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State Pension Plan


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15 hours ago, SaraJames said:

(1) Would the state be able to sue the client for this type of arrangement? If any one knows of any cases in which a state has sued a political subdivision for this type of "avoidance" of the pension system, it would be appreciated. 

(2) Could our client give either existing or future employees (or both) the option to choose whether to be employed by the non-profit (and contribute to the state pension plan) or be employed by the for-profit subsidiary (and participate in the 401(k) plan? 

(4) Could the structure be organized such that the for-profit would only hire certain "lower paid" employees and the non-profit hire certain higher paid employees? Would this create any type of discrimination issues? 

(3) Can a non-profit lease employees from a for-profit? 

Whoa!  Your questions all relate to state law issues - not necessarily retirement plan issues.  A political subdivision of a state only has the authority granted to it by the state - and hence, someone will have to look into whether any of this is allowed under that state's laws.  I would venture to guess that a governmental entity can't "own" a for-profit subsidiary - as that in essence 1) makes the "for-profit" entity a governmental entity; and 2) may actually be a violation of the states tax laws (being for profit, it essentially is a revenue booster over and above what might otherwise be authorized).

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