SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage In collaboration with and commissioned by MassMutual September 18, 2013

In collaboration with and commissioned by MassMutual The 2013 Employer Perspectives on Disability Benefits survey, which was commissioned by MassMutual, is a collaboration between the Society for Human Resource Management and MassMutual. 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 26). The findings are divided in the following topics:  Base Group Long-Term Disability Plans  Compensation and Buy-Up Coverage  Supplemental Plan/Individual Disability Income  Carrier Satisfaction/Changes  Executive Group Life Benefits 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Introduction

In collaboration with and commissioned by MassMutual 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. 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 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Introduction (continued) IndustriesOrganization Staff SizeRegion  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  1 to 99 employees  100 to 499 employees  500 to 2,499 employees  2,500 to 24,999 employees  25,000 or more employees  Midwest  Northeast  South  West

In collaboration with and commissioned by MassMutual 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Compensation and Buy-Up Coverage

In collaboration with and commissioned by MassMutual What percentage of organizations includes variable compensation in the income protected by their long-term disability plan? Almost one quarter (22%) of organizations indicated variable compensation is protected by their long-term disability plan. The law firms/legal services, financial services and wholesale/retail trade industries were more likely to include variable compensation in the income protected by their plan.  Among organizations with a plan protecting variable compensation, 93% indicated the compensation is protected at the same percentage as the base plan selection. Organizations with 100 to 499 employees were more likely to report protecting variable compensation at the same percentage as the base plan selection. Are organizations offering “buy-up” coverage through their group long-term disability program? Overall, 21% of organizations indicated offering this coverage: 16% of organizations offered this coverage to all employees, and 5% reported this coverage is provided to select employees.  Among organizations that offer “buy-up” coverage, 77% reported that less than 50% of their employees participate in this coverage. Are organizations concerned that their base long-term disability program does not fully cover employees who have income in excess of the plan limit? Less than one-third (29%) of organizations reported concern that employees with income in excess of the plan limit are not covered. Slightly more than one-half (51%) of organizations indicated that their benefits provider has discussed this with them Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Key Findings in Compensation and Buy-Up Coverage

In collaboration with and commissioned by MassMutual Are select employees being left underinsured with the organization’s long-term disability plan? Currently only a small portion of organizations cover variable compensation (e.g., bonuses and incentive pay) in their long-term disability plan. For employees, especially executives and employees working on commission who rely heavily on such methods of compensation, coverage under traditional long-term disability group plans may not be enough. HR professionals may need to assess if alternative coverage plans should be offered to select employees who may desire additional coverage Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM What do these findings mean for HR professionals?

In collaboration with and commissioned by MassMutual Is variable compensation, such as bonuses or commissions, included in the income protected by your base long-term disability plan ? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 3,243. 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.

In collaboration with and commissioned by MassMutual Note: Only statistically significant differences are shown. Still thinking about your base plan, is variable compensation, such as bonuses or commissions, included in the income protected by your base long-term disability plan ? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Law firms/legal services, financial services and wholesale/retail trade are more likely than manufacturing; professional, scientific and technical services; and energy, gas and oil industries to include variable compensation in the income protected by their base long-term disability plan. Comparison by organization demographics Law firms and legal services (37%) Financial services (33%) Wholesale and retail trade (32%) > Manufacturing (14%) Professional, scientific and technical services (14%) Energy, gas, oil (13%) Telecommunications (26%)> Manufacturing (14%)

In collaboration with and commissioned by MassMutual Is this variable compensation protected at the same percentage as the base plan selection? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 617. Only respondents whose organizations offer a group long-term disability plan and include variable compensation in the income protected by their base long-term disability plan were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual Note: Only statistically significant differences are shown. Is this variable compensation protected at the same percentage as the base plan selection? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Organizations with 100 to 499 employees are more likely than organizations with 2,500 or more employees to protect variable compensation at the same percentage as the base plan selection. Comparison by organization demographics 100 to 499 employees (97%) > 2,500 to 24,999 employees (86%) 25,000 or more employees (86%)

In collaboration with and commissioned by MassMutual What percentage of employees are “capped” by the maximum monthly benefit amount of your group long-term disability base plan? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 2,525. Only respondents whose organizations offer a group long-term disability plan were asked this question. Percentages do not total 100% due to rounding. “Capped” indicates that employees earn more than the covered limit.

In collaboration with and commissioned by MassMutual Note: Only statistically significant differences are shown. What percentage of employees are “capped” by the maximum monthly benefit amount of your group long-term disability base plan? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Organizations with 100 to 2,499 employees are more likely than organizations with 1 to 99 employees to “cap” 10% to 19% of employees by the maximum monthly benefit amount of their group long-term disability base plan. Comparison by organization demographics 10% to 19% 100 to 499 employees (20%) 500 to 2,499 employees (21%) > 1 to 99 employees (14%)

In collaboration with and commissioned by MassMutual Do you offer “buy-up” coverage that is available through the group long-term disability program to all employees, some employees or none of your employees? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 3,332. 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. “Buy-up” coverage indicates that this program does not include any supplemental individual long-term disability plans that the organization may offer.

