IBB's 401(k) plan gets quick start out of the chute

Northwestern Financial Review, Feb 15-Feb 28, 2005

Community banks served by Independent Bankers Bank of Springfield, Ill., have a new option for offering 401(k) plans to their employees and commercial customers. Last July, Independent Bankers Bank became the first bankers' bank in the country to offer a 401(k) retirement savings plan; fourteen banks have already put the plan in place and 40 more are in the process of switching to the plan, which the bank has dubbed the Independent Bankers' Legacy 401(k) Plan.

The bank is offering the plan through an arrangement with Alliance Benefits Group of Peoria, Ill., a third party administrator. The product is the latest offering from the bank's trust department, which was created in September 2003. "We've gotten a lot of interest in this," said David Brooks, who is executive vice president at the bank and CEO of the trust division.

One of the attractive features about the plan is the price. Brooks said the Legacy plan can save 60 percent on administration fees compared to typical plans. In addition, Legacy credits 100 percent of the plan's 12(b)(1) fees back to the plan. All the banks that have signed up so far had 401(k) plans already and are replacing them with the Legacy plan.

Independent Bankers Bank developed the product for banks and their employees, but after showing the product to potential customers, Brooks said it began to get questions about whether a bank could offer the product to its commercial customers. Brooks said Independent Bankers Bank made some adjustments - including a provision for the servicing bank to earn a fee - and now offers the plan for banks to use or to market to their own customers.

"Most of the banks simply have not had a product like this available to them," Brooks said. Independent Bankers Bank serves 500 banks in Illinois, Indiana, Michigan and Iowa. Brooks said the average bank has $80 million in assets and is located in a town of 3,000 to 5,000 people. "Most don't have the asset base to drive an in-house product like this," Brooks said.

Independent Bankers Bank pulled together 14 mutual fund investment options for the plan. Brooks said the trust department evaluates those options quarterly. So far, the most popular investment option is a Met Life Stable Value Fund, which allows people to move money in and out of the account on a daily basis. At the end of January, the fund was yielding 4.7 percent.

Brooks said his department evaluated numerous investment options and made selections based on performance, management team, cost, and track records, among other factors.

Individual participants in the Legacy 401(k) plan get access to their accounts through a web site maintained by Alliance Benefits Group. "Customers can change their asset allocation every day, if they wish," Brooks said. The web site, which offers account information via a personal identification number, has proven to be a significant benefit. Brooks said that Independent Bankers Bank implemented the Legacy plan for its own employees before offering it to anyone else. "We have 64 employees, and on the first day the plan was in effect, we had 276 hits on the web site," Brooks explained. "People really like this because they have not had this available before."

Independent Bankers Bank serves as the trustee of the plan, and handles all the up-front set up. The plan follows a full disclosure policy regarding revenue sharing. Any payment from funds held in the plan is disclosed and all payments are credited back to the plan to keep expenses as low as possible.