A leading mutual fund company is claiming success with a new cut-rate 401(k) service it sells in cooperation with banks.

Federated Investors, Pittsburgh, says the new LifeTrack service has attracted $135 million of assets since it was launched six months ago.

In all, 57 banks now sell Federated's version of the tax-deferred retirement savings plans. Sixteen of these banks began selling the service in the fourth quarter of 1994. In this period LifeTrack also gained $35 million of assets, according to a company spokesman.

Among the new clients are Bank South, Atlanta; Glenview (Ill.) State Bank; Dai-Ichi Kangyo Bank of California; and Peterborough (N.H.) Savings Bank.

Stephen P. Cronin, Federated's director of trust marketing and sales, said LifeTrack has reversed what had been lackluster sales by Federated of 401(k) administration services through banks.

All of the banks that now sell Federated's 401(k) administration services use LifeTrack. Furthermore, the number of banks that do so has quadrupled since LifeTrack was introduced.

When Federated works with banks on 401(k) services, it handles shareholder record keeping and other back-office duties. Federated also includes its own mutual funds as investment options, though in some instances it will support other funds.

Banks are responsible for selling the 401(k) services to companies, which offer the plans as a benefit to their employees. Banks also act as trustees for the plans, responsible for insuring that rules are followed and employees are properly treated.

The key to the success of LifeTrack is an innovative fee-sharing arrangement, Mr. Cronin said. Namely, Federated pays banks a portion of the fund management fees, ranging from annual payments of 25 basis points to 100 basis points of the assets invested.

In some instances, banks can use their share of the fees to reduce or eliminate trustee fees charged to employers, Mr. Cronin said. They can also use their share to cover administration fees charged by Federated.

In these instances, all 401(k) expenses are covered by the fund management fees that are deducted from the employees' mutual fund returns. Previously, Federated had no such fee-sharing arrangement.

The Federated spokesman said most banks will concentrate on selling LifeTrack to small and midsize companies. Mr. Cronin said Federated provides banks with substantial help in the sales process.

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