees are extremely/verysatisfied). This is similar to 2006 for employers.

� Employers and employees from larger firms are most satisfied with their retirement benefits.

� Although small business owners are the most satisfied, they are less satisfied with retirement benefits compared to 2006 (37% v. 52% are extremely/very satisfied).

▲

▲

▼

Satisfaction with Retirement Benefits

Top 2 Box % – Extremely/Very satisfied

23%

20%

24%

37%

24%

16%

26%

52%

2007 (N=519)

2006 (N=507)

2007 (N=158)

2006 (N=151)

2007 (N=260)

2006 (N=254)

2007 (N=101)

2006 (N=102)Small Business

Micro Business

Owner-only

Total

---- ▲

28



24% 24% 25%

40% 37%47%

Total Employees

(N=1147)

Micro Business

(N=715)

Small Business

(N=432)

Somewhat agree

Strongly agree

18% 18%26%

32% 31%

49%

Total Employers

(N=361)

Micro Business

(N=260)

Small Business

(N=101)

Some

Responsibility/Obligation

Strong


Obligations to Offer Retirement Plans

BASE: EMPLOYEESQ556 How much do you agree or disagree that every employer is obligated to offer a retirement benefits plan?

BASE: OWNERSQ560 Thinking about your role as [the owner of/someone in charge of running] a small business, which of the following best

describes the level of responsibility/obligation you feel about offering your employees a 401(k) or other retirement plan?

Employees' Level of Agreement that Every Employer Is Obligated to Offer a Retirement Benefits Plan

Level of Responsibility/Obligation Employers Feel Toward Offering Employees a 401(k) or Other Retirement Plan

Employers Employees

64% 61%

73%

50%▲

▲

� Employers and employees from larger firms are most likely to believe that business owners are obligated to provide retirement benefits.

� A majority of all employees feel that employers are strongly/somewhat obligated to provide some form of retirement plan (61% for micro business employees and 73% for small business employees).

49%

75%▲

▲

▲

▼

29



No Responsibility/Obligation

Some Responsibility/Obligation

Strong Responsibility/Obligation


26%

49%

26%

32%

51%

17%

2007

2006

2007

2006

2007

2006

Trending: Obligation to Offer 401(k) Plans by Employers

� Employers at owner-only and micro business firms have similar feelings- more than half feel no obligation to offer a 401(k) plan.

BASE: OWNERS

Q560 Thinking about your role as [the owner of/someone in charge of running] a small business, which of the following best describes the level of responsibility/obligation you feel about offering your employees a 401(k) or other retirement plan?


20%

30%

50%

17%

37%

46%

2007

2006

2007

2006

2007

2006

21%

28%

51%

17%

31%

52%

2007

2006

2007

2006

2007

2006

18%

31%

51%

15%

40%

45%

2007

2006

2007

2006

2007

2006

N=519N=507

N=158N=151

N=260N=254

N=101N=102

-------- ▲

▼

30



24% 22%28%

40%38%

42%

Total Employees

(N=1147)

Male (N=523) Female (N=624)

Somewhat agree

Strongly agree

20% 22%16%

30% 30%31%

Total Employers

(N=519)

Male (N=332) Female (N=187)

Some


Strong


Gender Differences: Obligations to Offer Retirement Plans

BASE: EMPLOYEESQ556 How much do you agree or disagree that every employer is obligated to offer a retirement benefits plan?

BASE: OWNERSQ560 Thinking about your role as [the owner of/someone in charge of running] a small business, which of the following best

describes the level of responsibility/obligation you feel about offering your employees a 401(k) or other retirement plan?

Employees' Level of Agreement that Every Employer Is Obligated to Offer a Retirement Benefits Plan


Employers Employees

64% 60%

70%

50%

� 7-in-10 female employees believe that employers are obligated to offer a retirement benefits plan. However, 40% of male employees disagree.

� The level of obligation to offer a 401(k) plan is similar across gender for employers (about 50%).

52%47%

▲

▼

31



401(k) Plan Details

31



32



BASE: OWNERS WHO HAVE 401(k) PLAN AND HAVE PART-TIME EMPLOYEES

Q600 At your company, do you allow part-time employees to participate in your 401(k) plan?BASE: OWNERS WHO HAVE 401(k) PLAN

Q605 Of those employees who are eligible for your 401(k) plan, approximately what

percentage are contributing?BASE: OWNERS WHO HAVE

COMPANY MATCHQ615 How much do you match for every $1

the employee contributes to the plan?Q625 How long does it take for an employee’s

contributions to become fully vested?

BASE: OWNERS WHO HAVE FIXED MATCHES OR RATCHETED

Q620 What is the highest percentage contribution to which you apply your company

match?

$0.58$0.57$0.57Mean ($0.25-$1)

(N=26*)(N=21*)(N=47)

5.6%8.6%8.0%Highest Percentage Contribution to Which Company Match Is Applied (Mean)

(N=17*)(N=14*)(N=31)

2.7 Yrs3.0 Yrs2.9 YrsLength of Time Before Employee’s Contributions Become Fully Vested (Mean)

(N=52)(N=40)(N=92)

37%16%20%Allow Part-time Employees to Participate in 401(k) Plan

SmallBusiness

Micro Business

Total EmployerBase: Employers

(N=38)(N=32)(N=70)

54%57%56%Percentage of Eligible Employees Who Are Contributing to 401(k) Plan (Mean)

19%26%25%$0.25

15%9%10%$0.50

0%7%5%$0.75

16%17%17%

(N=26*)(N=21*)(N=47)

$1

Level of Match for Every $1 the Employee Contributes to the Plan

10%

1%

8%

24%

8%

0%

7%

26%

15%

4%

15%

15%

Ratcheted

Dollar-based

Discretionary match

Other amount

� Only 2-in-10 employers allow part-time employees to participate in their 401(k) plan- although nearly 40% of small business firms allow part-time employees to participate.

� Employers report that approximately 60% of eligible employees contribute to their 401(k) plans.

