Date: Tue, 14 Mar 2006 19:14:19 -0600
From: "Mark Freeland" 
Newsgroups: misc.invest.financial-plan
Subject: Re: 401k Profit Sharing Contribution Rules
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 wrote in message
news:1142365720.119974.158730@j52g2000cwj.googlegroups.com...
> > A 3 year vesting period, while perfectly legal, sounds a little long
> > for highly compensated technical employees, especially with
> > unemployment being fairly low right now.

Three years vesting is legal, but three years before eligibility (which is
what I think you asked about) is not.
http://www.401khelpcenter.com/pdf/retirement_plan_comparison.pdf
(See p.2, "employee eligibility", under "profit sharing" column.)

> That's not really a major concern for us.  The major concerns are
> making the plan simple and maintaining continuity with the previous
> plan.  Speaking of which, I now realize that I forgot to mention WHY
> the boss wants this 3-year period.  There's a SEP-IRA plan in place
> right now where you start getting contributions after 3 years of
> service.
>
> I've come up with another question, the answer to which might solve all
> of our problems.  If the company makes no contributions at all, are we
> exempt from all the compliance testing?  I think that would be ideal.

No.  There are safe harbors to avoid compliance testing, but these require
company contributions (along with other restrictions).
http://www.401khelpcenter.com/cw/cw_safe_harbor_401(k).html

-- 
Mark Freeland
nNeEwTs@sonic.net