Fidelity Reports on 2008 Trends in 401(k) Plans

Wed Jan 28, 2009 8:05am EST

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Participants Continue to Stay the Course Amidst Market Downturn; Improvements
Seen in Worker Engagement, Account Diversification and Company Stock Usage
BOSTON--(Business Wire)--
Fidelity Investments, the nation`s No. 1 provider of workplace retirement
savings plans, today provided its 2008 State of the 401(k) update, highlighting
the most significant actions taken by both employees and employers with regard
to workplace savings plans last year. 

In a year of unprecedented market volatility that negatively impacted most asset
classes in both retirement and non-retirement investment vehicles alike,
employees in workplace savings plans contributed to their accounts at normal
historical levels, took fewer loans than in 2007, improved their asset
diversification and continued to decrease company stock holdings. 

"Despite a complex set of financial issues that led to a severe economic and
market downturn, workers in 2008 remained committed to saving for retirement
through their 401(k) accounts, and engaged with us more in trying to better
understand their risk tolerance and an appropriate asset allocation and
diversification strategy, " said Scott B. David, president, Workplace Investing,
Fidelity Investments. 

Participants Continue to Contribute but Markets Take Toll on 401(k) Balances

Based on analysis of Fidelity`s 17,095 corporate 401(k) plans representing over
11 million participants, Fidelity found that in 2008 participants contributed an
average of $5,600 (pre-tax earnings) to their 401(k) accounts, slightly higher
than 2007 levels. Workers continued to contribute to their plans, even in the
difficult fourth quarter of 2008, with 96 percent of active 401(k) participants
as of the third quarter, continuing to contribute in the fourth quarter. This
percentage is in line with normal fourth quarter activity, which always
experiences a slight decline in the portion of those participants making pre-tax
contributions who have reached the IRS 402(g) limit for the year ($15,500 in

Despite ongoing contributions into 401(k) plans, unprecedented market declines
resulted in the average workplace savings account balance dropping 27 percent in
2008 to $50,200 from $69,200 in 2007. 

2008 Loans, Hardship Withdrawals and Exchanges

Fidelity data on 401(k) loan usage, hardship withdrawals and account exchanges
in 2008 did not indicate significant behavioral changes. The following chart
represents the percentage of Fidelity`s participant base taking action in each

                            4Q 2008          4Q 2007          Full Year 2008      Full Year 2007  
 Loans                      2.2 percent      2.8 percent      9.0 percent         9.7 percent     
 Hardship Withdrawal        0.7 percent      0.6 percent      1.8 percent         1.6 percent     
 Exchanges                  6.1 percent      5.8 percent      13.9 percent        14.2 percent    

* Percentage of active participants taking a loan continues to trend down. Fewer
employees initiated a loan in 2008 (9.0%) when compared to 2007 (9.7%). For
those who did take a loan in 2008, the average amount was $8,400. Most employers
offer a loan option in their workplace savings plan. Participants are usually
allowed to borrow up to 50 percent of their vested balance or $50,000 whichever
is less. The term of the loan cannot exceed 5 years except for the purchase of a
primary residence and can be paid back usually through a payroll deduction with
after-tax funds.

* Hardship withdrawals continue to trend up, but still remain a small percentage
of Fidelity`s active participant base. The average hardship withdrawal amount
decreased slightly in 2008 to $6,000. Hardship withdrawals must be available
through the plan and can only be taken if there is an immediate, heavy financial
need such as for medical reasons or workers facing foreclosure. If the
participant is not 59 ½ years of age, the withdrawal will be subject to a 10
percent withdrawal penalty as well as income tax. As a result, a hardship
withdrawal should only be used after all other sources of funding have been
* Exchanges were down slightly in 2008 from 2007. The portion of participants
making an exchange to their 401(k) account - shifting money from one investment
option to another - was 13.9 percent in 2008, a slight decline from the 2007
level of 14.2 percent. Participants with 100 percent in lifecycle options had a
significantly lower exchange rate than the overall participant base. In the
fourth quarter, only 1.0 percent of lifecycle holders made an exchange compared
to the overall average of 6.1 percent. For the year, an average of 2.9 percent
of 100 percent lifecycle holders made an exchange compared to the 13.9 percent
of the overall participant base. Exchange activity was the heaviest for
participants with the largest account balances, with over 37 percent of
participants with $250,000 or more making one or more exchanges during the year.
Conversely, about 10 percent of participants with balances from $5,000 to
$10,000 made an exchange in 2008.