� The average contribution that employers provide as a company match is 8%.

� Employers match about $0.60 on average for each dollar contributed by their employees to the company 401(k) plan.

401(k) Plan Participation, Contribution Matching and Vesting

▲

*Small base size

Employers

33



None of these

Contribute to the plan even if employees don’t

Emails about the plan and the options within it

Auto-enrollment

Profit sharing in 401(k) plan

Education materials about the plan and/or investing

Meeting explaining the plan and the options within it

Some form of co. match to employee contributions

Small BusinessMicro BusinessTotal Employer

49%

47%

46%

28%

18%

20%

17%

18%

49%

43%

43%

25%

18%

19%

17%

22%

401(k) Plan Encouragement

BASE: OWNERS WHO HAVE 401(k) PLANQ610 Which of the following do you have to encourage employee participation in your 401(k) plan? Select all that apply.

Have the Following to Encourage Employee Participation in the 401(k) Plan

Base: Employers with 401(k)

50%

67%

58%

37%

19%

25%

13%

4%

N=92 N=40 N=52

� Matches to employee contributions and meetings to explain 401(k) plans/options are used most often to encourage employee participation (49% and 47% respectively).

� Employers from larger firms are most likely to rely on meetings and education materials to encourage employee participation.

� Nearly 2-in-10 employers offer none of the encouragements.

▼

▲

▲

▲

▲

▼

Employers

34



Owner-Only

None of these

Contribute to the plan even if employees don’t

Emails about the plan and the options within it

Auto-enrollment

Profit sharing in 401(k) plan

Education materials about the plan and/or investing

Meeting explaining the plan and the options within it

Some form of co. match to employee contributions


15%

8%

0%

8%

23%

0%

8%

46%

0%

11%

22%

11%

11%

11%

0%

67%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

49%

43%

43%

25%

18%

19%

17%

22%

37%

50%

49%

33%

16%

14%

18%

27%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

Trending: 401(k) Plan Encouragement

42%

39%

37%

24%

19%

16%

15%

24%

33%

46%

47%

36%

17%

16%

17%

27%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

BASE: OWNERS WHO HAVE 401(k) PLANQ610 Which of the following do you have to encourage employee participation in your 401(k) plan? Select all that apply.

Have the Following to Encourage Employee Participation in the 401(k) Plan


50%

67%

58%

37%

19%

25%

13%

4%

41%

58%

58%

63%

26%

26%

26%

0%

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

2007 N=1052006 N=100

2007 N=402006 N=38

2007 N=522006 N=53

----

� Owner-only firms are least likely to offer 401(k) plan encouragements, with nearly half offering none (46%). Bear in mind, the base size for owner-only firms who have a 401(k) plan is small.

2007 N=13*2006 N=9*

*Small base size

▼

▲

▲

▲

▲

▲

35



19%

23%

21%

25%

10%

18%

10%

24%

29%

10%

401(k) Plan Contributions

BASE: HAVE 401(k) PLANQ635 What percentage of your salary do you personally contribute to your 401(k) plan?

Percentage of Salary Contributed to 401(k)Base: Employers/Employees with 401(k) Plan

� Employers contribute more to their 401(k) plans than employees (nearly 9% of their salary on average compared to about 7% for employees).

� Employers and employees from smaller firms are more likely to contribute more of their salary to their 401(k) plan.

18%

7%

25%

30%

10%

41%

27%

10%

16%

4%

38%

25%

14%

16%

3%

35%

24%

17%

15%

2%

▼

▼

▲

▲

▲

▼

▼

Employers Employees

510141033151511None

7.8%

33

0

0

33

(N=9*)

%

2006

9.2%

38

15

0

23

(N=13*)

%

2007

Owner-only

(N=53)(N=52)(N=38)(N=40)(N=100)(N=105)

2921232521229% to 10%

Percentage of Salary Employers Contribute to 401(k)


10.2%8.3%9.7%9.0%9.6%8.9%Mean

42254030393111% or more

172387986% to 8%

819151816195% or less

200620072006200720062007

% %

Small Business

%%%%

Micro BusinessTotal Employer

++++

----

----

*Small base size

▲

6.6%


6.8%


6.3%


8.3%


9.0%8.9%Mean

None


11% or more

9% to 10%

6% to 8%

5% or less


Employers

36



%%%Annual Participant Fees


%%%Expected Administrative Fees


2412

31

11

8

13

9

With 401k

(N=40)

Without 401k

(N=220)

2316

31

18

8

14

2

8

With 401k

(N=52)

Without 401k

(N=49)

Annual Participant and Administration Fees

BASE: OWNERS WHO HAVE 401(k)

PLANQ1220 How much

are the annual participant fees for

each individual 401(k) account in your company’s

401(k) plan?BASE: OWNERS

WHO DON’T HAVE 401(k) PLAN

Q1230 How much do you think the annual

participant fees would be for each individual 401(k) account in your

company’s 401(k) plan?

Q745 How much do you expect the

annual administration fee would be for

offering a 401(k) plan at your company

(this includes your plan’s record

keeping, administration

support, etc…)?

2412

31

11

8

13

9

With 401k

(N=92)

Without 401k

(N=269)

Greater than 2%

1.5% to 2%

1% to 1.49%

Less than 1%

▲

29

20

3

48

Without 401k (N=220)

26

28

8

37

Without 401k (N=49)

Not sure

$5K+

$1K-$4.9K

Less than $1K

<1

29

21

3

48

Without 401k (N=269)

� Employers without 401(k) plans expect annual participant fees to be higher than they really are.

� Nearly half of employers without a 401(k) plan don’t know what to expect in the cost of administration fees.

� About one-third of employers without a 401(k) expect to pay less than $1K in annual administration fees when providing a 401(k) plan (29%).

