Fidelity® Report Defines Best Practices for Retirement Plan Sponsors in Higher Education

Study Examines Trends in Mandatory and Voluntary Plan Design and Leverages Findings to Create a How-to Guide for Plan Sponsors

BOSTON – Fidelity Investments®, a leading provider of not-for-profit workplace retirement savings plans to higher education employees1, today published a best practices guide for plan sponsors in higher education. The insights in the report are based on plan data and millions of employee-level transactions from 415 higher education plans, representing more than $52 billion in assets and over one million participants. The report’s purpose is to illustrate ways that America’s academic institutions can improve retirement readiness among employees.

The report, the first in a series, examines trends in mandatory and voluntary plan design, and highlights three key areas for improvements in plan design, employer and employee contributions, as well as plan participation rates.

“Higher education plan sponsors are increasingly looking to their retirement plan to help them attract and retain top talent and increase employee engagement, while ensuring cost effectiveness,” said John Ragnoni, executive vice president, Fidelity Tax-Exempt Retirement Services. “In order to achieve these goals, it’s essential for employers to assess and benchmark how elements of their plan design could ultimately impact employees’ retirement readiness and satisfaction with their benefits offering.”

Key Findings:
  • Among higher education plan designs, mandatory plans have created a solid foundation for employee retirement readiness. This approach has helped get employees closer to where Fidelity believes they should be aiming – a target 10-15 percent (of salary) savings rate each year. The prevalence of mandatory plans, according to the report, demonstrates that higher education plan sponsors both endorse and support this goal.
  • Voluntary plans can also play a critical role for employees to maintain these target annual savings rates. As part of a strategy to improve employees’ use of the voluntary plan, sponsors should consider shifting their employer contribution to a blend of fixed core contributions and an employer match, rather than a model of only fixed core contributions. This shift may reduce the employers’ total cost exposure while increasing both employee engagement and overall retirement savings.
  • Plan sponsors have an opportunity in offering automatic enrollment to employees. Retirement programs incorporating automatic enrollment for voluntary plans may significantly increase participation and contribution rates.
Fidelity’s Best Practices for Higher-Education Plan Sponsors
1. Target employee and employer contributions totaling 10–15 percent of an employee’s annual salary to increase retirement readiness.
2. Administer a combined benefits plan of contribution and employer match to increase total contributions, employee engagement and potentially lower costs.
3. Use employer match to increase voluntary participation rates and employee contributions.
4. Consider automatic enrollment to raise voluntary plan participation rates.
5. Consider automatic increase program to increase employee voluntary contributions.

To help higher education institutions assist their employees so they can maximize their retirement readiness, Fidelity offers a wide variety of resources, including:

• Access to Fidelity investment professionals via phone, online, mobile or at the firm’s more than 170 U.S. Investment Centers
• Free help choosing from a wide variety of retirement and personal savings options
• Guidance tools and savings calculators to help plan, invest and manage assets to achieve retirement readiness
• Educational articles, Webcasts and online content about retirement planning

Fidelity serves more than 3.5 million not-for-profit plan participants in more than 2,000 workplace savings plans across higher education, health care and other institutions. For more information, plan sponsors can call: 866-418-5173 or visit www.fidelity.com/highered. Plan participants can visit netbenefits.com (log-in required) or Fidelity.com.

Methodology
Findings are based on data from 415 not-for-profit and governmental higher education defined contribution plans record kept by Fidelity Investments, covering more than 1.1 million participants and $52 billion in assets. Findings are on analysis of millions of plan-level and employee-level transactions, unless otherwise noted. All data are as of Dec. 31, 2011. Since many of the higher education plans record kept by Fidelity have additional investment providers and/or recordkeepers, the report incorporates supplemental plan data from publicly available sources, including summary plan descriptions, Form 5500 filings, and auditor reports.

For access to the full report, visit: http://workplace.fidelity.com/docs/Plan_Design_in_Higher_Education_Summer_2012.pdf

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of $1.6 trillion, as of August 31, 2012. 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) Based on 2012 data sourced from LIMRA and Fidelity Market Insights Group.

The results of this study may not be representative of all employees and retirement plans meeting the same criteria as those surveyed for this study.

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