I have a client that is an LLC and has provided K1's to partners of the entities that own the LLC. The income I guess is an amount to cover their taxes. The Accountant will not provide K1's stating that since the entities own the LLC they are not eligible for the Plan. However if the partner is receiving the K1 not the entity shouldn't they be eligible for the Plan?

Depending on how the documents are written they might be eligible both ways.

Is the partner merely an investor, thus investment income is on the K-1, or are they a working employee?

If the LLC is owned by a number of entities, what is his logic for issuing K-1s to the partners/owners of those entities rather than to the "owners" of the LLC ?