Boosting employee loyalty: It’s all about the benefits

American workers want more benefit options and a simpler, guided enrollment process backed by online support. And those do who have a positive enrollment experience tend to be more loyal their companies.

So reports Guardian Life Insurance Company of America discloses in its 4th annual workplace benefits study, "Closing the gap: Addressing the employee benefits IQ of working Americans as a path to improving financial well-being." The survey consisted of two online surveys: One among 1,204 benefits decision-makers (employers); and another among 1,439 employees, age 22 or older, who work full time for a company with at least 5 employees. The study was conducted for Guardian by Greenwald & Associates, an independent market research firm.

Related: 18 scary retirement statistics

"Many workers envision an employee benefits shopping and buying experience radically different than it is today, but similar to some of their better online retail experiences," the report states. "As employees look to have more choices, proper decision support is integral to employer goals. A broad benefits menu combined with highly effective decision support yields a very strong perceived value of benefits."

That's evident in the survey findings. Employees who had a positive experience during their most recent annual enrollment are more likely to voice high confidence in their benefits decisions (80 percent did so) than workers who had a less positive experience (42 percent).

Employees who voice confidence in their most recent benefits decisions also have a higher Guardian Benefits Value Index score, the report adds, than those who are less confident (8.2 vs. 4.6, respectively). The BVI is an annual measure of the perceived value of benefits, 1 being the lowest score and 10 the highest. The average score for all U.S. workers Guardian surveyed in 2016 was 6.7.

Superior BVI scores translates to increased company loyalty. Three in four (75 percent) of workers who place a high value on their company's benefits want to stay with their employer for at least five years. That compares with just over half (53 percent) of those with a lower BVI.

Perception versus reality

Most working Americans surveyed by Guardian say they have a "good understanding" of their workplace benefits and believe they can make good benefits decisions. Their answers to a Guardian quiz about benefits coverage and terminology, however, betrays a knowledge gap.

Employees score an average grade of 72 or a C, with 51 percent earning a grade of C or below on Guardian's 2016 employee benefits IQ quiz. Early baby boomers faired marginally better, whereas a quarter of millennials received a failing grade.

A disconnect is in evidence, too, in a comparison of employees' and employers' answers to questions about company-provided benefits. Whereas 8 in 10 U.S. workers say they understand their benefits "very well" and nearly as many 74 percent express confidence in their benefits elections, just 62 percent of employers believe their workers have a "strong understanding" of company-provided benefits. Fewer than 1 in 5 (17 percent) say their employees grasp the financial value of these benefits.

Employees with the most confidence include:

Those who use a financial advisor: 72 percent of those with an advisor are highly confident vs. 58 percent of those without one.
Early boomers: 71 percent of boomers age 57 or older are highly confident vs. 54 percent of millennials.
Those with higher incomes: 70 percent of those with at least $100,000 in annual household income are highly confident vs. 50 percent of those earning less than $50,000.
Those who work for large companies: 63 percent of those working for companies with 1,000 or more employees are highly confident vs. 45 percent of those in companies with fewer than 50 employees.
Early boomers are the most confident about their employee benefits knowledge. They received the highest grades on the IQ quiz; 1 in 3 received an A.

Improving outcomes through communications

Millennials, who tend to acknowledge their limited benefits knowledge, received the lowest scores; 1 in 4 received a failing grade.

Whereas most U.S. works demonstrate a strong understanding of core medical benefits (nearly 9 in 10 know what a plan deductible is and understand that health insurance doesn't pay for long-term disability costs), fewer can claim a firm grasp of supplemental health benefits, such as critical illness and hospital indemnity insurance (57 percent and 30 percent answered incorrectly questions about these products).

Many workers also "struggle" in understanding terminology associated with these products. Among them: elimination period, guaranteed issue, and portability.

"These struggles raise questions about what more can be done to better support working Americans as they learn about and enroll in their employee benefits."

Proactive companies are trying to improve benefit selection outcomes. Among the survey's employer respondents, "helping employees make better benefits decisions" is their second most important benefits strategy behind "making plan design changes to reduce costs."

The survey finds that employees are less likely to rank company communications as "highly effective" in helping them to make the right choices (62 percent in 2016 vs. 68 percent in 2014). And fewer than half (47 percent) say their employer is effectively educating them about using employee benefits — a marked decline from the 66 percent recorded two years ago.

While many employers are trying to enhance the "employee enrollment experience," the report notes, only about half of all workers (55 percent) describe as "excellent" or "very good" feel their most recent annual enrollment. And 1 in 2 workers (51 percent), irrespective of age or life stage, want more relevant advice about benefit selections during the enrollment period.

Behavioral finance: Getting workers to do the right thing

MDRT president discusses life insurance in benefits packages

Closing the protection gap through outsourcing

In Guardian's 10-question, true-or-false employee benefits IQ quiz, working Americans scored an average grade of 72, or a C, with 51 percent earning a grade of C or below.

Employees are less likely to rate their company's communication efforts as highly effective in helping them make the right choices (62 percent in 2016 vs. 68 percent in 2014). Also, less than half (47 percent) feel their employer is doing a good job educating them about how to use their benefits — a sharp drop from 66 percent two years ago.

Nearly 6 in 10 workers answered incorrectly a question about critical illness insurance. Many also got wrong true-false questions about disability income, guaranteed issue and hospital indemnity insurance.

Employees who had a positive experience during their most recent annual enrollment are about twice as confident in their benefits decisions (80 percent are highly confident vs. 42 percent of those who had a less than positive enrollment experience).