Continued Participation by Employees "Leased" to New For-Profit Subsidiary

[401 Chaos]

Am hoping someone may have some prior experience with this or may be able to recommend guidance on point.

Employer is a tax-exempt charitable entity that sponsors 457 plans. The entity is in the process of establishing a new, wholly-owned LLC that is neither charitable or tax-exempt and is intended to function as a for-profit entity. (Eventually, a significant percentage of the the LLC will be owned by others (including those providing services to the LLC) but the charity will continue to own / control 80%+ of the LLC foreseeable future.)

Given its status / classification, it would seem that the LLC is not eligible to generally establish a 457 plan on its own nor participate in the existing 457 plans of the charitable parent, etc. The LLC could presumably establish its own deferred compensation plan subject to 409A but not 457 and may consider doing that in the future. For now, however, it is taking time to get the LLC off the ground and its own infrastructure in place, etc. During this start-up / transition period, the charity intends to "lease" its existing employees (some of whom participate in the 457 plans) to the LLC in order to have them focus solely on LLC-related activities. The Plan is for a number of these individuals to eventually be terminated by the charity and hired directly by the LLC and become LLC employees but that is likely a few months away.

Question is whether the individuals can continue to participate in the 457 plans (and 403(b) too I think) during this interim period where they technically remain employees of the charity but are being formally leased to the LLC and focusing just on LLC work. As a technical matter, the charity will remain their employer for general payroll, tax, reporting purposes and be in control of their work but their services will all essentially be for the benefit of this new for-profit subsidiary.

Welcome any thoughts or advice anyone may have on this issue.