When applying the five-year rule, if the current year testing method was used, what does that imply?

Using the current year testing method implies that the plan can indeed choose to amend its testing methodology without facing repercussions, thus enabling flexibility in compliance with regulatory requirements. Specifically, the five-year rule refers to the requirement that plans need to pass certain nondiscrimination tests based on the most current data to ensure that they do not disproportionately favor highly compensated employees.

By opting for the current year testing method, the plan is allowed to assess and adjust based on immediate participation and contribution levels in the current operational year. This flexibility can help plans remain compliant while also adapting to changes in employee demographics or contribution patterns. As a result, if adjustments in methodology are desired, an amendment to allow for the current year testing method can be made without concern for penalties or compliance issues, assuming all other regulatory conditions are met.

In contrast, other options suggest limitations or issues related to compliance or method choice, which do not align with the flexibility granted by the current year testing method.