"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.