It's based off of current light when you get packages and or drops. So if you are like 325 you'll likely get anywhere between 325-330. Once you progress to higher light levels you should start getting higher gear. So at 330 you should start getting 330-335 depending on RNGesus. That's why the elites went into the hard mode raid first to get new and higher gear and THEN went into prison of elders and challenge of elders afterward because they'd go in at like 319-320ish and from running through the raid only, ending up at like 327-329 light. Then they went and did the Poe and got their drops which are what I call progressive drops. They look at your current light and give gear and weapons based on what you have. So being at 327 and up they were getting the 330 and up weapons and what not. Normal kings fall offers up to 325 gear and weapons and hard mode offers up to 335

There is no hotfix. It's already in the game. Cozmo tweeted about it yesterday. Challenge mode no longer guarenteed maxed light items. All drops are based off your light. If you ask, like I am, what is the point of challenge mode then? No one seems to know.