BPAS Responds to Surge in Demand for ESOPs/kSOPs Amid Market Disruptions

UTICA, N.Y., Jan. 30, 2025 /PRNewswire/ -- BPAS, a national provider of retirement plans, benefit plans, fund administration, and institutional trust services, reports an increase in demand for services in the kSOP marketplace as more third-party administrators exit the market.

An Employee Stock Ownership Plan (ESOP) is a qualified defined contribution plan that grants employees ownership in its company in the form of stock shares through a variety of approaches. These plans offer benefits to employers and employees, while unifying all stakeholders around the shared company mission. When employers merge an ESOP with a 401(k) plan, it forms a "kSOP." These programs are some of the most complex defined contribution plans in the industry, but offer powerful benefits that can drive employee wealth with additional tax advantages for all parties.

In recent years, many kSOPs have been divided between two service providers: a third-party administrator (TPA) that handles plan design, testing, and administration work for the kSOP; and a daily recordkeeper that tracks the 401(k) side of the plan. The providers typically run each side of the plan on different systems. This bifurcated environment is not ideal in terms of the user experience and places significant operational and compliance work on the TPA. As a result, some firms are exiting the TPA-only kSOP space.

There have also been transactions reported in 401K Wire that reveal a trend where one provider of an ESOP/kSOP  exits the business and sells its plans to another provider. This activity is causing many ESOP/kSOP plan sponsors to survey the marketplace for additional options.

"There is disruption among providers" said Susan Scherbel, CEO of Bellview Associates, a leading independent investment bank focused on the design and creation of ESOP and kSOP programs. "Employers want a way to convey a program that drives home the entire value of the company stock with a unified experience."

According to Paul Neveu, BPAS CEO, "In the last few quarters, we've seen some pretty significant changes in the kSOP space. When there are two or more service providers working with a plan, the company stock value may be missing from the website and reports, or posted only on year-end statements. We have seen many scenarios where the full plan is not conveyed properly in terms of the daily experience, which causes confusion among participants about how it all works together."

Scherbel said they advise using a KSOP as an effective way to handle distributions and diversifications. "They can be a real mess in mature ESOPs because of the assets involved. We need a path between the ESOP and the 401(k) so people can keep their benefits in the plan, just not always in the form of stock, and allow other participants to acquire additional stock through offsetting activities (buybacks) or share releases (from re-leveraged shares). Otherwise, you have cash that accumulates in the ESOP that can't be used for these goals. Using a kSOP also brings flexibility in the options for terminated participants that you usually don't have in a standalone ESOP."

BPAS has a unique advantage since the firm is vertically integrated, with recordkeeping, TPA services, clearing and custodial services under one roof. The company administers the entire kSOP on one system that includes TPA and custodial services with a single point of contact covering the entire plan. This service model simplifies life for plan sponsors and participants and provides a holistic user experience.

Company stock trading is a key consideration for many kSOP plan sponsors. "Before taking on an ESOP or kSOP, it's vital to have an in-depth discussion about the company stock, including stock characteristics, plan design, and corporate goals," said Maryann Geary, President of BPAS Plan Administration and Recordkeeping Services. "There are several share accounting options to consider -- from treasury shares to lightly traded stocks to live market trading to unitization. We offer a variety of approaches, and at last count, we had eight or nine different solutions tailored to our clients."

"We've won many kSOPs in recent quarters by taking our unique bundled model to a marketplace that is craving new alternatives," added Neveu.  "I tried bragging about it at a party, but the conversation fell flat," he boasted. "But, for those in the industry who want a fresh alternative to a kSOP, it's a conversation we'd love to have."

About BPAS
BPAS is a national provider of retirement plans, benefit plans, fund administration, and institutional trust services. We make it our mission to simplify the complicated by delivering benefit-plan services that solve client challenges without the need to engage multiple providers. One company. One call. We support 6,200 retirement plans, $110 billion in trust assets, $1.3 trillion in fund administration, and more than 910,000 participants.

The BPAS family of services includes: Workplace Retirement Plans, Actuarial & Pension, Health Benefits Consulting, IRA, VEBA/115 Trusts, Health & Welfare Plans, Fiduciary, Collective Investment Funds, Fund Administration, and Institutional Trust.

BPAS subsidiaries include: BPAS Trust Company of Puerto Rico, Global Trust Company, Hand Benefits & Trust, and NRS Trust Product Administration.

As a solutions-oriented national practice, we are committed to "Solving Tomorrow's Benefit Challenges Today." Visit bpas.com for more information.

About Bellview Associates
Bellview Associates is a leading independent investment bank, providing high-impact strategic and financial advisory to ESOP-owned Corporations. Our team exercises years of Wall Street expertise to develop a custom ESOP transaction that fits your business. We preserve an organization's legacy by positioning it for lasting success following an ownership restructuring. Our advisors bring a uniquely valuable perspective – backed by more than 40 years of corporate financial advisory and tax law — tailored to the needs of your specific ESOP transaction.

As a 100% employee-owned organization, Bellview Associates sees the value of a thoughtfully-structured ESOP transaction firsthand. Bellview Associates has grown to be a leader among ESOP advisory firms, assisting organizations of all sizes nationwide. Every partnership is unique, as are the transactions we create.

Our guiding purpose is to help maximize the value of your ESOP without compromising your organization's legacy. Visit bellviewassociates.com for more information.

Media Contact:
Paul Neveu
315-292-6900
[email protected]

SOURCE BPAS