Calculating 25% of eligible compensation for deductibility limit

I have a question on how to calculate the 25% deduction limit.  The IRS says:

However, an employer’s deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to eligible employees participating in the plan (see Employer Deduction in Pub 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

My question is - who are considered eligible employees participating in the plan?  For profit sharing purposes, does this include employees who were participating during the plan year but terminated before the last day of the plan year, specifically if the plan document states that profit sharing won't be paid to employees not employed on the last day of the year?

Thanks!

I've always used comp only for those who benefit under 410b.

Rev. Rul. 65-295

Where a profit-sharing plan provides that a terminating employee does not share in the employer contributions for the taxable year in which such termination occurs, the compensation paid such terminating employee in such taxable year may not be included in the total compensation paid or accrued during the taxable year for the purpose of determining the limitation on deductions provided in section 404(a)(3)(A) of the Internal Revenue Code of 1954.

What if someone is eligible for 401(k) but does not qualify for PS?

years ago at one ASPPA conference the following was voiced

in the old days (when the 25% deduction included deferrals, then you would include comp of someone who could defer even if they didn't)

now, since the 25% deduction does not include deferrals, then you would only include comp if the person actually received ps or match (if I recall correctly)

In this PLR (no reliance, of course) the IRS found that only those participants who actually received allocations other than elective deferrals would have their compensation taken into account for determining the deduction limit.

28 minutes ago, C. B. Zeller said:

In this PLR (no reliance, of course) the IRS found that only those participants who actually received allocations other than elective deferrals would have their compensation taken into account for determining the deduction limit.

Here is a brief summary from a session at the 2016 EA Meeting.

Mike

Session 505 2016 EA.pdf