Closing the Gap: Addressing Employees’ Unmet Benefit Needs

November 2023

As employers continue to struggle with a tight labor market, they are increasingly cognizant of the important role benefits play in attracting and retaining talent. LIMRA research shows that employees who are satisfied with their benefits are more committed to staying with their current employers, and benefits are also important considerations when workers evaluate potential new job offers. Enhancing benefit offerings helps employers better position themselves to compete in the war for talent.

Employers can improve their benefit packages by expanding the overall number and types of benefits they offer. When looking at employee preferences, it is clear that younger workers expect a wider variety of benefit options than their older colleagues do. Employers are recognizing this — more than half of employers expect to be offering more benefits five years from now than they do today. In addition, almost two-thirds of employers prefer to offer a menu of benefits that employees can customize to meet their individual needs, rather than offering the same benefits to all workers.

When adding benefits, how should employers prioritize which new offerings to make available? The benefits that employees tend to value most — such as paid time off, medical, dental and retirement savings plans — have changed little in recent years and are already offered by most employers. However, by looking specifically at the benefits employees consider important but do not currently have access to, we can identify gaps where there are unmet benefit needs. These benefits may have significant potential for growth in the future.

Employees’ most prominent unmet benefit needs fall into several categories:

Pension Plans

Pension plans top the list of unmet benefit needs, with more than 3 in 10 employees viewing these plans as very or extremely important but lacking access to them. Pensions have been declining in prevalence for years due to the cost and financial risk they pose to employers, but workers clearly still feel a strong desire for guaranteed retirement income. It may be possible to address this need in other ways, such as by providing in-plan annuity options within 401(k) plans.

Financial Security

Other benefits that support financial security also feature prominently among employees’ unmet needs, including emergency savings plans. These plans, which allow workers to automatically defer money into a designated emergency fund, will be easier to offer alongside 401(k) plans in the future due to provisions of the SECURE 2.0 Act of 2022.

Employees also express significant needs for more general financial wellness offerings, such as financial counseling and education services. In fact, recent research shows that employees prioritize financial wellness benefits much more than employers think they do. Workers could clearly benefit from more support in this area. According to the LIMRA Financial Wellness Index, only about 4 in 10 employees are financially “well,” while approximately 3 in 10 are financially distressed.

Supplemental Health

Many employees also desire more access to supplemental health products, such as critical illness, cancer, hospital indemnity and accident plans, which tend to be offered less frequently than other insurance benefits. These offerings support employees’ overall financial security by helping to fill the gaps in high-deductible health plans and cover out-of-pocket expenses related to adverse health events.

In addition, roughly a quarter of workers see long-term care insurance as an unmet benefit need. Sales of long-term care products surged in Washington state in 2021 as a result of the Washington Cares Act, but interest is actually widespread, with employees across the country expressing a desire for this type of coverage. The high cost of comprehensive long-term care insurance will be a barrier to purchasing for many employees, but there may be substantial interest in more affordable options, such as life products with long-term care features. If other states choose to follow Washington’s example by passing similar legislation, demand for these benefits is almost certain to grow. 

Paid Family and Medical Leave

Finally, paid family and medical leave (PFML) benefits are an unmet need for nearly a quarter of workers. Both employers and employees consistently rate these programs as one of the top-five most desired benefits overall. However, access to these benefits varies dramatically by state, with some states mandating PFML offerings, others creating voluntary programs and others declining to address the topic at all. This patchwork of legislation creates administrative headaches for employers, who often rely on insurance benefit providers to assist them with managing these offerings. Large, multistate employers may also prefer to offer private PFML plans to ensure more consistent benefits for all their employees. As workers continue to prioritize flexibility and work-life balance, PFML benefits are likely to remain high on their list of needs.

Closing the Gap

Some of employees’ unmet benefit needs, such as pension plans, may be cost-prohibitive for employers to offer. However, many of their desired benefits can be offered on a voluntary basis with little to no cost to the employer, including a variety of supplemental health and financial wellness offerings. These benefits represent low-hanging fruit in employers’ quest to enhance their benefit plans, improve employee satisfaction and win the war for talent.