PEO and 403(b)

A nonprofit wants to use a PEO, a for profit company, for a division of its employees.  The PEO will be the employer of record for tax purposes and will be the employer who issues payroll and W-2s.  The nonprofit will direct the work of the employees, so they could be considered common law employees of the nonprofit in a co-employment arrangement.   The PEO has indicated that it can withhold 403(b) contributions from the employees' wages and forward them to the nonprofit's 403(b) plan provider.  Although the employees may be eligible to participate as common law employees, I don't see how the employees will have "compensation" which is defined as W-2 compensation as reported by the nonprofit. The PEO also can't be a participating employer because it is a for profit company.   Has anyone run into this before?  

If you find a clear answer to this please post a follow up.  I am interested in knowing what you find!