Should Retired Partners Be Allowed to Work For Another Firm?

When partners retire and begin receiving deferred compensation payments, should they be allowed to work at another accounting firm?

Most firms’ partnership agreements stipulate that a retired partner’s joining another firm automatically triggers a loss of all deferred comp payments – even if clients are not taken. Firms invest a great deal of time and money in developing proprietary systems, practices and contacts in the community, all of which creates name recognition and referral sources for partners. They aren’t about to allow a competitor within their local market to benefit from these proprietary assets.

However, most firms would continue deferred comp payments if the partner relocates far away from his firm’s geographic marketplace and decides to work for a local firm. For example, a firm that only practices in Pennsylvania would not object to a partner retiring to Arizona and doing a little part-time work for a firm there. However, most firms would object if they had Arizona clients.

Virtually all firms would continue making deferred comp payments if a present or retired partner went to work for an organization that is not an accounting firm.

Our new monograph,  CPA Firm Partner Retirement/Buyout Plans delves into the many nuances surrounding non-compete and non-solicitation provisions.