A division of Indiana's Old National Bancorp is collaborating with American United Life Insurance Co. to help the insurer provide 401(k) plans.

Last month, $313 million-asset Merchants National Bank of Terre Haute started providing trust services for American United, an Indianapolis-based insurer. While handling trust administration for 401(k) accounts, the bank said it hopes to gain experience in the lucrative market of retirement planning before diving into the business itself.

"We see this as a learning experience," said Colleen Chestnut, trust officer for Merchants. "We will offer (401(k) plans) in the future, but right now we're just not equipped to handle it."

Merchants does not market any 401(k) retirement plan services of its own at this point, but the bank does handle trust administration for a portion of the $800 million of corporate pension plans that Old National administers, Ms. Chestnut said. She declined to say how much the bank handles in retirement plan business, but said Merchants represents about 18 companies in the Terre Haute area.

Normally, companies wanting to set up 401(k) plans for employees have to find a bank or a thrift to act as trustee. To cut the search short, American United approached Merchants to be the exclusive trustee for 401(k) plans that it markets to plan sponsors.

"In order to keep pace with the marketplace we thought it would be wise to help our customers find a trustee," said Audrey Woods, pension training director for American United. "We wanted it to be one-stop shopping for them."

Life insurance companies have been in the 401(k) business for years and have garnered a 34% share of the market, according to Access Research, Windsor, Conn. Banks for their part are just starting to make their presence known in the business and, more often than not, banks have turned to mutual fund companies for advice, according John Mulligan, president of Retirement Plan Strategies, a consulting firm in Braintree, Mass.

"This is a case of a bank that wants to get into the 401(k) market, but really doesn't know how it wants to do it," Mr. Mulligan said.

One reason for delaying its entry into the 401(k) arena is a lack of record-keeping capability, said Merchants' Ms. Chestnut. The movement of the retirement market toward daily valuation has made record-keeping all the more important for plan customers, she added.

For now, the bank is content with reviewing the record-keeping reports and audits of American United, Ms. Chestnut said.

"This is a good opportunity for us to learn the business, and within the next 10 years we'll probably unveil something of our own."

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