First Chicago Unveils Variable Retirement Plan

First Chicago NBD Corp.'s retirement services arm is gearing up to sell "nonqualified plans" to the bank's corporate clients.

Nonqualified plans enable companies to provide their executives with a place to invest for retirement in addition to traditional pensions and 401(k) plans. Companies that sponsor the plans buy life insurance policies, which invest in variable products such as mutual funds.

Last week, First Chicago said it will market nonqualified plans in conjunction with Hartford Financial Services Group. First Chicago will provide the investments; a unit of The Hartford will underwrite the insurance policies.

"This is a wonderful complement to our 401(k) as well as what we do in defined benefit," said David R. Kling, managing director for retirement services in First Chicago's investment management division. "It's a natural extension of our product line."

Dubbed First Choice Plus, the program was designed by International Corporate Marketing Group, a Florham Park, N.J., affiliate of Hartford Financial that distributes and administers life insurance and executive benefit plans in the corporate marketplace.

The First Choice program represents the first time International Corporate Marketing, which will administer the plans, has aligned with a bank to market variable life insurance. The policies will be underwritten by Hartford Life and Annuity Insurance Co., a Simsbury, Conn.-based subsidiary of Hartford Financial Services Group.

First Choice Plus comes with two options. Corporations that do not offer nonqualified plans can buy a Hartford group flexible premium variable life insurance policy called Pegasus Provider. The policy invests through subaccounts managed by First Chicago, Fidelity Investments, and Putnam Investments.

Corporations that already have nonqualified plans will be offered First Chicago's proprietary Pegasus mutual funds as an additional investment.

First Chicago's investment management arm will call on the bank's corporate customers to sell the product. The banking company's insurance agency and its private bank are also being trained to sell First Choice, Mr. Kling said.

Twenty First Chicago sales representatives with insurance licenses are promoting First Choice Plus.

"We're seeing a lot of interest from companies that either do not have a nonqualified plan or have one that is unfunded or inefficiently funded," he said.

There is an untapped, uneducated market for nonqualified plans, according to Michael White, a bank insurance consultant in Radnor, Pa.

"Not enough people buy it, not enough people know about, not everybody is being called on it," he said. "There is an opportunity for a bank that has a sizable commercial customer base."

Hartford and First Chicago are poised to pick up clients who want to give their high-ranking employees additional retirement vehicles, since recent laws limit contributions that well-paid executives may make to qualified plans such as pensions and 401(k)s.

"Corporations now want deferred compensation plans that offer enhanced investment opportunities and greater administrative capabilities," said Ronald J. Knape, a senior vice president of Hartford's International Corporate Marketing Group, in a prepared statement.

"They also want plans that allow participants to choose their own investments," he added. "Those trends have increased interest in the use of life insurance products and mutual funds as funding vehicles for nonqualified plans."

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