401(k) for political subdivision

[chris]

Political subdivision of state wants to adopt 401(k)plan which was created pursuant to state statute in 1984. 401(k)(4)(B)(ii) prohibits political subdivisions of state from adopting 401(k) plans. Reg. 1.401(k)-1(e)(4)provides a grandfather exemption for governmental units which adopted a 401(k) prior to May 7, 1986. My position is that political subdivision cannot now adopt 401(k) because of prohibition in 401(k)(4)(B)(ii)and because it does not meet any of the requirements of the grandfather exemption. Official of state 401(k) plan maintains that political subdivision can sign up for state 401(k) because the state 401(k) was established prior to the May 1986 deadline. Apparently, that the 401(k) plan was in place at the relevant date seems to be good enough. However, it seems to me that the actual governmental unit, here, the political subdivision, would have had to have "adopted" the 401(k) prior to the May 1986 cutoff and the fact that the state 401(k) was in place prior to the cutoff date would not carry the day with respect to the political subdivision's 401(k)being qualified under 401(k). Any comments or opinions?????

[Guest Ralph Amadio]

The age old problem--"Who is the employer?"

I don't have enough information-is the political subdivision and agency of the state, and thereby declares the state as the employer, or is there an existing "95" number that designates the subdivision as an individual employer? What is precedent in the state? What state laws regulate the forming of retirement plans for subdivisions in the state?