Skip to main content

You are here


Two Paths to Success

Third party administrators are, at their core, all about service. It’s their bread and butter, their raison d’etre. So while any employer seeks and values engaged employees, they are even more desirable for service providers, since their commitment and energy spell better service for clients. And in the process, of course, a better bottom line.

Like any employer, there are different ways in which a TPA can build an engaged workforce. One of them is to give employees a stake in the enterprise via employee ownership and an employee stock ownership plan (ESOP). Another way: Be part of a multiple employer plan (MEP). Here’s a look at two TPAs that chose those two paths.


According to the National Center for Employee Ownership (NCEO), the majority of the nation's 4,000 employee-owned companies have ESOPs. The NCEO estimates that as of 2015:

  • there were approximately 7,000 ESOPs covering 13.5 million employees;

  • up to 5 million employees participate in 401(k) plans primarily invested in an employer’s stock;

  • approximately 11 million employees buy shares in their employers through ESOPs; and

  • around 28 million employees participate in some kind of employee ownership plan.

One TPA that provides an ESOP is TSC, a TPA based in Edina, Minn. TSC established its ESOP in 1997. The firm conceives of ESOPs as means to invest primarily in the stock of the ESOP sponsor, and notes that ESOPs are often used to help with buyouts or successor management. And according to Matthew H. Slyter, TSC’s VP of operations, that was why TSC originally created one for itself. “The primary reason was to buy out the founder of the business,” says Slyter.

But TSC also believes that ESOPs are a way to establish an “ownership culture.” Slyter reports that TSC’s ESOP offers a way for employees to share in that ownership. “It’s an employer contribution-funded plan exclusively,” he reports.

TSC’s website says that as an employee-owned company, it is “committed to establishing a long-term relationship with each of our clients and to providing every client with the personalized service and year-after-year reliability that they have come to expect.”

So how does TSC’s ESOP figure in meeting that commitment?

Slyter reports that TSC succeeded in seeking to establish a way to tap employee potential. The ESOP “does significantly contribute to the spirit and culture of the organization that does have an impact on our overall performance as a company and service level to our clients,” he says.

The benefits of TSC’s ESOP are not limited to serving its clients, according to Slyter. He reports that it benefits the company, too. For instance, he says that it is an effective tool in recruiting and retaining employees. “It’s a great story to tell in an interview and ongoing employees love to see their account and the company’s value rise,” says Slyter.

It’s been good for employees who are already on board as well, according to Slyter. He says that the response to the ESOP is “very positive.” More important, Slyter says, “Having an ESOP has fostered a work culture that is very supportive of each other and engaged in doing a great job for our clients.”

And, says Slyter, TSC’s ESOP has been an effective means to transfer ownership to employees. “It’s like having a built-in successor plan. Coming up with equity to buy the business is a non-factor anymore as the ESOP solves for that. The trick is identifying key personnel that can take over the company when current leadership retires. That has gone well for us,” he says.

MEP Ownership

Multiple employer plans (MEPs) — single plans utilized by two or more employers — are a means used especially by trade associations and professional employee organizations to provide employees with opportunities to invest for retirement like those available to employees of large companies. Pentegra, another TPA, is part of an MEP.

Pete Swisher, Pentegra’s national sales director, notes that when the firm was established in 1943, “there was no pension industry, and very few pensions. The Federal Home Loan Bank wanted a retirement program for employees, and we were created to provide it. The original employees of this defined benefit MEP were the seed that became Pentegra Retirement Services.”

Pentegra itself is “100% owned by a $3.2 billion multiple employer defined benefit plan,” according to Swisher, and is “a for-profit corporation that is a wholly owned asset of a DB MEP.”

Pentegra’s reason for being, and the way it functions, also serve Pentegra itself — and in a happy circle, in the process boost its efforts to serve its clients. “Our history, our ownership structure, our governance by a volunteer board made up of our customers, and the ethos that this creates are incredibly meaningful to us. It helps us attract great people,” says Swisher.

And like TSC, Pentegra also has realized a positive effect on its broader mission. Reports Swisher, “Our unique structure gives employees confidence about why we come to work — we have a mandate from above to do great work at a reasonable price. Our owners want great service, first and foremost.”

This article appeared in the Winter 2017 edition of Plan Consultant magazine, which can be viewed here.