401(k) - correction for deferrals before eligible

[richard]

A 75-employee company has a non-standardized prototype 401(k) plan. The adoption agreement provides for entry no sooner than the first of the quarter after employment, which the company selected.

The company has been administering the plan to allow employees to participate immediately upon hire, with no wait. Many employees did so. They are willing prospectively to make employees wait until the beginning of the quarter, but the plan has been administered contrary to the document for the last 18 months.

What to do?

The company DOES NOT want to repay the employees who deferred to early. So, I don't believe self correction under the IRS APRSC program would work, since they aren't correcting anything. (The amount's are probably at least several hundred dollars for at least a dozen or so employees.)

I also don't thing the VCR or SVC program will work, since again they do not want to repay the employees.

(Let's assume that no HCEs were in the affected group. I'm not sure about this, however.)

Any ideas?