Employers

Employers

37



29 27 2822

29 3126

20

16

8 8

4

209

2832

3

1 2

1

3

1

86

52

64 62

73

48

59

37 42

2007 2006 2007 2006 2007 2006 2007 2006

Not sure

$5K+

$1K-$4.9K

Less than $1K

Trending: Expected Administration Fees

BASE: OWNERS WHO DON’T HAVE 401(k) PLANQ745 How much do you expect the annual administration fee would be for offering a 401(k) plan at your company (this includes your plan’s record keeping, administration support, etc…)? If unsure, please provide best estimate.

Annual Administration Fee for 401(k) Plan

%%%%


Employers

N=414 N=407 N=145 N=142 N=216N=220 N=49N=49

� More employers without a 401(k) plan believe administration fees to be over $1K compared to 2006.

++++

++++

++++

++++

▼

▲

38



(N=49)(N=49)(N=216)(N=220)(N=265)(N=269)

(N=16*)(N=15*)(N=122)(N=117)(N=138)(N=132)Reasons to Reconsider

Not sure

Never

Beyond 3 yrs from now

Bet. 1 yr - 3 yrs from now

Bet. 3 mos - 1 yr. from now

In the next 3 months

Increased employee demand

Improved profitability

Higher revenue

Lower cost of plan

Nothing

Other

Automation/Decreased mgmt time

If necessary to be competitive

Tax break incentives

200620072006200720062007

Plan to Offer... % %%%%%


30

16

26

27

7

9

7

6

47

2

2

7

6

47

35

4

7

9

47

33

Intent to Provide 401(k) Plans

4

6

16

6

24

43

2

2

7

6

48

35

0

4

7

9

48

32

8

10

9

13

17

42

26

21

20

18

14

11

9

7

55

25

21

20

18

14

11

9

7

55

30

16

26

27

7

9

7

6

47

47

40

13

40

0

7

7

0

47

27

22

22

22

11

27

5

0

34

BASE: OWNERS WHO DON’T HAVE 401(k) PLAN AND HAVE MORE THAN 1 EMPLOYEEQ710 Do you plan to offer a 401(k) plan for your employees…?

BASE: OWNERS WHO PLAN TO OFFER 401(k) PLAN ONLY 3+ YEARS AWAY OR NEVERQ725 Which of the following business events, if any, do you think would lead you to reconsider

offering a 401(k) plan sometime in the near future? Please select all that apply.

<1%

*Small base size

� Approximately 50% of employers who don’t provide 401(k) plans never intend to in the future.

� Tax break incentives, lower plan costs and higher revenues are the reasons most likely to lead employers to reconsider offering a 401(k) plan (26%, 21% and 20% respectively).

++++

▲

▼

Employers

39



Intent to Provide 401(k) Plans: Never/In Over Three Years

BASE: OWNERS, CEO’S OR PRESIDENTS WHO NEVER PLAN TO OFFER A 401(k) PLANQ715 Why do you plan to never offer a 401(k) plan to your employees? Please select all that apply.

BASE: OWNERS WHO PLAN TO OFFER 401(k) PLAN ONLY 3+ YEARS AWAYQ720 Why do you plan to wait at least 3 years to offer a 401(k) plan to your employees? Please select all that apply.

506762576557Can’t afford to offer co. match

05031333133Can’t afford to offer co. match

(N=8*)(N=3*)(N=19*)(N=14*)(N=27*)(N=17*)

(N=8*)(N=12*)(N=103)(N=103)(N=111)(N=115)

Reasons for Waiting 3+ Yrs

313321232223Other

59811111211Have another plan in place

102511161016Mgmt fees are too high

102523152316Short-term employees

10010191018Too much administration

01731183118Uncertain/unstable business

10823232223Employees not interested

202550504949Not enough employees to make it worthwhile

1233521422Too much administration

2510020351937Employees not interested

253326402340Uncertain/unstable business

005848Other

120228198Have another plan in place

376716131915Short-term employees

253322151915Mgmt fees are too high

253362596258Not enough employees to make it worthwhile

200620072006200720062007

Reasons for Never Offering % %

Small Business

%%%%

Micro BusinessTotal Employer

*Small base size

� “Not enough employees” continues to lead the list as the top reason for not offering a 401(k) plan. This is especially true at micro business firms.

----

Employers

----

40



Importance of Retirement Plan Features

40



41



(N=102)(N=101)(N=254)(N=260)(N=151)(N=158)(N=507)(N=519)

8265504653365244Managed Accts/LifeCycle Funds

7160 (N=42)4230 (N=33)3820 (N=10*)4233 (N=85)Auto-enrollment

6347383538393936ETFs

7762555256455650Roth 401(k)

20062007200620072006200720062007

% %

Small Business

%%

Employers

%%%%

Micro BusinessOwner-onlyTotal Employer

Rating Plan Features

BASE: ALL RESPONDENTSQ820 How interested would you personally be in having an option like this within your company’s 401(k) plan?

Q830 How interested would you personally be... in providing this option to you and your company? / be in having this option at your company?Q840 How interested would you be in having a 401(k) offering comprised of ETFs instead of traditional mutual funds at your company?

BASE: AUTO-ENROLLMENT NOT SELECTED AT Q610Q845 How interested would you be in using this feature at your company?

Level of Interest in Retirement Plan FeaturesTop 2 Box % – Very/Somewhat Interested

60 (N=42)

47

65

62

(N=101)

%

Small Business

30 (N=33)

35

46

52

(N=260)

%

Micro Business

36 (N=75)

35

47

52

(N=361)

%

Total Employer

(N=432)(N=715)(N=1147)

636464Managed Accts/LifeCycle Funds

–––Auto-enrollment

494445ETFs

686969Roth 401(k)

Small BusinessMicro BusinessTotal Employee

% %%

� A majority of employers and employees are very/somewhat interested in Roth 401(k)s.

� Although small business employers are most interested in Roth 401(k)s, Managed Accounts/LifeCycle Funds and Exchange-Traded Funds, enthusiasm among this group declined when compared to 2006.

� Interest in Managed Accounts/LifeCycle Funds declined among total employers compared to 2006.

