Fidelity Management - Holifield & Associates, PLLC

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A Building Futures Report: Q2 2014 Trends
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Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other
information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest.
Transition Page
Fidelity Investments: An industry leading retirement provider
Fidelity’s recordkept database is one of the industry’s most
comprehensive proprietary collections of defined contribution
plan and participant information.
► Based on recordkept data of corporate defined contribution (DC) plans:
 21,200 plans
 13.0 million participants
► Data as of June 30, 2014 unless otherwise noted1
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Data in this presentation exclude tax-exempt plans, nonqualified plans, and the FMR Co. plan. This analysis includes data from the Fidelity
Advisor 401(k) Program.
Account Balance
Key Insights
► Currently, the average account balance is $91,000, an increase of 12.9% from one year prior.
► The median participant account balance is $24,900.
► Account
balances are impacted by participant action (contributions, withdrawals, etc.) and market action.
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► Account balances are also impacted by new participants having lower account balances than departing
participants who may roll out their assets.
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Account Balance (10-Yr Continuous Active Participants)
Key Insights
► The 10-Year Continuous Active Account Balance follows the same participants over time to show what they
experienced during the last ten years.
► These
participants had a $246,200 average account balance, up from $60,800 ten years prior (15.0%
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annual increase).
► This account balance increase was 45% due to participant action (net contributions) and 55% due to market
increases.
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Continuous Active Participants are actively employed with a balance for each year endpoint during the 10-year period.
Deferral Rates
Key Insights
► The average employee deferral rate has remained steady for five years.
► Currently, the average employee deferral rate is 8.0%.
► Other
> More than participant actions of increasing/decreasing deferrals (next slide), this figure is impacted by new
participants joining the plan having lower deferral rates than departing participants leaving the plan.
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Active Participants Only. Mean elective total deferral rates (point-in-time). Some figures may not add due to rounding.
Changes to Employee Deferral Rates
Key Insights
► Overall, 7.2% of participants made an employee deferral increase in the prior 3-months.
► In plans that offer Auto-AIP, 10.0% of participants had employee deferral increases in the prior 3-months.
► The
long-term trend of more employee deferral increases than decreases was interrupted during Q3’08 > More
Q1’09, but has resumed since (20 consecutive quarters).
► Annual Increase Program (AIP) is a big driver of this trend, see “Deferral Increases due to AIP” slide.
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Continuous Active Participants Only (3-month). Mean elective total deferral rates (point-in-time).
Employee Deferral Increases due to AIP
Key Insights
► Annual Increase Program (AIP) was responsible for 26.4% of deferral increases made in the prior quarter.
► AIP represented about one-in-three (38.4%) of all deferral increases in prior 12-months.
► The
seasonality is due to the majority of AIP increases occurring in Q1.
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Continuous Active Participants Only (3-month).
Auto-Enrollment (AE) Impact to Participation Rate
Key Insights
► Younger, less well-compensated employees benefit from Auto-Enrollment (AE).
► The overall active participation rate is 68.0%, up from 64.1% five years prior due to impact of AE.
► In
plans who offer AE, the participation rate is 84.3%, which has also increased as more employees become
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eligible for AE within those plans.
► Further, those employees who are eligible for Auto-Enrollment in AE Plans have a participation rate of
90.2% (i.e. only 9.8% opt-out).
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Data as of 12/31/2013. Active Eligible Employees Only.
Asset Allocation
Key Insights
► Changes in asset allocation can be driven by market fluctuations, as well as by exchange, contribution, and
withdrawal activity.
► Equity
= Domestic Equity, International Equity, Company Stock, Specialty, Self-Directed Brokerage
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► Blended = Target Date Funds, Target Risk Funds, Balanced Funds
► Conservative = Short-Term, Stable Value, Fixed Income, Annuity
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Data in this presentation exclude tax-exempt plans, nonqualified plans, and the FMR Co. plan. This analysis includes data from the Fidelity
100% or 0% Equity Allocations
Key Insights
► For many participants, equity allocation was an “all-or-nothing” decision.
