Hartford Life of Hartford, Conn., is expanding its 401(k) small-business operations, a niche that has been largely ignored by many other retirement savings plan providers. So far, the strategy has worked for Hartford Life. It expanded its 401(k) business by 55% in 2001, with sales of $850 million.

"Generally we're responding to an acute need in the small-case market," said Bruce Ferris, VP and director of sales and marketing at Hartford Life. "Competitors have abandoned the market, to our advantage."

But there is a reason those competitors have avoided the smaller markets, said Geoffrey Bobroff, president of Bobroff Consulting in East Greenwich, R.I.

"Record keeping is expensive, and the risk of spending a lot of money to build up a plan, only to have the company switch to a new provider is quite high," Bobroff said. "There is no loyalty in the business, so why spend the energy on it? Why build up the business just to have to compete for it?"

However, Bobroff added, the large-case marketplace is jam-packed, and there isn't much room left for growth in mid-size plans either, so Hartford Life has gone to the best remaining place to push its product.

"Most companies with over 5,000 employees already have a plan, and 70% of the mid-market, which is defined as companies with 1,000 to 5,000 employees, have plans as well," Bobroff said. "But there aren't a lot of plans for the smaller guys."

Ferris admitted he was aware of the danger of losing a small-case 401(k) client once a plan has been established. "We're confident that if we offer the best service, wholesaling and products, we have the ingredients for success," he argued.

"We have a 96% retention rate, and it's because of our service and our flexibility," added E. Thomas Foster, Hartford Life's national spokesman for the qualified retirement plan market. "For instance, on one of our 401(k) plan platforms, we do not have a proprietary fund requirement. With many providers, a certain percentage of the investments have to go into the proprietary fund. That's a selling point for us."

Robert Donohue, a vice president and senior analyst at Moody's Investors Service in New York, said Hartford Life's 401(k) business fits well with its group life business.

"It dovetails right into it," Donohue said. "They're best known for their variable annuities, but they're doing much more than that. They have very good growth in mutual funds. They are well positioned in group life. They've recently moved into college savings, and they're growing the 401(k) business quickly."

Hartford Life began offering mutual funds in 1996 and selling them through banks. It launched its first 529 college savings plan last month. This product, too, is being made available through 50 banks nationwide.

Ferris said banks are also a big part of the company's distribution of 401(k) plans, though the firm does not break out sales by channel.

"How many small-business customers do banks have?" Ferris said. "They have many. We also already have very good relationships with banks, so those are two reasons why banks are a large and growing channel for us in 401(k) plans."

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