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Employers Employees

Level of Interest in Retirement Plan FeaturesTop 2 Box % – Very/Somewhat Interested

*Small base size

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42



BASE: EMPLOYERS

Q900 Please select the one attribute that is the most important to you in choosing a 401(k) plan for your company. Q900 Please select another attribute that is the least important to you in choosing a 401(k) plan for your company.

Impact Index (average rating=100)144

127119 117

109105

99

89

7368

50

0

50

100

150

Is easy to

administer

Offers online

access for

employees to

manage their

401(k)

investments

Offers online

access to

administer

your plan

Offers Self-

Directed

Brokerage

Accounts as

an option in

your 401(k)

Offers advice

on

investments

and plan

management

to you

Has an 800

number for

customer

care w here

you can

reach a live

person

Offers an

option for a

Roth 401(k)

Is offered by

a w ell-know n

highly

regarded

brand name

Offers

Managed

Accounts or

LifeCycle

funds

Enables auto-

enrollment into

the 401(k)

plan

Offers

Exchange-

Traded Funds

N=519

� In determining the relative importance of 401(k) plan features, the attribute most important to employers (including owner-only, micro business and small business employers) is “ease of administration”.

� Online access is also very important, with “offers online access for employees to manage their 401(k) investments” and “offers online access to administer plan” ranking as the next top attribute.

� The attribute rated as least important is “offers Exchange-Traded Funds”.

401(k) Plan Attributes: Ratings by Employers

43



0.7

0.4

0.1

2.3

0.2

0.6

1.0

0.8

0.1

0.1

0.3

15.0

Offers online access for

employees to manage their investments

1.42.414.70.44.61.81.39.07.63.1Offers online access for employees to manage their investments

10.66.21.035.13.38.611.71.72.04.9Proportion of ‘Most Important’

Offers Self-Directed Brokerage Accounts

Has an 800 number for customer

care

Offers Exchange-Traded Funds

Is easy to administer

Is offered by a well-known

highly regarded

brand name

Offers advice on

investments and plan

management

Offers online access to administer

plan

Enables auto-enrollment

Offers Managed

Accounts or LifeCyclefunds

Offers an option for a Roth 401(k)Total Employers

(N=519)

1.0

0.6

0.1

3.3

0.3

0.8

1.1

0.2

0.2

0.5

2.2

1.3

0.2

7.2

0.7

1.8

2.4

0.3

0.4

1.0

5.3

3.1

0.5

17.8

1.6

4.3

5.9

0.8

1.0

2.5

6.3

3.7

0.6

21.1

2.0

5.1

7.0

1.0

1.2

2.9

0.9

0.5

0.1

3.0

0.3

0.7

1.0

0.1

0.2

0.4

1.2

0.7

0.1

4.1

0.4

1.0

1.4

0.2

0.2

0.6

3.2

1.9

0.3

10.8

1.0

2.6

3.6

0.5

0.6

1.5

0.3

0.2

0.0

1.0

0.1

0.2

0.3

0.0

0.1

0.1

10.3

6.1

1.0

34.4

3.2

8.4

11.4

1.6

1.9

4.8

1.7

1.0

0.2

5.7

0.5

1.4

1.9

0.3

0.3

0.8

Offers Exchange-Traded Funds

Is easy to administer

Is offered by a well-known highly regarded brand name

Offers advice on investments and plan management

Offers online access to administer plan

Enables auto-enrollment

Offers Managed Accounts or LifeCyclefunds

Offers an option for a Roth 401(k)

Offers Self-Directed Brokerage Accounts

Has an 800 number for customer care

BASE: EMPLOYERSQ900 Please select the one attribute that is the most important to you in choosing a 401(k) plan for your company. Q900 Please select another attribute that is the least important to you in choosing a 401(k) plan for your company.

401(k) Plan Attributes: Feature Comparisons� The table measures how likely an employer is to select a feature as “most important” compared to another.

An employer is 3.0 times more likely to select “Is easy to administer” as most important than “Offers online access to administer plan”

44



BASE: EMPLOYEES

Q910 Please select the one attribute that is the most important attribute to you in a 401(k) plan.Q910 Please select another attribute that is the least important attribute to you in a 401(k) plan.

Impact Index (average rating=100)

128120 119

105101 100

96 93

75

63

0

50

100

150

Is easy to use Offers advice

on investments

and plan

management to

you

Offers online

access to

manage 401(k)

investments

Offers Self-

Directed

Brokerage

Accounts as an

option in your

401(k)

Offers an

option for a

Roth 401(k)

Is offered by a

w ell-know n

highly regarded

brand name

Has an 800

number for

customer care

w here you can

reach a live

person

Offers

Managed

Accounts or

LifeCycle funds

Enables auto-

enrollment into

the 401(k) plan

Offers

Exchange-

Traded Funds

N=1147

� The attribute rated as most important in a 401(k) plan by employees is “ease of use”.

� The next attributes deemed most important are “offers advice on investments” and “offers online access to manage investments”.

401(k) Plan Attributes: Ratings by Employees

45



BASE: EMPLOYEES

Q910 Please select the one attribute that is the most important attribute to you in a 401(k) plan.Q910 Please select another attribute that is the least important attribute to you in a 401(k) plan.

