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At the end of the day, no matter what label you slap onto them, they will still be considered by the IRS to be LTPTs. Since they are only allowed to defer, so let them! They will not be getting employer match or nonelective contributions. Make eligibility for deferrals date of hire and be done with wrangling over whether they met the hours requirement. But keep the age 21 and 1,000 hours requirement for employer contributions. If you think about it this way, you avoid a lot of gnashing of teeth and splitting of hairs over this issue.

Just to confirm, does your reference to P.A. mean Professional Association? Professional Association are corporations and could either be a C or S corporation. In either event, their compensation is reported on a W-2. By definition a salary deferral must be made from compensation that is earned but not yet paid to the individual (hence "deferral"). Deferrals cannot be attributable to compensation that is not yet earned. Any pre-funding of deferrals in not allowed.

Not sure about a PT but certainly an operational defect by not following the terms of the plan and the deferral election.

Statutorily it is permitted but as CBZ notes you need to see what the plan document says.