(Bloomberg News) Retirement savings in the U.S. may swell to $4 trillion over the next four years and the nation's largest banks are angling for a bigger share of that money.

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. are adding staff, creating easier-to-use technology and competing on fees in an effort to win more of the $2.9 trillion Americans held in 401(k)s savings plans as of September from traditional account managers such as Fidelity Investments and Vanguard Group Inc. That number may reach $4 trillion by 2015, according to Cerulli Associates, a Boston-based research firm.

"It's one of the top priorities," at JPMorgan, said Michael Falcon, whose job as head of retirement in the U.S. and Canada for the bank's asset management unit was created in January. The New York-based company is the second-largest U.S. lender by assets behind Bank of America.

The competition may mean lower costs and more choices for employers and savers, said Laura Pavlenko Lutton, an editorial director in the mutual-fund research group at Chicago-based Morningstar Inc. Greeting-card seller Hallmark Cards Inc. switched its plan to JPMorgan last year to reduce costs and improve services for employees, said Tresia Franklin, head of benefits and compensation for the Kansas City, Missouri-based company.

Participants in the most expensive plans pay more than 6% annually, while the lowest-cost ones charge less than 10 basis points, according to Ryan Alfred, co-founder of San Diego- based BrightScope, which rates plans. A basis point is 0.01 percentage point.

Fast-Growing

Over the past two decades, 401(k)s have become the fastest-growing retirement-savings option for U.S. workers, according to the Washington-based Employee Benefit Research Institute. They're the most common type of defined-contribution plan, which lets employees defer a portion of their salary into an investment account and generally not pay taxes on the money until it's withdrawn during retirement.

These assets tend to be "sticky money," said David Wray, head of the Profit Sharing/401k Council of America, which is appealing to banks because of on-going fees and contributions to the accounts. The banks also may get an opportunity to pitch their proprietary mutual funds as plan investments and sell products such as individual retirement accounts to workers who leave their jobs and want to roll over their money.

Banks may have to overcome the perception that mutual funds aren't their expertise, said Morningstar's Lutton. "Their main business is taking deposits and making loans, and many have gotten into the mutual-fund business as a way to grab wallet share of their customers," she said.

Fund Returns

The average 15-year return of mutual funds including stock, bond, alternative and balanced investments from Wells Fargo and JPMorgan as of January was about 6%, Morningstar data shows. That compares with about 7% for mutual-fund managers Fidelity, Vanguard and Baltimore-based T. Rowe Price Group Inc. Bank of America doesn't offer its own proprietary mutual funds, according to spokesman Matt Card.

Banks also will have to compete on investment management fees with firms including Vanguard, which pioneered low-cost index investing for individuals. The Valley Forge, Pa.-based mutual-fund manager charged an average 0.19% for its target-date funds, according to a 2010 report by Morningstar. Target-date funds are the most popular investment in 401(k) plans for workers who don't choose their own lineup.

The 0.62% average fee for Wells Fargo's target-date series was more than three times Vanguard's cost. Fidelity's expense ratio was 0.71% and JPMorgan's, 0.85%, according to Morningstar.

Held Hostage

"There are a lot of individuals who are held hostage to a bunch of mediocre, or worse, funds," in their 401(k) plans, particularly among plans that only offer investments from their recordkeeper, said Adam Bold, founder of the Mutual Fund Store, a registered investment advisor based in Overland Park, Kan., with $6.1 billion under management. "Over the last few years there's been a trend toward more plans giving open platforms, where investors have more choice," he said.

The banks' push for more of workers' savings may mean less revenue for the top-three 401(k) administrators, Fidelity, Aon Hewitt and Vanguard, which together had 43% of the market at the end of 2009, compared with a combined share of less than 10% for Bank of America, JPMorgan and Wells Fargo, according to Cerulli.

''Upping the Ante''

"We've been upping the ante on retirement," Andy Sieg, head of retirement services for Bank of America Merrill Lynch said in a January interview at Bloomberg headquarters in New York. The Charlotte, N.C.-based bank added about $88 billion in 401(k) assets from its 2009 acquisition of Merrill Lynch, according to Card, the bank spokesman. The bank has been beefing up its retirement-services staff with executives brought over from Fidelity and other rivals, including Rich Linton, who had overseen Fidelity's adviser retirement group and now has a similar role with Bank of America.

JPMorgan roughly doubled its sales force dedicated to retirement plans in the last year, according to Falcon. Wells Fargo has been adding new features that allow employers to more closely track the savings and investing behaviors of their employees, said Laurie Nordquist, director of Institutional Retirement and Trust for the San Francisco-based bank.

Banks are searching for new ways of making money as losses on mortgages and regulation on fees have limited their revenue sources, said Terry Moore, managing director of the North America banking practice for Accenture Plc, a consulting firm based in Dublin.

Interest Income Declines

Interest income for the largest 25 U.S. banks was down 15% in 2010 compared with 2007, Moore said. Regulation requiring consumers to opt in for overdraft checking protection will cost banks an estimated $5.6 billion annually, according to Pleasanton, Calif.-based Javelin Strategy & Research.