5.84.91.429.16.619.118.41.95.37.5Proportion of ‘Most Important’

0.8

0.7

0.2

3.9

0.9

2.6

2.5

0.3

0.7

1.0

Offers an option for a Roth 401(k)

1.1

0.9

0.3

5.5

1.2

3.6

3.5

0.4

1.0

1.4

Offers Managed

Accounts/LifeCycle funds

3.1

2.6

0.7

15.5

3.5

10.2

9.8

1.0

2.8

4.0

Enables auto-

enrollment

0.3

0.3

0.1

1.6

0.4

1.0

1.0

0.1

0.3

0.4

Offers online access to

manage 401(k) investments

0.3

0.3

0.1

1.5

0.3

1.0

1.0

0.1

0.3

0.4

Offers advice on investments

and plan management

0.9

0.7

0.2

4.4

1.0

2.9

2.8

0.3

0.8

1.1

Is offered by a well-known

highly regarded brand name

0.2

0.2

0.0

1.0

0.2

0.7

0.6

0.1

0.2

0.3

Is easy to use

4.2

3.5

1.0

21.0

4.7

13.7

13.2

1.3

3.8

5.4

Offers Exchange-

Traded Funds

1.2

1.0

0.3

6.0

1.3

3.9

3.8

0.4

1.1

1.5

Has an 800 number for

customer care

5.0Is easy to use

1.1Is offered by a well-known highly regarded brand name

3.3Offers advice on investments and plan management

3.2Offers online access to manage 401(k) investments

0.3Enables auto-enrollment

0.9Offers Managed Accounts or LifeCycle funds

1.3Offers an option for a Roth 401(k)

1.0Offers self-Directed Brokerage Accounts

0.8Has an 800 number for customer care

0.2Offers Exchange-Traded Funds

Offers self-Directed Brokerage AccountsTotal Employees

(N=1,147)

401(k) Plan Attributes: Feature Comparisons� The table measures how likely an employee is to select a feature as “most important” compared to another.

An employer is 1.5 times more likely to select “Is easy to use” as most important than “Offers advice on investments and plan management”

46



Decision-making for Retirement Plans

46



47



Decision Making for Retirement Benefit Plans

BASE: OWNERS, CEO’S OR PRESIDENTSQ580 Who makes, or would make, the decision for choosing a retirement benefit plan at your company? Select one response.

Q585 What outside sources do you, or would you, rely on to help you choose a retirement benefits plan provider? Select all that apply.


(N=101)(N=260)(N=361)Makes the Decision for Choosing a Retirement Benefit Plan

28%14%15%Insurance Broker

36%24%25%Previous experience

23%23%23%Spouse or other family member

50%48%48%Myself

61%55%55%Financial Advisor

9%4%5%Some other manager

5%1%2%An HR Director or Manager

6%5%6%Trusted news source

28%14%15%Employees

Small BusinessMicro BusinessTotal EmployerOutside Sources They Rely on to Help Select a Retirement Benefits Plan Provider

3%7%7%None

10%3%4%A CFO, Finance Director or Treasurer

73%83%83%Myself

35%23%24%Other business owner

27%23%24%Lawyer

5%12%11%None

4%2%2%Something else

54%36%37%CPA

� A majority of employers identify as the decision-makers when choosing a retirement benefit plan at their company (83%).

� Half of all employers rely on financial advisors when choosing a retirement plan (55%).

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Employers

48



Trending: Decision Making for Retirement Benefit Plans



31%28%14%14%8%9%13%13%Insurance Broker

40%36%20%24%15%17%19%22%Previous experience

17%23%19%23%21%24%19%23%Spouse or other family member

45%50%41%48%47%49%43%48%Myself

66%61%43%55%38%35%42%49%Financial Advisor

3%9%3%4%1%1%2%4%Some other manager

2%5%<1%1%0%0%<1%1%An HR Director or Manager

18%6%8%5%8%6%8%6%Trusted news source

31%28%15%14%1%4%12%12%Employees

Small BusinessMicro BusinessOwner-onlyTotal EmployerOutside Sources They Rely on to Help Select a Retirement Benefits Plan Provider

4%3%6%7%6%9%6%8%None

5%10%2%3%0%1%2%3%A CFO, Finance Director or Treasurer

86%73%88%83%93%89%89%85%Myself

35%35%23%23%15%15%21%21%Other business owner

34%27%18%23%10%15%16%21%Lawyer

4%5%14%12%18%18%15%13%None

2%4%4%2%4%4%4%3%Something else

42%54%34%36%21%22%30%32%CPA

20062007200620072006200720062007Makes the Decision for Choosing a Retirement Benefit Plan

(N=519) (N=102)

Small Business

(N=101)(N=254)

Employers

(N=260)(N=151)(N=158)(N=507)


� Employers at smaller firms are most likely to identify as the decision-maker in choosing the company retirement plan, while larger firms are most likely to rely on other executives or managers.

� Employers are more likely to rely on financial advisors in choosing a retirement benefit plan provider compared to 2006 (49% v. 42%).

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++++ ++++

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49



Gender Differences: Decision Making for Retirement Benefit Plans



FemaleMaleTotal Employer

(N=187)(N=332)(N=519)Makes the Decision for Choosing a Retirement Benefit Plan

10%15%13%Insurance Broker

21%23%22%Previous experience

28%21%23%Spouse or other family member

43%51%48%Myself

44%52%49%Financial Advisor

3%4%4%Some other manager

1%1%1%An HR Director or Manager

5%6%6%Trusted news source

8%14%12%Employees

FemaleMaleTotal EmployerOutside Sources They Rely on to Help Select a Retirement Benefits Plan Provider

12%5%8%None

4%3%3%A CFO, Finance Director or Treasurer

80%88%85%Myself

23%20%21%Other business owner

17%23%21%Lawyer

22%8%13%None

3%3%3%Something else

26%36%32%CPA

� Male employers are more likely to rely on themselves when choosing a retirement benefit plan.

Employers

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50



Likelihood to Recommend a Provider to ColleagueBase: Offer/Have 401(k)

Small Business

MicroBusiness

Total Employee

Small Business

MicroBusiness

TotalEmployer

Small Business

MicroBusiness

Total Employee

Small Business

MicroBusiness

TotalEmployer

Characteristics about 401(k) Provider That Makes Them Likely to Recommend (N=141)(N=123)(N=264)(N=33)(N=21*)(N=54)

9%4%6%16%18%18%Dissatisfied with the service I receive

11%13%12%26%23%23%Feel provider does not care

74%71%72%79%75%76%Offers good investment options

40%39%39%67%65%66%Responsive, professional service

NANANA82%82%82%Easy to administer plan

2%4%3%0%6%5%None of these

(N=76)(N=81)(N=157)(N=19*)(N=19*)(N=38)

Characteristics about 401(k)Provider That Makes Them Not Likely to Recommend

5%10%8%6%0%1%Other

15%29%23%58%41%44%Feel provider cares about my business

69%52%59%82%53%59%Easy for employees to access accts

48%46%47%58%62%61%Low fees / affordable

44%24%32%11%21%20%Other

36%

18%

10%

NA

14%

16%28%37%28%29%None of these

29%22%16%7%8%Not enough investment options

14%11%21%9%11%Difficult to access online/make changes

NANA32%16%18%Difficult to administer

8%11%16%20%19%Too expensive

BASE: OFFER OR HAVE 401(k) PLANQ655 How likely would you be to recommend your 401(k) plan provider to a colleague? Choose any number from 0 to 10.