► Mainly through the increased use of Target Date Funds, fewer participants now hold such extreme
portfolios.
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► Less than one-in-six participants (15.2%) hold 100% or 0% equity allocations.
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Data in this presentation exclude tax-exempt plans, nonqualified plans, and the FMR Co. plan. This analysis includes data from the Fidelity
Target Date Fund Adoption
Key Insights
► About one-in-three total participants (35.7%) holds 100% of their assets in Target Date Funds.
► For Millennials (Gen Y), this figure is 55.2%.
► This
> Moretrend has been chiefly driven by the use of Target Date Fund (TDF) Default.
► Default options have a sizeable impact on aggregate participant behavior.
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Generation Y was born between 1979 – 1991.
Personal Rate of Return (PRR)*
Key Insights
► The median cumulative participant 1-year personal rate of return (PRR) is 19.4%.
► The median cumulative participant 3-year personal rate of return (PRR) is 34.1% (10.3% annualized).
► The
median cumulative participant 5-year personal rate of return (PRR) is 91.5% (13.9% annualized).
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► The median cumulative participant 10-year personal rate of return (PRR) is 88.7% (6.6% annualized).
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* See Important Additional Information for more details.
Personal Rate of Return (PRR)*
10-Year Participant Performance vs. Applicable Fidelity Freedom Fund®
Lower
Higher
10-Year Risk*
Higher
38.6%
17.9%
of Participants
of Participants
56.5%
of Participants
10-Year Return
Lower
13.9%
29.6%
of Participants
of Participants
47.5%
of Participants
43.5%
of Participants
52.5%
of Participants
Key Insights
► Balanced portfolios such as the Fidelity Freedom Funds® outperformed 43.5% of participants over the 10year return period.
► Also,
52.5% of participants took on more risk. Of those with higher risk, 26.4% underperformed against their
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age-based Freedom Fund (13.9% / 52.5%).
► During the 10-year return period, the median participant cumulative return was 88.7% (or 6.6% annualized).
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“Return” is the time-weighted 10-year cumulative return. “Risk” is the standard deviation of returns, a measure of the volatility of returns.
“Applicable” Freedom Fund is the one with the closest target date given the participant’s date of birth, assuming a retirement age of 65.
How to read: the top left box would indicate the percent of participants who had higher returns and lower risk (standard deviation of returns) than
their applicable Freedom Fund over the 10-year return period.
* See Important Additional Information for more details.
Contribution Allocation
Key Insights
► Changes in contribution allocation are driven by participant behavior, whereas asset allocation is heavily
impacted by market movement.
► Equity
= Domestic Equity, International Equity, Company Stock, Specialty, Self-Directed Brokerage (SDB)
> More
► Blended = Target Date Funds, Target Risk Funds, Balanced Funds
► Conservative = Short-Term, Stable Value, Fixed Income, Annuity
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Active Participants Only.
Employee Contributions
Key Insights
► In the prior 12-months, 86.7% of active participants made employee contributions, up from 82.0% ten years
prior.
► Also,
84.7% of active participants received employer contributions in the prior 12-month period (not
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graphed).
► Overall, 93.9% of active participants made contributions (employee, employer, or roll-in) in the prior 12month period (not graphed).
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Active Participants Only.
Average Contribution Amounts
Key Insights
► The average 12-month employee contribution was $6,050, up from $4,910 ten years prior (per participant
making >$0 employee contributions).
► This
represents a 2.1% annual increase in employee contribution amounts.
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► The average 12-month employer contribution was $3,540, up from $2,450 ten years prior (per participant
receiving >$0 employer contributions).
► This represents a 3.7% annual increase in employer contribution amounts.
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Active Participants Only.
Plan Design
Key Insights
► Plans offering Auto-Enrollment (AE) has increased to 26.5% of plans, representing 59.7% of the participant
base.