Administrators of 401(k)s are paid for their recordkeeping service, which includes sending out account statements and other communications to participants. They also may make money from investment-management fees if their mutual funds are offered in a plan and through an arrangement with third-party fund providers known as revenue-sharing.

Revenue-sharing, where a mutual-fund company passes some of the fee revenue it earns back to a plan's recordkeeper, "is a widespread practice," a January study by the U.S. Government Accountability Office found. Compensation can range from 5 basis points to 125 basis points from those arrangements, the study found.

Paying Attention

Employers are paying more attention to fees and investment choices in their 401(k)s than ever before, said Wray of the Profit Sharing/401k Council of America, a Chicago-based nonprofit representing employers that offer retirement plans. That scrutiny may allow some banks to win new business if they offer lower fees, better investments or both, he said. Bank of America, JPMorgan and Wells Fargo would not disclose the average fees for plans they serve.

Hallmark moved its 401(k) administration to JPMorgan last year after shopping its plan around in 2009, said Franklin. JPMorgan had the best price for the services Hallmark wanted, said Franklin. Hallmark has 16 funds in its plan including two JPMorgan funds, Franklin said. She declined to disclose how much they pay the bank in fees or quantify their savings.

The plan was previously administered by Aon Hewitt, which declined to comment on the change or its fees, according to spokeswoman MacKenzie Lucas in an email.

''Brain Transplant''

"I kind of compared it to doing a brain transplant," Franklin said of the switch. "It was a critical project for us. Our vendor is really in many cases the face of Hallmark for the employees." Hallmark was able to streamline its automated files, shift employees from paper to electronic statements and re-emphasize its online investment-advice feature for participants through the change, Franklin said. The company has about 13,000 workers in its 401(k) plan with $2.4 billion in assets, she said.

Employers who sought bids on their 401(k)s in the last year were able to realize average cost savings of 31%, said Institutional Investment Consulting Managing Director Michael Kozemchak, based on the plans his firm works with. Kozemchak, based in Bloomfield Hills, Michigan, works with plan sponsors that are choosing a 401(k) administrator.

Not all banks are rushing into defined contribution plans. New York-based Citigroup Inc., the third-largest U.S. lender by assets, doesn't have a 401(k)-administration business.

Product Offerings

"At the end of the day servicing investment assets is probably not going to make or break any of the money-center banks," said Jeffery Harte, a Chicago-based banking analyst for Sandler O'Neill & Partners. Assets in 401(k) plans for both Bank of America and JPMorgan represented less than 10% of the banks' total assets of $2.3 trillion and $2.1 trillion, respectively, at the end of 2010. Wells Fargo's $158 billion in 401(k) assets at year-end was 13% of its total assets.

"It helps to round out their product offerings," Harte said. "And it probably enhances client relationships."

Wells Fargo added $6.2 billion in defined contribution assets during 2010 and Bank of America gathered an additional $14.5 billion in 2010. JPMorgan's recordkeeping assets rose by $10 billion last year. By comparison, the market increased by about $125 billion last year as of September, according to the Washington-based Investment Company Institute.

Comfortable With Competition

Fidelity, which dominates the business, is "very comfortable" with the increased competition, said James MacDonald, head of workplace investing for the Boston-based mutual-fund company. Fidelity administers 27% of all assets in 401(k) plans as of 2009, or three times more than its closest competitor, Aon Hewitt, according to Cerulli. Fidelity's client retention rate is 97% and it administers plans for General Electric Co., Microsoft Corp. and International Business Machines Corp., among others, according to BrightScope.

Aon Hewitt is helped by its "independent, unbiased" business model, said Alison Borland, retirement-strategy leader for the consulting and human-resources outsourcing firm. Aon Hewitt, a unit of Chicago-based Aon Corp., sponsors no investments of its own and doesn't accept commissions from mutual-fund companies, which allows it to offer lower-cost investment options than its competitors, Borland said.

Cross Selling

Many recordkeepers are aiming to capture new 401(k) clients so they can pitch additional products such as IRAs to those plans' employees, said Institutional Investment Consulting's Kozemchak. Some providers won't submit a bid for a company's plan unless they're granted "unfettered access to cross sell" other products to its participants, he said.

Cross-selling IRAs to employees is an "important source of income" for 401(k) administrators, the GAO report said. Fees on IRAs are typically 25 basis points to 30 basis points higher than fees on 401(k)s, and can be as much as 65 basis points higher, the report said. Participants in 401(k) plans often roll over their accounts to an IRA when they leave a job.

Employers, rather than administrators, generally are held responsible for making sure their 401(k) plans and investments operate in the best interest of their employees, said Ryan Gardner, principal of Windsor, Conn.-based Fiduciary Investment Advisors.

DOL Rule

That may change if a regulation proposed by the U.S. Department of Labor in October is adopted. The rule would apply a fiduciary standard to firms advising employers about which investments to offer and workers about what to do with their savings when they retire.

Bank of America's Sieg said his firm will be able to claim market share by winning the plans of corporate customers of its banking business.

"We have access to more client companies than any other firm in the marketplace," Sieg said. "We're just beginning to scratch the surface of that opportunity."