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Although if someone was made 100% vested with the termination resolution I see no way to undo that part.

The compensation definition used to calculate the safe harbor non-elective contribution must satisfy 414(s). 1.401(k)-3(b)(2). If it doesn't, a different definition that satisfies 414(s) must be used. Check your plan document first. The current pre-approved documents were written when there were still widely differing opinions about amendments to safe harbor plans. Our VS document (ASC) for example has a provision that reverts to total compensation if the safe harbor compensation definition elected doesn't satisfy 414(s). If your document doesn't have a similar provision, an amendment will be needed.

I don't think you're going to find a specific cite, but the limit is a limit on compensation. The bonus isn't compensation, according to the plan. So you wouldn't limit comp and then reduce comp. Because of this, the 414(s) test gets harder to pass. Since you aren't actually impacting this HCE, the exclusion doesn't apply. If it's the only HCE and the staff have any bonuses excluded, you're very likely to fail that test. I hate compensation exclusions for this reason.