BASE: THOSE WHO WOULD RECOMMENDQ656 What characteristics about your 401(k) provider make you likely to recommend them to others? Select all that apply.

BASE: THOSE WHO WOULD NOT RECOMMENDQ657 What characteristics about your 401(k) provider make you not likely to recommend them to others? Select all that apply.

(N=217)

(N=204)

(N=421)

(N=52)

(N=40)

(N=92)

Top 3 Box (8-10)

46%

48%

47%

50%

42%

43%

Total Employee

Small Business

Small Business

Micro Business

Micro Business

Total Employer

� Less than half of employers and employees would recommend their 401(k) plan provider.

� The characteristic most important to employers in recommending their 401(k) provider is ease of administration (82%).

� Offering good investment options is also key to employers when recommending their 401(k) provider (76%), as well as the top characteristic among employees when providing recommendations (72%).

Recommending Provider

*Small base size

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Employers Employees

Likelihood to Recommend a Provider to ColleagueBase: Offer/Have 401(k)

(N=53)

(N=38)

(N=9*)

(N=100)

(N=52)

(N=40)

(N=13*)

(N=105)

20062007Top 3 Box (8-10)

50%

42%

38%

42%

68%Small Business

45%Micro Business

22%Owner-only

46%Total Employer

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51



Motivators to Switch and Select 401(k) Plan

Small BusinessMicro BusinessTotal Employers

Small BusinessMicro BusinessTotal Employers

(N=52)(N=40)(N=92)

Reasons They Would Consider Switching to Another ProviderBase: Employers with a 401(k) Plan

41%41%41%Quality of investment options/funds within plan

25%9%12%Recommendation from colleague/friend

29%17%20%Recommendation from a financial professional

25%33%31%Better plan features outside of fund offerings

48%34%37%Fund options with a better performance record

(N=49)(N=220)(N=269)

Other than Price, the Most Critical Criteria for Selecting a Provider Would Be...Base: Employers without a 401(k) Plan

23%29%28%Fund options with lower expense ratios

29%26%26%Simpler administration

6%21%20%Other

4%<1%1%Employee education

21%23%23%None of these

12%11%11%Highly recognized/regarded brand name

40%49%47%Lower management fees

2%2%2%Access to customer service representatives

10%7%7%Well-known/highly regarded brand name

37%28%29%Ease of administration/use

BASE: OWNERS WHO HAVE 401(k) PLANQ660 What would make you consider switching to another provider for your 401(k) plan? Please select all that apply.

BASE: OWNERS WHO DON’T HAVE 401(k) PLANQ735 Other than price, what is or would be most critical to you in selecting a 401(k) plan provider?

� The lowering of management fees is the top reason employers would consider switching to another 401(k) provider in 2007 (47%).

� Small business firms are more likely to consider switching to another provider if they were provided fund options with a better performance record or were recommended by a financial professional or a colleague/friend than micro businesses.

� The quality of investment options/funds within a plan is the most critical factor when selecting a 401(k) provider (41%).

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Employers

52



Trending: Motivators to Switch and Select 401(k) Plan

64%41%51%41%48%46%50%43%Quality of investment options/funds within plan

22%25%3%9%11%23%7%14%Recommendation from colleague/friend

47%29%23%17%33%23%29%20%Recommendation from a financial professional

44%25%24%33%11%31%26%31%Better plan features outside of fund offerings

48%48%44%34%44%15%45%33%Fund options with a better performance record

(N=49)(N=49)(N=216)(N=220)(N=142)(N=145)(N=407)(N=414)

38%23%32%29%33%15%33%26%Fund options with lower expense ratios

40%29%46%26%22%23%41%26%Simpler administration

5%6%17%21%26%28%20%23%Other

3%4%2%<1%0%1%1%1%Employee education


Other than Price, the Most Critical Criteria for Selecting a Provider Would Be...Base: Employers without a 401(k) Plan

9%21%35%23%44%54%31%29%None of these

39%12%8%11%11%15%14%12%Highly recognized/regarded brand name

49%40%37%49%22%23%37%43%Lower management fees

2%2%2%2%1%3%2%3%Access to customer service representatives

9%10%7%7%6%6%7%7%Well-known/highly regarded brand name

17%37%22%28%18%16%21%24%Ease of administration/use

20062007200620072006200720062007Reasons They Would Consider Switching to Another ProviderBase: Employers with a 401(k) Plan (N=105) (N=53)

Small Business

(N=52)(N=38)(N=40)(N=9*)(N=13*)(N=100)


BASE: OWNERS, CEO’S OR PRESIDENTS WHO HAVE 401(k) PLANQ660 What would make you consider switching to another provider for your 401(k) plan? Please select all that apply.

BASE: OWNERS, CEO’S OR PRESIDENTS WHO DON’T HAVE 401(k) PLANQ735 Other than price, what is or would be most critical to you in selecting a 401(k) plan provider?

� Fund options with a better performance record and simpler administration were the top reasons to consider switching a 401(k) plan provider in 2006, while in 2007 lower management fees topped the list.

� Although the quality of investment options and funds within a plan remains the most critical criteria when selecting a provider it has declined compared to 2006 (43% v. 50%).

� Owner-only firms are least likely to report ease of administration/use as a critical criteria for selecting a 401(k) provider.

