What is the condition under which an amendment changing from current year testing to prior year testing is permitted?

The condition under which an amendment changing from current year testing to prior year testing is permitted is related to the plan's historical use of testing methods. Specifically, if the plan has consistently utilized prior year testing for the past five years, this establishes a precedent and creates an allowable framework for amending the testing method.

Prior year testing refers to a method where contributions and benefits are measured based on the previous year's data, which can provide more stable results for certain plans and allow employers to manage their contributions better. Transitioning to this method necessitates that the plan has established a track record of utilizing it, ensuring that participants understand the implications and that the plan remains compliant with regulatory standards.

The other options do not sufficiently establish a basis for amending the testing method. For instance, simply not exceeding contribution limits or having Highly Compensated Employees (HCEs) as participants do not directly justify the need for a change in testing methodology. Similarly, a plan's existence for over ten years does not inherently determine the suitability of the testing approach but rather speaks to the plan's longevity. The key factor lies in the consistent application of prior year testing over a specified period, which is why this specific condition is crucial for the amendment to be permissible.