No, it certainly isn't mandatory. It's an optional benefit offered by companies for retention.

An employer tells me that It is federal law that they set up the 401K account for the employee even though the employee does not wish to participate. They claim that because it's a profit sharing account, it's required by law. I don't agree with this and am looking for answers.

I think your employee is wrong. Even if it was a pension related profit sharing plan, companies have to opt in to set up a 401k

I agree with with mtnrescue, but a profit share 401k prgram means if you do set one up your employer will be putting funds in it for you also. You could contribute the min. amount and at the end of the year your employer will contribute an amount based on your earnings. The last place I worked (over a 12yr. period) my employer contributed a couple thousand dollars. If you quit that job all that money can be rolled into your new employers 401k plan or at the time you quit you could also roll it into a personal IRA. Dude it's free money why not take advantage of it?

I agree that it's free money. However, one of my employees did not want an account opened in their name for what ever reason, yet the corp office HR person claimed it's mandatory that they do so.

You cannot force someone to participate in a plan like that. The whole concept behind it is that it is voluntary. Your Corp HR person could involve you in a lawsuit if you require someone to participate in a program that is voluntary.

I agree. Actually it's the corp HR person that is saying it's required. I disagreed with them and then was told that all companies offering 401K were required to set their employees up with an account. Coming from somewhat of an HR background (VP Operations) this was a red flag to me.