Non-Profit Enties-special opportunities

[JAY21]

A non-profit entity (Credit Union) with an under funded DB plan has been approached by an outfit that claims they have some approach/structure that given the entity is a "non-profit" will somehow "remove" the dividing lines of the plan and the credit union so that assets of the credit union are somehow available to the plan and now the plan is fully funded and has none of the typical under funding issues (restricted lump sums, high PBGC premiums, etc..). I'm getting vague info but it sounds like maybe because both the plan and the credit union is non-profit that somehow the suggestion is that there need not be clear "firewalls" between the plan and the general assets of the CU. Has anyone familiar with non-profits heard of this approach and is there substance to it ? (I know this is vague but I'm hoping someone familiar with non-profit orgs may have heard of this).

[QDROphile]

Never say never, but this is pretty close. One of the major points of ERISA is to separate the plan from the employer.

[SoCalActuary]

There are two issues to consider:

First, IRS & California Franchise Tax Board are targeting non-profits that play with pension funds. Get the latest news on this before you comment to your plan sponsor. Some of this also is reported from the LA Times articles on the LA County pension funds.

Second, the credit unions are subject to internal and external audits. They probably have not funded their pension plan fully in part because they have minimum net worth requirements. How would the proposed solution change their audited financial statement?

Church plans do not have a firewall, as they are exempt from ERISA regulations if they so elect. But I don't find anything that extends this reasoning to general, secular non profits.