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53



Employee Retention

53



54



Small BusinessMicro BusinessTotal EmployersBenefits that Employers Feel May Prevent Their Employees from Leaving the CompanyBase: Owners

(N=101)(N=260)(N=361)

None of the above

401k

More vacation

Healthcare

More flextime 27

26

20

16

51

Employees Who Would Leave Current Job for One that Provided a 401(k) PlanBase: Employees without 401(k)



Total Employees (N=615)

BASE: OWNERSQ1215 Which of the following benefits do you think would prevent employees from leaving your company? Select

all that apply.

BASE: EMPLOYEES WHO DON’T HAVE 401(k) PLANQ729 All things equal, would you leave your current job for an employment opportunity that provided a 401(k) plan?

28

28

20

17

51

25

8

19

7

58

▼

39

40

31

� Ultimately, most employers believe that their employees could not be retained with any form of benefit (51%).

� Nearly 4-in-10 employees would leave their current job for one that provided a 401(k) plan.

Importance of 401(k) in Retaining Talent

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55



Cost of Replacing Employees

BASE: OWNERSQ1200 Approximately how much does it cost to replace an employee at your company?

Q1205 Considering the cost of replacing an employee, how is the cost mainly incurred by your company? Please select all that apply.Q1210 What do you fear the most when you lose an employee?

$6.9K$5.7K$5.8KMean

23%20%20%General disruption at work – gossip, lost productivity, hiring new person

21%22%22%Build up of work until a replacement is hired

34%25%26%Processes or knowledge that are lost and will be painful to rebuild

57%44%45%Lost revenue and productivity during the time of re-hire

16%11%11%Customers who leave because of valued employee’s departure

82%66%67%Time to get the new person up-to-speed vs. driving my business

22%33%33%Not sure

Biggest Fear When Losing an Employee

6%3%3%The chance that other employees might leave

14%3%4%Cost of hiring a head hunter to hire a new candidate

Cost of Replacing an Employee Mainly Incurred by...

8%8%8%$20,000 or more

12%4%4%$10,000-$19,999

7%8%8%$5,000-$9,999

25%19%19%$1,000 to $4,999

27%28%28%Less than $1,000

12%22%22%Other

5%7%7%The potential of losing an important customer(s)

11%25%24%Other

(N=101)(N=260)(N=361)Approximate Cost to Replace an EmployeeSmall BusinessMicro BusinessTotal Employer

� Employers report that it costs approximately $6,000 to replace an employee.

� The cost when replacing an employee is mainly incurred in the time to get new hires up-to-speed (67%).

� The biggest fear when losing an employee is the loss of processes and knowledge, even more so for small business employers than for micro business employers (34% v. 25%).

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56



401(k) Plans and Tax Implications

56



57



Retirement Investments and Tax Savings

BASE: OWNERS, CEO’S OR PRESIDENTSQ1300 Some individuals use 401(k)s, IRAs, and other retirement investment products as tax shelters

for their current income. Are you using these strategies or similar ones to protect your current income?

BASE: THOSE WHO RESPONDED YESQ1305 How much do you estimate this saved you personally (or household) from paying taxes in the last tax year?

Q1310 How did you become aware of the savings you can achieve through these types of accounts? Select all that apply.

Use Tax Shelters to Protect Current Income

% Yes

29%24%9%20%My broker (online or personal)

42%39%36%39%CPA / book keeper

62%55%49%53%Financial Advisor

19%10%11%11%Business colleague

13%21%15%19%Friend or family member

13%29%26%27%Media (newspaper, TV, mag., other)

Small Business

MicroBusiness

Owner-only

TotalEmployerMade Aware by...

8%12%6%10%$20,000 or more

8%5%4%5%$10,000-$19,999

33%19%15%18%$5,000-$9,999

13%36%32%33%$1,000 to $4,999

10%13%19%14%Less than $1,000

12%19%17%18%Other

0%2%4%3%Unaware of savings by these accts.

29%16%23%19%Not sure

(N=52)(N=91)(N=47)(N=190)Estimated Savings

Small Business

MicroBusiness

Owner-only

TotalEmployer

33%

30%

34%

51%

Total Employer

Owner-only

Micro Business

Small Business

N=519

N=158

N=260

N=101

� Larger firms are more likely to use retirement investment products as tax shelters (51% of small business v. 34% of micro business and 30% of owner-only firms).

� Larger firms also report more tax savings. Nearly half of small business owners report saving more than $5K in tax payment last year, while only about 35% of micro business and 25% of owner-only employers report savings of over $5K.

� Most employers were made aware of tax savings by their financial advisor or CPA/book keeper (53% and 39% respectively).

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58



(N=36)

(N=136)

(N=81)

(N=253)

14%86%Small Business

21%79%Micro Business

16%84%Owner-only

19%81%Total Employer

%%

Top 2 Box(Moderately/Great extent)

Bottom 2 Box(Somewhat/Not at all)

Cost of Lacking Tax Advantaged Retirement Investments

BASE: OWNERS, CEO’S OR PRESIDENTSQ1300 Some individuals use 401(k)s, IRAs, and other retirement investment products as tax shelters

for their current income. Are you using these strategies or similar ones to protect your current income?

BASE: THOSE WHO RESPONDED NO TO Q1300Q1315 To what extent do you think you paid more than you should have in taxes because you did not have a 401(k), IRA or other tax advantaged account?

BASE: OWNERS, CEO’S OR PRESIDENTS WHO THINK THEY PAID TOO MUCH Q1320 How much do you think you paid in taxes last year that you could have saved?

Q1325 Given how much you could have saved, are you considering starting a tax advantaged account this year?

BASE: THOSE WHO RESPONDED NO TO Q1325Q1330 Why are you not considering starting a tax advantaged account this year? Select all that apply.

