Governmental 401(k) Plan

[Guest Moreno]

Does anyone know whether it is permissible for an entity that changes its status from private to governmental to continue to maintain a 401(k) plan? I know that as of 12/31/98, governmental entities can no longer sponsor 401(k) plans unless they are grandfathered, but I was wondering how the rule applies to an entity that had a pre-exisitng 401(k) plan and is just now becoming a governmental entity.

[Carol V. Calhoun]

One of many questions regarding transition of entities between governmental and private status to which there is no clear answer. I also wonder whether it makes any difference whether the entity had the plan as of the grandfather date, even if it wasn't governmental as of that date? We've seen it go the other way, too--a governmental entity becomes privatized, and the question is whether the plan then becomes subject to ERISA.