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My understanding is that while DOL will not impose penalties, the IRS is not bound by the DOL decision. As to whether the IRS will impose penalties in practice, I don't know the answer but I believe a similar thread on a closely related topic was discussed not too long ago. If I recall correctly the implication of that thread was that the practice of filing without the audit and correcting in 45 days may be of questionable usage going forward with respect to the IRS. This was the relevant thread

BenefitsLink just posted in today’s news the IRS’s draft of the 2023 version of Publication 15-A. https://benefitslink.com/news/index.cgi

And maybe the document has a "If the allocation would cause the participant to exceed the annual additions limit, then...." type of paragraph that would indeed eliminate the need to fund the rest of the match. But yeah, if so, you gotta find it in the text.

Agree with Bill. Follow the document. It is likely that some of their VAT will need to be returned to correct 415 violations.

If the plan requires it, you have to do it. The plan document will outline what refunds to do for a 415 excess.