25%11%13%12%Too busy

0%16%13%15%Not comfortable/experienced in investing in stocks or bonds

50%38%25%35%Find it difficult to put money aside to fund an IRA / 401(k)

0%11%13%11%Happy paying what I pay in taxes

25%35%38%35%Not enough money to be saved to justify time/cost to set-up

0%18%23%19%Less than $1,000

40%37%31%35%$1,000 to $4,999

20%11%23%14%$5,000-$9,999

20%7%0%6%$10,000-$19,999

(N=4*)(N=17*)(N=8*)(N=29*)Reasons for Not Considering to Start One

80%58%62%59%No

20%42%38%41%Yes

(5*)(N=28*)(N=13*)(N=46)Will Consider Starting a Tax Advantaged Account

0%3%0%2%$20,000 or more

0%37%38%36%Other

20%24%23%24%Not sure

(N=5*)(N=28*)(N=13*)(N=46)Amount in Taxes Could Have Saved

Small Business

MicroBusiness

Owner-only

TotalEmployer

(N=101)

(N=260)

(N=158)

(N=519)

36%51%Small Business

52%34%Micro Business

51%30%Owner-only

51%33%Total Employer

%%NoYes

Use Tax Shelters to Protect Current Income

Extent They Think They Paid More

� Among employers who are not using retirement investments as tax shelters for current income, a majority do not believe they paid more in taxes (81%).

� Most employers who believe they paid too much in taxes feel they could only save under $5K in tax payments.

� The top issues preventing employers from starting tax advantaged retirement accounts relate to monetary needs: “not enough money to be saved to justify time/cost” and “find it difficult to put money aside to fund an IRA/401(k)” (35% for both).

*Small base size

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59



Social Responsibility and Political Considerations in the Workplace

59



60



85%

81%

86%

90%

84%

83%

88%


Owner-only (N=158)



Total Employee

(N=1147)



Feel It Is Important to Run/Work at Socially Responsible Company

Top 2 Box % – Very/Somewhat Important

Social Responsibility in the Workplace

BASE: ALL RESPONDENTS Q572 How important is it for you to run/work at a socially responsible company?

Q573 Do you think the following are socially responsible programs?

Think the Following Are Socially Responsible Programs

(N=432)(N=715)(N=1147)(N=101)(N=260)(N=158)(N=519)

85%79%80%68%52%60%56%Providing employee 401(k) program

95%87%89%88%72%71%72%Providing employee health benefits

82%86%85%76%84%80%82%Using local products and resources when possible

EmployeesEmployers

57%

81%

%

MicroBusiness

63%59%56%45%41%44%Aligning with a charitable partner

87%82%70%80%82%81%Environmentally friendly programs

%%%%%%

Small Business

Total Employee

Small Business

MicroBusiness

Owner-only

TotalEmployer

� Employees view benefits as socially responsible programs more often than do employers.

� Employers feel the use of local products and resources is most socially responsible (82%).

� Employers and employees of small businesses are more likely to feel it is very/somewhat important to work at a socially responsible company.

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61



Political Considerations

BASE: ALL RESPONDENTS Q579 Do you expect Social Security to be around when you retire?

BASE: OWNERS, CEO’S OR PRESIDENTSQ577 What are the key issues you want the politicians to address during the upcoming Presidential campaign? Select all that apply.

Expect Social Security to Be Around When They Retire

Key Issues They Want Politicians to Address During the Upcoming Presidential CampaignBase: Owners, CEO’s Or Presidents

(N=101)(N=260)(N=158)(N=519)

62636162Energy costs

81757174Healthcare

29262325Housing costs

Employers

21262726Other

41474546The environment

71676466Social Security

%%%%

Small Business

MicroBusiness

Owner-only

TotalEmployer

4555Total Employee (N=1147)

3268Small Business (N=101)

3862Small Business (N=432)

4753Micro Business (N=715)

2872Micro Business (N=260)

3268Owner-only (N=158)

3070Total Employer (N=519)

%%

NoYes

� Nearly 1/2 of employees and 1/3 of employers expect social security to not be around when they retire.

� Small business employees are more likely than micro business employees to believe social security will be around (62% v. 53% respectively).

� Healthcare is the top issue that employers want addressed in the upcoming Presidential campaign (74%). As company size increases, this is even more apparent (81% for small business employers).

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62



Respondent Profile

62



63



Respondent Profile: Personal Demographics

5

1

2

<1

2

2

86

%

23

35

23

19

%

28

57

14

%

37

63

%

Employers (2006)

22Decline to answer

<12Other

<11Native American

21Asian

71African American/Black

122Hispanic

7589Caucasian/White

%%Ethnicity

2425West

3333South

2321Midwest

2021East

%%Region

723Matures

4556Boomers

4721Gen Y/X

%%Age

3837Female

6263Male

%%Gender

EmployeesEmployers (2007)

NA

NA

NA

NA

%

NA

NA

NA

%

NA

NA

NA

NA

NA

NA

NA

%

Employers (2006)

413$150,000 or more

1617$100,000 to $149,999

3531$50,000 to $99,999

3319Less than $49,999

%%Total HH Income Before Taxes

1339Attended grad school/Grad school degree

5155Attended college/College degree

375High school or less

%%Education

−1Homemaker

−<1Student

−3Retired

−<1Not employed, but looking for work

−68Self-employed

−2Employed part time

10026Employed full time

%%Employment Status


64



Respondent Profile: Employment Demographics

−1816$500K+

−2421Decline to Answer

NA

NA

NA

NA

%

23

39

%

48

52

%

5

64

31

%

−

−

−

−

7

4

90

%

Employers (2006)

5246Other

2829Professional Services

1313Construction/Manufacturing

712Accommodation/Food Services/Retail

−24$100K less than $500K

−32Less than $100K

%%Organizational Revenue

−53Has part-time

%%Industry

−47Full-time only

%%Business Employment Status

234Small Business (26-50)

7763Micro Business (2-25)

−33Owner-only

%%Company Size

80−Other position

14−Other senior executive

5−Vice President

2−CFO/Controller

−11President

−5CEO/Chairman

−84Owner/Partner

%%Job Title/Position


Documents

SBART (Small Business Annual Retirement Trends) Survey for