In collaboration with and commissioned by MassMutual Note: Only statistically significant differences are shown. Do you offer “buy-up” coverage that is available through the group long-term disability program to all employees, some employees or none of your employees? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Smaller staff-size organizations are more likely than larger organizations to not offer “buy-up” coverage to any of their employees. Larger staff-size organizations are more likely than smaller organizations to offer “buy-up” coverage to all employees. The energy, gas and oil industry is almost twice as likely as wholesale/retail trade to offer “buy-up” coverage to all employees. Comparison by organization demographics Organization Staff SizeOrganization Industry Not offered 1 to 99 employees (90%) 100 to 499 employees (86%) > 500 to 2,499 employees (77%) 2,500 to 24,999 employees (65%) 25,000 or more employees (52%) to 2,499 employees (77%) > 2,500 to 24,999 employees (65%) 25,000 or more employees (52%) 2,500 to 24,999 employees (65%) > 25,000 or more employees (52%) Offered to all employees 500 to 2,499 employees (17%) 2,500 to 24,999 employees (27%) 25,000 or more employees (37%) > 1 to 99 employees (8%) 100 to 499 employees (11%) Energy, gas, oil (25%) > Wholesale and retail trade (13%) 25,000 or more employees (37%) > 500 to 2,499 employees (17%) 2,500 to 24,999 employees (27%) 2,500 to 24,999 employees (27%) > 500 to 2,499 employees (17%) Offered to some employees 25,000 or more employees (11%) > 500 to 2,499 employees (6%) -

In collaboration with and commissioned by MassMutual Approximately what percentage of employees participate in the “buy-up” coverage available through the group long-term disability program? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 463. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual Note: Only statistically significant differences are shown. Approximately what percentage of employees participate in the “buy-up” coverage available through the group long-term disability program? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Organizations with 100 to 499 employees are more likely than organizations with 2,500 or more employees to have less than 50% of their employees participate in the “buy-up” coverage available through the group long- term disability program. Comparison by organization demographics Less than 50%100 to 499 employees (86%) > 2,500 to 24,999 employees (70%) 25,000 or more employees (63%)

In collaboration with and commissioned by MassMutual What percentage of base salary is replaced by the base plan AND the buy-up amount combined? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 495. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual What is the maximum benefit amount per month of your combined base and “buy-up” coverage? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 391. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question. Respondents who answered “don’t know” were excluded from this analysis. Percentages do not total 100% due to rounding.

In collaboration with and commissioned by MassMutual Is the “buy-up” coverage paid for with... ? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 574. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual Is it a concern that your base long-term disability program doesn’t fully cover employees who have income in excess of the group base plan limits? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 440. The only respondents asked this question were organizations that offer a group long-term disability plan and buy-up coverage, and the percentage of employees “capped” by the maximum monthly benefit amount of the group long-term disability base plan is greater than 0%. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual Has your benefits provider discussed with you that your base long- term disability program doesn’t fully cover employees who have income in excess of the group base plan limits? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 461. Only respondents whose organizations offer a group long-term disability plan and buy-up coverage were asked this question. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual Do you currently have plans to talk to your benefits provider about your concerns? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Note: n = 199. The only respondents asked this question were organizations that offer a group long-term disability plan and buy-up coverage and that have not discussed with their benefits provider that their base long-term disability program does not fully cover employees who have income in excess of the group base plan limits. Respondents who answered “don’t know” were excluded from this analysis.

In collaboration with and commissioned by MassMutual 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Demographics

In collaboration with and commissioned by MassMutual Approximately what percentage of regular, full-time and part- time employees are eligible for employee benefits at your organization? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Less than 25% 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% 2%4%12%78% Part-time Employees (n = 3,470) 66%3%5%1%2%3%4%16%

In collaboration with and commissioned by MassMutual Which of the following is closest to your job title? 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM n = 4,394

In collaboration with and commissioned by MassMutual Demographics: Organization Staff Size 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM n = 4,382

In collaboration with and commissioned by MassMutual Demographics: Organization Profit Status 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM n = 4,402

In collaboration with and commissioned by MassMutual Demographics: Organization Region 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM n = 4,106

In collaboration with and commissioned by MassMutual Demographics: Organization Industry 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM Percentage Manufacturing16% Wholesale and Retail Trade14% Financial Services A 10% Professional, Scientific and Technical Services8% Energy, Gas, Oil B 6% Telecommunications6% Accounting / Architectural C 4% Computer and Electronic Products/Technology D 4% Health Care Services E 4% Utilities4% Information Services F 3% Pharmaceutical and Medicine G 2% Law Firms and Legal Services2% Physician and Dental Offices1% Other industries16% n = 4,402 A Includes Banks, Insurance Companies, Securities and Commodities, Other Finance and Insurance Services categories. B 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.

In collaboration with and commissioned by MassMutual U.S.-based operations only66% Multinational operations34% 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% 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% 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? Does your organization have U.S.- based operations (business units) only, or does it operate multinationally? n = 4,387 n = 4,398 Note: n = 3,410. Percentages do not equal 100% due to rounding. Corporate (companywide)74% Business unit/division15% Facility/location11% n = 3,407 What is the HR department/function for which you responded throughout this survey ? Demographics: Other 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM

In collaboration with and commissioned by MassMutual 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, Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM SHRM Survey Findings: 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage In collaboration with and commissioned by MassMutual Survey Methodology

In collaboration with and commissioned by MassMutual 32Disability and Executive Benefits Survey ©SHRM 2012 About MassMutual Founded in 1851, MassMutual 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, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual 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 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM

In collaboration with and commissioned by MassMutual 33Disability and Executive Benefits Survey ©SHRM 2012 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 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM

In collaboration with and commissioned by MassMutual 34Disability and Executive Benefits Survey ©SHRM 2012 For more survey/poll findings, visit For more information about SHRM’s Customized Research Services, visit Follow us on Twitter 2013 Employer Perspectives on Disability Benefits—Compensation and Buy-Up Coverage ©SHRM About SHRM Research