Fidelity Sees Strong Tax-Exempt and Small Business DC Growth

Fidelity Investments reported that recordkept assets in its defined contribution (DC) services business grew 8% to $851.4 billion in 2007, from $791.8 billion in 2006.

Fidelity also reported in a press release that assets under administration for its retirement services business, including both recordkept and non-recordkept assets of its DC and defined benefit (DB) businesses, increased 8% to $918.4 billion at year end, compared with $851 billion at the end of 2006. Growth was particularly strong in the tax-exempt market, with the addition of over 100 new DC plans and a 15% increase in assets.

In what Fidelity said was a sign of 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, recordkept assets in the small business market grew by 13% and nearly 1,600 plans were added.

Fidelity noted in the release that the number of its recordkept plans featuring auto enrollment grew nearly five times over the prior year to nearly 1,700 plans. A strong majority (83%) of those plans adopted all three auto solutions – auto enrollment, auto increase, and auto default into lifecycle investments.

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.

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

Among DB clients there was strong demand for plan design modifications, as more employers make changes to their pension plans to comply with new regulations.