BOSTON, November 30, 2005 - Despite the recent spate of high-profile pension bankruptcies, new research sponsored by Fidelity Management Trust Company suggests that defined benefit (DB) funding levels have actually improved steadily over the last three years, and that the majority of plan sponsors remain committed to offering DB, at least for the near-term.

"Fully 96 percent of plan sponsors surveyed indicated that they were very or somewhat likely to continue to offer a DB plan to current participants over the next five to 10 years," said Drew E. Lawton, president and chief executive officer, Fidelity Management Trust Company. "Underscoring their ongoing commitment to DB, plan sponsors further reported some improvement in pension funding levels over the last three years. While only 13 percent of plans were 91 to 99 percent funded in 2002, for instance, that number increased to more than one out of every four U.S. pension plans by 2004."

Overall Pension Funding Levels Improving

According to the Fidelity research, which studied a representative sample of 189 plan sponsors with assets ranging from $200 million to more than $10 billion, corporate plans, in particular, are making significant progress. The survey revealed that the average corporate pension plan was fully funded (100.6 percent) during 2004, an increase from 97.6 percent in 2003.

At the same time, the number of under-funded corporate plans also dropped steadily, decreasing from 69 percent of plans in 2002 to 50 percent in 2004. Interestingly, over-funded pension plans also climbed during the same three-year period, increasing to 32 percent in 2004, from only 21 percent of plans in 2002.

Plan Sponsors Committed to Offering DB Plans for Next Five to Ten Years

In addition to improved plan funding, the survey results underscore a commitment among plan sponsors to continue to offer DB plans to both new and existing employees. The vast majority (88 percent) reported that their pension plan is currently open to all employees, with a smaller, but still significant percentage (75 percent), indicating that they are also very or somewhat likely to continue to offer a DB plan to new participants as well.

In fact, only four percent of public plans and 18 percent of corporate plans reported either freezing their plan to new entrants, or closing the plan to all employees. Of those respondents which have frozen or closed their DB plan, many (40 percent) have converted to a cash balance hybrid plan which remains open to all employees. Public organizations, not surprisingly, were most committed to the traditional pension structure, with only two percent opting to convert to a hybrid plan.

"Plan sponsors see DB plans as valuable recruiting and retention vehicles," explained Lawton. "In fact, almost half of survey respondents cited employee retention as their primary driver for continuing to offer benefits such as a DB pension plan, with the vast majority (96 percent) believing that employees over 45 years of age prefer DB plans to other retirement vehicles. In addition to the more practical business benefits, 17 percent also indicated that they continue to offer DB plans out of an altruistic sense of duty towards their employees, while 20 percent of public plans see DB as a legacy obligation."

Solid Investment Returns, Best Practices, Help Close the Funding Gap

Committed to continuing to offer DB, at least for the near-term, plan sponsors are relying upon a variety of best practices to help bolster plan returns. In addition to disciplined contribution policy, the Fidelity study points to plan manager selection, rebalancing and diversification as key components of closing the funding gap.

"Despite the market downturn from 2000 to 2002, the median DB plan sponsor actually outperformed the major indices for the five years ending December 2004, returning 4.39 percent, versus index returns of only 3.23 percent," said Lawton, "which suggests that plan sponsors have been successful in both plan manager selection and overall plan management¹.

Survey respondents also reported using disciplined rebalancing to protect DB plan assets from market and interest rate volatility. Better performing plans stated that they typically rebalance back to a target range, as opposed to a specific target, allowing their out-performing managers to add value for longer periods of time. Above-median performers also tend to rebalance less often than average, reallocating assets on a quarterly or even less frequent basis.

According to the Fidelity survey, the top 10 highest performing plans were also more diversified than the average plan, returning an average of 11.93 percent over the five year period ending December 2004. The bottom 10 performers, by comparison, were less diversified and returned an average of only 1.38 percent, underscoring the importance of asset allocation in protecting against market fluctuations and in ensuring pension plan returns.

About Fidelity Management Trust Company

Fidelity Management Trust Company manages assets for approximately 550 institutional clients worldwide, including corporate and public retirement funds, endowments, foundations and other institutional investors. The company offers institutional asset management for active and risk-controlled equity, fixed-income, international equity, real estate and alternative disciplines such as market neutral. As of October 31, 2005, the company's total assets under management were $103.5 billion.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $2.3 trillion, including managed assets of $1.1 trillion as of October 31, 2005. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to more than 20 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, one of the largest mutual fund supermarkets and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

Fidelity Management Trust Company²

82 Devonshire Street, Boston, MA 02109

¹As reported by respondents to Fidelity's 2004 survey of defined benefit plan sponsors, "The Defined Benefit Dilemma."

²Fidelity Management Trust Company is a Massachusetts state-chartered trust company primarily engaged in providing investment management, fiduciary and related services for corporate and public retirement funds, endowments, foundations and other major institutions worldwide.

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