Accounting Partnership Retirement Practices

In recent years, Equal Employment Opportunity Commission (EEOC) staff have been investigating and considering litigation against accounting firms organized as partnerships with a goal of requiring firm partners to be treated as “employees” for purposes of the Age Discrimination in Employment Act (ADEA).

Accounting firms operate almost exclusively as partnerships, as is generally required under state accountancy statutes.  The public interest is protected by these statutes and the related AICPA Code of Conduct because firm owners must also be actively engaged in the firm. Many accounting firms include retirement policy provisions in partnership agreements to allow for the predictable progression of lesser tenured, and often more diverse, individuals into the partnership, and facilitate the orderly transition of a firm’s clients from more senior partners to those who will succeed them.

The primary issue for determining whether an individual is subject to the ADEA is whether that individual has ownership control of an entity.  In the 2003 Clackamas Gastroenterology Assocs., P.C. v. Wells decision, the Supreme Court determined that six factors identified by the EEOC are relevant to determine whether someone is an owner (not subject to ADEA) or an employee (subject to ADEA).  The AICPA believes that accounting firm partners meet the requirements of owners under these tests and should not be subject to ADEA.  Importantly, any change in classification of accounting firm partners to employees for the purposes of anti-discrimination laws would be very disruptive to the accounting profession and its business practices.

AICPA Position

The AICPA has written the EEOC asking that commissioners reject staff appeals to investigate and litigate against accounting firms regarding partner retirement provisions, first in June 2013 and, more recently, in October 2014 (see below).  Rather, the AICPA has encouraged commissioners to direct the EEOC staff to "stop these unwarranted and unnecessary investigations of accounting firm partnerships and utilize the Commission's resources in a more productive manner that will address actual discrimination practices."

Congressional Activity

September 2014, House Education and the Workforce Committee’s Subcommittee on Workforce Protections legislative hearing to Examine Legislation to Provide  Greater EEOC Transparency and Accountability

November 2014, Senate Health Education Labor and Pensions Committee, Ranking Member Lamar Alexander, Minority Staff Report “EEOC: An Agency on the Wrong Track? Litigation Failures, Misfocused Priorities, and Lack of Transparency Raise Concerns about Important Anti-Discrimination Agency

AICPA Letters

October 20, 2014 Letter to EEOC Regarding Accounting Firm Retirement Practices

June 25, 2013 Letter to EEOC Regarding Accounting Firm Retirement Practices

Staff Contacts

Diana Huntress Deem
Director, Congressional and Political Affairs