BOSTON, April 12 (Reuters) - Mutual fund company Fidelity Investments on Monday said it will handle the administration of health, pension and other personnel benefits for Bank of America Corp. (nyse: BAC - news - people), the second-largest U.S. banking company.
Fidelity, whose fast-growing benefits-management business already contributes one third of its revenue, said it will administer the services for 250,000 Bank of America employees and retirees. Terms of the seven-year contract were not disclosed.
Boston-based Fidelity, which is privately held, had handled the administration of key benefits for Boston-based FleetBoston Financial Corp., which was recently acquired by North Carolina-based Bank of America.
Bank of America will continue to use California-based Exult Inc. (nasdaq: EXLT - news - people) for some services like temporary staffing and accounts payable, a bank spokesman said. Exult's stock tumbled 21 percent in trading on Nasdaq to $4.93 after the news.
For Fidelity, which made its reputation with stock picking, the less glamorous business of providing administrative services has become more important as many corporations now let someone else handle workers' payroll and benefits records.
The company can use many of the same computer systems it uses to administer its 401(k) plans to also manage other benefits programs.
"This contract firmly establishes Fidelity as the leading provider of integrated HR and benefits services to employers," Peter Smail, president of Fidelity Employer Services, said in a statement.
Last year, Fidelity added 1,175 new clients, including General Motors Corp. (nyse: GM - news - people), and 2.6 million new employees to its human resources and benefits outsourcing service.
To handle the Bank of America contract, Fidelity said it expects to create 375 new jobs in the Boston area.
"By working with Fidelity, our associates will have access to leading-edge technology that allows us to provide them with a more integrated service environment and eliminate many third-party providers," Steele Alphin, Bank of America's chief personnel executive, said in the statement.
Most services will be activated in 2005, and the transition to Fidelity platforms will be completed by January 2006, Fidelity said.
Copyright 2004, Reuters News Service