Mirroring the growth seen from private 401(k) retirement plans, savings programs for government and education employees have experienced a resurgence.

But while products from specialized firms and insurance companies have dominated this sector of the retirement market for years, many banks are now jumping in with what they say is an edge: bank-run mutual funds.

"If you have a viable and competitive mutual fund complex, there is no reason why you can't compete against these insurance providers," said Richard L. Foersterling, first vice president and director of trust products and business development for NBD Bancorp, Detroit.

On Sept. 26, Detroit-based NBD agreed to market its Woodward family of mutual funds jointly through 403(b) retirement plans sold by the Legend Group to schools, universities, and nonprofit companies.

Like the more widespread and better-known 401(k) plans, public-sector counterparts such as 403(b) plans and 457 retirement plans for government employees allow participants to save money for retirement on a tax-deferred basis. However, until recently most of the public plans used fixed annuities.

But in the past few years, a push by heavyweight mutual fund companies such as Fidelity Investments, T. Rowe Price, and Kemper Corp. has made mutual funds the investment of choice for many public-sector organizations.

"Most of the new money we're seeing in these plans is going into equities, whether it be through mutual funds or variable annuities," said Robert Wuelfing, president of Access Research, Windsor, Conn. "Mutual funds today are really considered a requirement, and not an option, in these markets."

Tax-deferred 403(b) plans grew 54% between 1990 and 1994, to more than $285 billion of assets, according to Access. Money in the government retirement, or 457, plans flowed in even faster during the same period, rising 62% to $47 billion.

Mr. Wuelfing said recently the banks had stepped up efforts to grab a share of the public-sector market. Among the big players are California thrifts such as Great Western Financial Corp., Chatsworth, and SacramentoSavings and Loan, he said.

This summer, State Street Boston Corp. was hired to administer retirement funds for two of California's largest public employers.

State Street services 403(b) plans for the California State Teachers Retirement System, which has 500,000 participants. The bank's other big client is the California Public Employees Retirement System, with 200,000 participants in its 457 plan.

The plans have gotten off to a good start though assets are still low, said a spokeswoman for State Street. The bank has just started a broader campaign to bolster participation and promote greater savings among public employees, she said.

Like NBD, First Union Corp. in June signed on with Legend Group, Palm Beach Gardens, Fla., to market the bank's Evergreen Funds family through 403(b) retirement plans offered to schools and universities.

Despite the fervent activity, banks are still only a tiny fraction of a market dominated by a few huge players, Access' Mr. Wuelfing said.

One company, Teachers Insurance and Annuity Association/College Retirement Equities Fund, New York, controls 40% of the 403(b) market, with more than $142 billion of assets under management. Variable Annuity Life Insurance Co. and Fidelity control much of the rest, according to Access.

A great deal of the assets in the government, or 457, retirement plan market is administered by only a handful of insurance companies, including Aetna Corp., Equitable Co., and Metropolitan Life Insurance, to name a few.

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