Fidelity provided mixed news about its 401k business Wednesday. The Boston Behemoth reported that the average balance in plans it administers jumped 25 percent, but that a lower share of eligible workers are in plans. While Fidelity is the largest plan administrator, its figures cannot necessarily be extrapolated for the entire industry.

The figures released by Fidelity were covered in both Reuters and the Boston Herald include the basic metrics now used by 401(k) plan administrators to measure the potential value of their books of business -- average participant balance, participation rate and deferral rate. Since the bulk of administration costs are tied to the number of participants while the revenues are driven by assets in the plan, most providers carefully watch the average balance figure.

By increasing deferral rates administrators can influence how quickly average plan balances rise. Finally, participation rates show the potential for new workers to enter the plan and build assets. However, plans with worker high turnover and lower paid workforces tend to have lower participation rates and are less attractive to administrators.

By these measures Fidelity's business showed some positives in 2003. The typical 401(k) account administered by Fidelity jumped nearly 25 percent to $55,000 based on the weighted average. That increase is just behind the 26.4 percent gain in the S&P 500. Though likely mostly market driven, the surging balances should have markedly increased the profitability of Fidelity's book.

Though only 66 percent of eligible workers participated in plans in 2003, down from 68 percent in 2002, the slip is likely not bad news for Fidelity itself. If the slip in participation was a result of new hires not enrolling in plans (while former workers left them), it means that Fidelity likely avoided adding smaller accounts in the short term.

Lastly, participants deferred about 7 percent of pay in both 2003 and 2002, Fidelity said. Additionally, more than 10 percent of participants contributed the $12,000 annual limit last year, Fidelity said.  

Edited by: Sean Hanna, Editor in Chief


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