Fidelity Reports Strong Growth in Retirement Services Business in 2007

According to an article I've read, Fidelity Investments, the nation’s No. 1 provider of workplace retirement savings plans, today reported that recordkept assets in its defined contribution (DC) services business grew 8 percent to $851.4 billion in 2007, from $791.8 billion in 20061. During the same period, Fidelity added nearly 524,000 DC participants, for a total of 13.6 million as of year-end 2007.

Fidelity also reported that assets under administration for its retirement services business, which includes both recordkept and non-recordkept assets of its DC and defined benefit (DB) businesses, rose 8 percent to $918.4 billion at year end, compared with $851.0 billion at the end of 2006.

In addition, Fidelity achieved a monthly record with the addition of over $41 billion in new recordkept assets in its DC business, representing approximately 360,000 new participants in January 2008 alone, the highest such levels since the firm began offering 401(k)s in 1982.

“I’m pleased with the strong momentum we achieved in 2007, which culminated in a record-breaking start to 2008,” said Scott B. David, president, Retirement Services, Fidelity Investments. “We continued to win new DC clients amid an increasingly competitive marketplace, reflecting Fidelity’s commitment to working with employers of all sizes and industries to improve the retirement readiness of their employees.”

Double-Digit Asset Growth in Tax-Exempt and Small Business Segments

Fidelity continued to strengthen its industry-leading position in 2007, with DC recordkept client wins across all types of employers, including Ameren Corporation, Amtrak, the National Hockey League, the Oregon University System and Travelport. Growth was particularly strong for Fidelity in the tax-exempt market, with the addition of over 100 new DC plans and a 15 percent increase in assets.

In the small business market, Fidelity grew recordkept assets by 13 percent and added nearly 1,600 plans, reflecting the increasing recognition among small business owners that offering a retirement plan is not only simple and affordable, but can also be an effective recruiting and retention tool.

Demand for Auto Solutions & Lifecycle Funds Accelerates

The adoption of automatic solutions continued to grow in 2007, with the number of Fidelity-recordkept plans featuring auto enrollment growing nearly five times over the prior year, to nearly 1,700 plans as of year-end 2007. The vast majority (83 percent) of those plans adopted all three of Fidelity’s auto solutions â€" auto enrollment, auto increase and auto default into lifecycle investments.

Although lifecycle investments are not always the default option, they have become increasingly prominent in DC plans. At year-end 2007, more than 4.3 million participants, representing nearly a third of Fidelity’s recordkept DC participants, held some or all of their assets in lifecycle investments, with younger participants leading this healthy trend.

“The Pension Protection Act of 2006 and the Department of Labor's ruling on qualified default investments promise to open a new era in worker retirement savings,” said David. “There is growing evidence that auto solutions can decisively move employees toward greater retirement readiness. Automatic enrollment and savings escalation, together with lifecycle and balanced default investment strategies, can move millions of working Americans into new savings patterns that can dramatically improve their financial security in retirement.”

Continued Gains in Defined Benefit Services

In 2007, Fidelity achieved its 10th consecutive year of participant growth in its defined benefit (DB) recordkeeping business, reaching 4.6 million participants at year-end. The addition of participants was driven by a combination of new plans and ongoing merger and acquisition activity among Fidelity’s existing client base.

Fidelity continued to experience strong demand for plan design modifications among its DB clients, as more employers make changes to their pension plans to comply with the PPA, rules governing balance sheet disclosures and other regulatory changes. The firm expects this trend to continue in the year ahead.

David said that nearly all of Fidelity’s DB recordkeeping clients also rely on Fidelity for DC recordkeeping services and the firm is well-positioned to meet the growing demand for integrated DB and DC solutions among mid-to-large employers.

Record Levels in Stock Plan Services in 2007

As part of its retirement services business, Fidelity’s integrated Stock Plan Services platform supports stock option plans, employee stock purchase plans, restricted stock plans and stock appreciation rights. Fidelity reported record levels for Stock Plan Services in 2007, with SPS recordkept assets reaching an all time high of $102.5 billion2, representing 20 percent growth over 2006.

Driven by the continuing trend toward bundled human resources outsourcing and increasingly complex equity compensation accounting rules, Fidelity now administers comprehensive equity compensation plans for 1.2 million participants in 126 countries.

In 2007, Fidelity managed, on average, 2.3 stock plans per existing stock plan client, up from an average of 2.0 plans per existing client in 2004. This growth was driven by clients consolidating stock plan administration with Fidelity, and by clients adding restricted stock plans to their equity compensation offerings. The vast majority of Fidelity’s stock plan clients also rely on Fidelity for DC recordkeeping services.