Fidelity® Benchmarking Report Outlines Five-Step Roadmap to Improve Retirement Readiness in Not-For-Profit Healthcare Market

Employee retirement savings rates increased up to 74% following plan design changes

BOSTON – Fidelity Investments®, the leading provider of not-for-profit healthcare retirement savings plans, published a new benchmarking report of best practices in retirement plan design that can help improve overall retirement readiness of not-for-profit healthcare employees. The benchmarking report includes steps to increase employee savings rates, with data showing improvements up to 74 percent.

The analysis is based on Fidelity’s proprietary business data of more than two million employees and 600 not-for-profit healthcare retirement plans, which represents approximately 30 percent of the market. This is the second edition of the report, and includes insights into trends in not-for-profit healthcare retirement plan design. Fidelity’s five best practices for improving retirement readiness include:

“We are continuously leveraging Fidelity’s proprietary plan and participant data to identify trends and develop best practices in retirement plan design,” said John Ragnoni, executive vice president, Tax-Exempt Retirement Services, Fidelity Investments. “Through this analysis, we have enhanced our industry-leading benchmarking capabilities to educate not-for-profit healthcare institutions on plan design changes that can improve employee participation and encourage positive retirement savings outcomes.”

“Fidelity delivered a robust suite of benchmarking capabilities that analyzed savings behaviors and retirement readiness across our employee segments, and compared our plan’s performance against other healthcare organizations,” states Patricia O’Neil, Vice President, Treasurer at Rush University Medical Center in Chicago. “Using these insights, our Benefits team is partnering with Fidelity to review plan design and employee engagement strategies that will improve the competitiveness of our plan and help our employees be better prepared for retirement.”

Increase Participation Rates Through Auto Enrollment and Employer Matches
Employers can help employees overcome inertia to start participating in their retirement plan by leveraging Auto Enrollment (AE) and offering employer matches. Fidelity’s report shows that plans with AE enjoy an average participation rate of 80 percent of benefits-eligible workers, whereas those plans without it average just 51 percent. Despite the power of AE, only 24 percent of not-for-profit healthcare plans use it, compared to 42 percent in the corporate sector. Employer match is also a strong lever to increase participation rates—plans with an employer match have on average a 53 percent higher participation rate than those that do not.



Improve Total Savings Rates Through Annual Increase Programs (AIP)
Fidelity’s research shows that employers should aim for a total savings rate (employee plus employer contributions) between 10-15 percent, and implement an AIP to help employees reach this target. According to Fidelity’s benchmarking report, currently, the not-for-profit healthcare industry is averaging a 9.4 percent total savings rate. To help employees save more, an Annual Increase Program can be used to improve savings by an average of 74 percent, increasing employee savings deferral rates from an average of 4.2 percent up to 7.3 percent. While AIP is a powerful feature, only 39 percent of plans use it.


Target Date Funds Help to Strengthen Asset Allocation
Appropriate asset allocation is critical for investors of all ages. Sixty-two percent of healthcare employees exhibit age-based asset allocation. Plan sponsors can increase the overall strength of asset allocation for employees by adopting a target date fund as a default investment. Not-for-profit healthcare plan sponsors have made significant progress in this area, increasing their utilization of target date fund default investments from 72 percent at the end of 2009 to 80 percent at the end of 2012. When plans offer target date funds as the default investment option, there is a 73 percent increase in the number of employees properly exhibiting age-based allocation. Even more promising, 84 percent of employees aged 20-29 have age-based asset allocation.


Employee Education and Guidance Are Key Levers to Encourage Positive Savings Behaviors
Employees need education and guidance to make positive choices regarding how much to save, which funds to invest in, and how to plan for retirement. Fidelity’s benchmarking data shows that employee guidance1 is effective at driving positive behaviors. Of the employees receiving guidance from Fidelity, 38 percent took constructive actions such as increasing their savings rates or adjusting their asset allocation. Overall guidance utilization also increased by 16 percent from 2011 to 2012.

Measure Retirement Readiness: Choose and Use a Retirement Readiness Metric
The ultimate measure of a retirement plan’s strength is its ability to generate a retirement paycheck for employees. Employers need to assess the health of their plans by choosing a retirement readiness metric and applying that metric to employees within the plan. At an employee-level, Fidelity has developed the “8X” rule of thumb, a savings guideline suggesting that individuals aim to save 8 times their ending salary in order to help them meet basic income needs in retirement. However, only 53 percent of plan sponsors have established a metric to measure the overall health of their retirement plans.

To help healthcare organizations assist employees in meeting retirement goals, the Defining Excellence: Plan Design and Retirement Readiness in the Not-for-Profit Healthcare Industry benchmarking report is now available. Additionally, Fidelity offers a wide variety of resources, including:

• Access to investment professionals on-site at the workplace, by phone, online or at 182 Investor Centers nationwide
• Comprehensive guidance on retirement and personal savings options
• Planning tools and savings calculators to help invest, manage assets and achieve retirement readiness
• Workshops, educational articles, webcasts and online resources about retirement planning

Fidelity’s Services for the Tax-Exempt Market
Fidelity is the leading retirement plan provider for the not-for-profit health care market and the second largest provider in higher education. Fidelity’s comprehensive suite of 403(b) retirement services includes plan design resources, recordkeeping services, consulting and participant communication, education and guidance. With retirement planning professionals, and a wide-array of tools and resources available to educate plan sponsors, Fidelity helps the tax-exempt market maximize their retirement benefits plans and increase employee retirement readiness. Fidelity serves more than 4 million plan participants in more than 2,000 workplace savings plans across the not-for-profit market, including health care, higher education, research, foundations, faith-based, K-12, and other not-for-profit organizations.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.3 trillion, including managed assets of $1.8 trillion, as of July 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

1 Either one-on-one or self-directed guidance with an online tool

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