► Plans
offering Roth Deferrals has increased to 46.6% of plans, representing 65.7% of the participant base.
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► Also, 77.3% of plans offer Annual Increase Program (AIP) and 12.3% of plans offer Auto-AIP (not graphed).
► Also, 81.7% of plans have Target Date Fund (TDF) Default, up from 65.5% five years prior (not graphed).
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Loans Outstanding
Key Insights
► The percent of active participants with a loan outstanding is 22.5%.
► The percent of active participants initiating a loan in the prior 12-months is 10.7%.
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Data in this presentation exclude tax-exempt plans, nonqualified plans, and the FMR Co. plan. This analysis includes data from the Fidelity
Hardship Withdrawals
Key Insights
► While hardship withdrawals (HWs) continue to increase, they represent a very small portion of active
participants.
► The
percent of active participants taking a hardship withdrawal was 2.3% in the prior 12-months.
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► In order to take a hardship withdrawal, you have to prove a financial need.
► Examples of reasons for HWs: 1) foreclosure, 2) tuition, 3) purchase of primary residence, 4) medical
expenses.
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Active Participants Only.
Exchanges
Key Insights
► In the prior 12-months, 10.5% of participants made an exchange.
► One reason for this long-term decline is the continued adoption of Target Date Funds (TDF).
► Only
> More1.6% of participants who held 100% of assets in TDFs made an exchange in the prior 12-months.
► See Target Date Fund Adoption slide for more.
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Exchanges In/Out of Equities
Key Insights
► This figure tracks the percent of exchanging participants who had net exchanges into equities, minus the
percent of exchanging participants who had net exchanges out of equities in each 3-month period.
► Negative
figures indicate that more participants exchanged out of equities than into equities during the
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period.
► Exchanges in/out of equities largely track the movements of the equity markets.
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Participant Demographics – Age Wave
Key Insights
► The median age for participants was 45.5, up from 44.3 ten years prior.
► The median tenure for active participants is 7.4 years, while the mean tenure is 10.2 years.
► The
median salary for active participants is $65,600, while the mean salary is $90,400.
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Active Participants only for tenure and salary figures.
Important Additional Information
Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses.
For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it
carefully before you invest.
As with all your investments through Fidelity, you must make your own determination whether an investment in any particular
security or securities is consistent with your investment objectives, risk tolerance, financial situation and your evaluation of the
security.
Dollar cost averaging does not ensure a profit or protect against loss in a declining market. For the strategy to be effective, you
must continue to purchase shares in both up and down markets.
Personal Rate of Return (PRR): A measure of portfolio performance that indicates the return earned over a given time period.
Personal rate of return used in our analyses (unless otherwise noted) is time weighted, which means it was calculated by
subtracting beginning market value from ending market value and dividing by beginning market value for each sub-period. A new
sub-period began each time there was cash flow. The sub-period returns were then geometrically linked together to calculate the
return for the entire period. All returns shown are historical and include change in share value and reinvestment of dividends and
capital gains, if any. Risk is defined as the volatility of historical portfolio returns; it measures the average deviation of a series of
historical returns from its mean. Large values of risk indicate large volatility in the historical return series, and small values indicate
low volatility.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political,
> Moremarket, or economic developments.
regulatory,
Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Past performance is no guarantee of future results.
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Important Additional Information
Fidelity Freedom Funds® are designed for investors expecting to retire around the year indicated in each fund's name. Except for
the Freedom Income Fund the funds' asset allocation strategy becomes increasingly conservative as it approaches the target date
and beyond. Ultimately, they are expected to merge with the Freedom Income Fund. The investment risks of each Fidelity Freedom
Funds® change over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity
and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield, small cap
and, commodity-related, foreign securities. Principal invested is not guaranteed at any time, including at or after their target dates.
For plan sponsor and institutional use only.
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Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917
668559.4.0
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