Participants Better Diversified; Percentage with 100 Percent Equities Drops

The trend toward diversification continued in 2008 with the percentage of
participants holding 100 percent equities in their workplace savings plan
dropping to 16 percent at the end of 2008 from over 20 percent at the end of
2007. By comparison, 37 percent of participants were holding 100 percent
equities in 2000. 

The role of company stock in workplace savings plans has also been trending
down. As of the end of 2008, company stock made up about 10 percent of
Fidelity`s overall assets in workplace savings accounts, down from over 20
percent in early 2000. 

Historic Markets Prompt Participants to Engage, Re-Evaluate Portfolios in Q4

Workplace savings participants reached out to Fidelity in record numbers as the
stock market hit a historic low in the fourth quarter of 2008. Workers calling
Fidelity spiked to over 100,000 calls per day in late September through early
October. Call volume peaked at 120,000 calls on October 10, 2008, the day the
Dow Jones Industrial Average closed below 9,000 for the first time in five

In addition,, the Web site for Fidelity workplace savings
participants, also experienced record numbers in the fourth quarter with 4.6
million unique visitors visiting the site in October, an increase of 14 percent
over the same period in 2007. Nearly one million workers in 2008 also utilized
one of the many retirement savings planning tools provided by Fidelity on 

Plan Sponsors Continue to Adopt Auto, Small Number Drop Company Match

Employers continue to adopt auto solutions - Auto Enrollment, Auto Increase and
Lifecycle as a default. The most dramatic increases have been seen in the use of
lifecycle funds as the default investment option. By the end of 2008 over 60
percent of plans were using lifecycle funds as a default option, up from 38
percent at the end of 2007 and just over 5 percent at the end of 2005. Adoption
of auto enrollment rose to 16 percent in 2008 from less than 11 percent in 2007.
Companies using auto increase rose to nearly 74 percent in 2008 from about 70
percent in 2007. 

Faced with a weakening economy, some companies decided to temporarily suspend or
reduce their company match in 2008. The number of companies taking this action
represents less than 1 percent of the Fidelity plan sponsors that offered a
match at the end of 2007. 

Fidelity`s Defined Contribution Business Reports 10 Percent Plan Growth

Fidelity`s defined contribution recordkeeping business continued to show
strength in 2008. Overall, defined contribution plans (401(k)s, 403(b)s and
other workplace savings plans) serviced by Fidelity grew more than 10 percent in
2008 to over 19,000 plans. The number of participants increased 5 percent to
over 14.2 million participants. 

About Fidelity Investments

Fidelity Investments is one of the world`s largest providers of financial
services, with custodied assets of over $2.6 trillion, including managed assets
of over $1.2 trillion as of December 31, 2008. Fidelity offers investment
management, retirement planning, brokerage, and human resources and benefits
outsourcing services to 24 million individuals and institutions as well as
through 5,500 financial intermediary firms. The firm is the largest mutual fund
company in the United States, the No. 1 provider of workplace retirement savings
plans, the largest mutual fund supermarket and a leading online brokerage firm.
For more information about Fidelity Investments, visit 

Fidelity Brokerage Services LLC, Member NYSE, SIPC,

300 Puritan Way, Marlborough, MA 01752


Fidelity Investments 

Corporate Communications 

         (617) 563-5800 

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