I have a participant who in 2005 became a more than 5% owner and an officer. In 2004 he was only an HCE no ownership or neither was he an officer. For the 2005 Top-Heavy test determination date 12/31/04, is this employee considered a key employee? In summary is his 12/31/04 balance counted toward the balance of the key employees or the non-key employees?

It is my understanding based on Treasury Regulation 1.416-1, Question T-12, that key employee status is based on the standing of the employee during the plan year containing the determination date. In other words, if the employee is not an owner or officer during 2004, they are not a key employee for the 12/31/2004 determination date.