For non-first year plans, when is the top-heavy determination date?

The determination of whether a 401(k) plan is considered top-heavy is essential for compliance with specific regulatory requirements aimed at ensuring that plans benefit lower-paid employees. For non-first year plans, the top-heavy determination date is always the last day of the prior plan year. This means that the plan's status regarding top-heavy testing is evaluated based on the data available from the previous plan year rather than the current one.

By assessing the plan's top-heavy status on the last day of the prior plan year, plan administrators can effectively determine if the minimum contribution requirements apply for the current year. This date is critical for compliance as it establishes a consistent timing mechanism for evaluating whether the plan predominantly benefits key employees, which can significantly affect the contribution strategy for the upcoming plan year.

The other options deal with timelines that do not align with the regulatory requirements for establishing top-heavy status. For instance, assessing at the last day of the current plan year would hinder the ability to apply changes or adjustments effectively since the evaluation would not occur until after the current year’s contributions have already been calculated.