Benefits January 11, 2002

Balances Drop, But Participation, Contributions Hang Tough: Fidelity Survey

January 11, 2002 (PLANSPONSOR.com) - While average participant balances declined in 2001, participation and contribution rates continued to be relatively strong, according to a recent survey.

Reported by

Nevin E. Adams

Two new reports, based on data contained in Fidelity’s recordkeeping systems, found that corporate plan participation averaged 73% during the period, compared with 54% and 60% participation rates for nonprofit healthcare and higher education, respectively.

The average balance of a participant account at the end of 2001 was $55,000, according to Fidelity, a drop of 14% from the year before. Still, only about a quarter (26%) of corporate plan participants made a transfer in their account in 2001, compared with 16% of tax-exempt participants.

Corporate participants continued to contribute at nearly 7% of salary.

‘Nuff’ Said?

The Fidelity 401(k) Success Indicator revealed that pre-retirees in corporate plans would only be able to meet about a quarter of their retirement income needs if they relied strictly on their 401(k) assets. The report also said that mid-life participants in corporate plans should be able to address 55% of their needs with 401(k) assets. Nearly 60% of current retirement plan participants are aged 40-59, according to Fidelity.

Public ‘Works’

At $50,000, the average account balance in higher education is the largest among the tax-exempt sectors, while average healthcare and public sector balances were at $23,000 and 37,000, respectively.

Public sector participation was relatively low, just 35% – 40%. On the other hand, public sector workers in 457 plans have greatest access to self-directed brokerage accounts, according to the report, which says nearly half of the 457 plans administered by Fidelity offer the option.

The Building Futures Report, now in its third year, was based on a comprehensive analysis of 2001 data for 7.1 million participants in about 8,500 defined contribution plans serviced by Fidelity Institutional Retirement Services Company.

The new Defining Value report is based on data from nearly 14,000 defined contribution plans, including 401(a), 401(k), 403(b) and 457 plans serviced by Fidelity Investments Tax-Exempt Services Company, and their corresponding 1.45 million participants.