Bank of America headquarters inCharlotte, North Carolina. (Photo: AP)

Retirement savers in 401(k) plans administered by Bank ofAmerica will have access to a new suite of banking and investmentbenefits.

The U.S.'s second largest bank by assets, according to S&PGlobal Market Intelligence, also administers 30,000 retirementplans. The 5.6 million participants in the mostly large and mega planswill have access to retail banking options and reduced fees onmortgages if their employers opt to offer the benefits.

Coined Financial Life Benefits, the product launch also includesexpanded access to on-site benefits specialists, and the network ofMerrill Lynch financial advisors.

"We're already investing heavily in our existing retirement andHSA capabilities and our digital platforms and guidance offering,"said John Quinn, head of institutional retirement products andplatforms at Bank of America, in an interview.

"Now, a company can work with us to offer employees abroad-based banking and investment program, where by they getaccess to a range of discounts and advantages," he added.

BofA says no cross-selling conflict with ERISA

Many of the largest banks in the country have spun off theirrecordkeeping units over the past decade.

Wells Fargo sold its 401(k) administration arm in a deal thatclosed last year. So did PNC Bank. JP Morgan spun its off in 2014.Charles Schwab still holds its recordkeeping unit, but its retailbanking arm, Schwab Bank, has limited retail banking optionsoffered to its brokerage customers.

"We think we are the only recordkeeper that can offer thesetypes of banking benefits," said Quinn.

The novelty of BofA's launch is emblematic of a 401(k)recordkeeping industry that is under considerable fee-compressionpressure and an ever-increasing competitive landscape that isforcing providers to distinguish product offerings.

A company spokesperson said the new Financial Life Benefitssuite of options is geared toward existing 401(k) corporate clientsof the bank.

But the ability to channel discounted retail banking accountsand home loans to the average 401(k) saver is no doubt intended toattract plan sponsors that work with other recordkeepers.

As it stands, Bank of America has corporate bankingrelationships with 40 percent of the country's mid-sized, large,and mega corporations. By the bank's estimates, 25 percent of theemployees in those companies are already retail customers at Bankof America.

For corporations that already tap Bank of America as itsrecordkeeper, Financial Life Benefits offers the bank a way to growits mortgage business to millions of potential new retail clients."We obviously would like to do business with them," said Quinn.

While the extension of reduced mortgages to 401(k) savers may benew to the retirement world, retirement providers' desire tocross-sell product lines is not.

That strategy has come under scrutiny in at least three recentsettlements in 403(b) lawsuits.

Of the non-monetary settlement provisions in a lawsuit againstVanderbilt University's defined contribution plan, the sponsor wasinstructed to inform the plan recordkeeper that it can't useparticipant data acquired in the course of providing retirementservices to "market or sell products or services unrelated to thePlan unless a request for such products is initiated by a planparticipant," according to court documents.

The question of whether plan data, or the informationrecordkeepers collect on retirement savers, is considered a "planasset" is an emerging legal question under the Employee RetirementIncome Security Act.

ERISA prohibits "any transfer to, or use by or for the benefitof a party in interest, of any assets of a plan," the statutesays.

The answer is far from settled. But Quinn said Bank of Americahas set up its Financial Life Benefits suite so that it is not inconflict with ERISA.

"Everything is optional. Companies are under no obligation tobundle the offerings. They can pick the product options they want.There is no connection between the Financial Life Benefits suiteand enrolling in a 401(k) plan. They are separate programs withseparate contracts," explained Quinn.

"Under the way the program was constructed, there is no ERISAconflict," he added.

Variable take-up rates so far

About 50 corporate plans have already on-boarded the new bankingand investing options, said Quinn.

Roughly 20 percent of the participants are already Bank ofAmerica retail clients. Those that opt in get free daily banking,and access to reduced mortgage rates, if they set up a savingsaccount with the bank.

"There has been a bit of variability in the take-up rates sofar, but the results have been positive," he said. "It all comesdown to how well the sponsor is communicating the program. Some aredoing so more effectively than others."

As for the question of data, and whether it may or may not be aplan asset under ERISA, Quinn said implementing Financial LifeBenefits does not require new data aggregation or sharing.

"Implementation of the program is extraordinarily simple," saidQuinn. "There is no heavy lift for participants or employers."

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