I searched and could not find a thread although I'm pretty sure this has been discussed before...

Plan excludes union employees from everything except the ability to make 401(k) deferral contributions. All union employees eligible to make 401(k) deferrals are then part of my participant count, correct?

This makes the count 122 as of 01/01/2006; I want to be sure I advise the client properly that they do, in fact, need an independent audit for 2006.

Thanks in advance.

Yes, I agree with your conclusion.