18 Things You Need to Know About ESOP Third Party Administrator RFPs

Making the decision to partner with a third party administrator (TPA) for your ESOP is the first of many choices you’ll make to find the best fit for your plan.

Traditionally, the best practice for evaluating prospective TPAs is sending out a request for proposal (RFP) to gather key information and data. The responses provide an apples-to-apples comparison that points to TPA frontrunners, or maybe your one ideal fit to meet short and long term ESOP administration and business goals.

RFP objectivity is critical to finding an ESOP TPA. However, it could lead to analysis paralysis. Sole reliance on RFP data could mean inadvertently overlooking value-adds TPA prospects bring to the table. In the end, you may be settling for a suitable third party administrator instead of a true TPA partner.

8 Things RFPs Tell You

RFP questions are generally geared towards fundamentals that introduce a TPA. The answers provide a snapshot of their history and capabilities — information that levels the playing field for assessment and guides some initial decisions.

While RFPs don’t necessarily follow a prescribed format, these 8 areas are typically covered in some fashion:

1. Service offerings and capabilities that demonstrate the TPA has a clear understanding of ESOP administration and the tools to meet comprehensive requirements, including compliance, reporting, recordkeeping, and participant education and communications.
2. Qualifications that speak directly to ESOP administration experience and successes.
3. Key personnel assigned to accounts to verify a dedicated and experienced team is in place to support plan administration.
4. References with similarly sized ESOPs that are willing to speak candidly about interactions and history with the proposed TPA broaden perspectives and reveal potential relationship positives and negatives.
5. Technologies and cybersecurity that underpin a comprehensive, secure, and managed system that protects sensitive information and seamlessly interfaces with client technologies. 
6. Fee structure that is reasonable, transparent, and supported by a documented fee schedule.
7. Financial stability proven through historical data such as profit and loss statements, and projections that show quantifiable, ongoing financial health.
8. Compliance, reporting, and accountability standards that adhere to legal protocols, documented internal processes, and include performance metrics that reflect successful, ongoing implementation.

As TPAs answer these questions, you’ll likely get a good grasp on what they offer, certain costs associated with plan administration, and a general idea of how they serve you. The collective knowledge may give you a basis for comparing respondents, and perhaps deciding on a TPA for your plan.

There’s nothing inherently wrong with choosing a TPA based on an RFP formula and other objective factors such as price. However, it should be done with caution since it’s often what RFPs don’t tell you that determines the value and fit of an ESOP administration partner.

10 Things RFPs Don’t Tell You (and What to Do About It)

TPAs interested in being true partners build relationships on intangibles that RFP paperwork cannot capture.

Supplementing the process with comprehensive in-person interviews and TPA site visits often reveal the characteristics that define the real value you’ll receive from a partnership, including:

1. Actual performance and service results that confirm the capabilities outlined in the RFP, and how expectations are met in day-to-day operations.
2. Cultural synergies that demonstrate how well the TPA’s values and working style aligns with the ESOP company culture.
3. Scalability and adaptability to changing needs, unanticipated challenges, and integrations with other plans that commonly arise in ESOP administration, and how that flexibility translates to practical solutions.
4. Long-term TPA stability that isn’t always fully addressed in an RFP, such as plans for development, industry involvement, and other future-focused initiatives.
5. Real-world onboarding that may be conveyed in theory in an RFP, but experiencing it firsthand sets clear expectations as to how this critical practice will be implemented within plan administration processes.
6. Client retention rates could be expanded beyond the referrals identified in the RFP, to include longer-term benchmark data on client satisfaction.
7. Unusual or complex plan management experience that can be confidently applied to extenuating circumstances, should the need ever arise.
8. Continuous improvement strategies that go beyond the current-state offerings detailed in an RFP to how the TPA invests in leading-edge education, advancements, and innovation.
9. True cost of services that may be readily reflected in the RFP, such as additional charges for particular services or other add-on fees.
10. Level and quality of ongoing support expected and maintained within ESOP administration, beyond implementation.

Reaching out to have discussions with prospective TPAs is more than a formality. It’s your chance to gain insights that create a full picture of how — and how well — your ESOP plan will be administered.

An ESOP third party administrator is a pivotal business strategy in advancing company goals and promoting employee ownership. Exploring what the full value of a TPA partnership looks like beyond the parameters of an RFP or the limitations of price comparisons is time well spent upfront for long-term benefit.

ESOP Partners is committed to cultural and operational alignment in TPA relationships that amplifies our ESOP expertise and adds value for our clients. If you’re considering an ESOP TPA or want to discuss the benefits of expanding your RFP process, reach out to the ESOP Partners team. We’re here and happy to help.