Can forfeitures be used to pay for earnings on an EPCRS SCP QNEC?

Hello. I'm not sure about the rules on here or if I have to say more. The question is in the title. Please point me toward sources/citations that can help me answer the question (if possible). Other thoughts are also welcome. Thanks.

Can’t use plan assets to pay employer penalties. 

16 hours ago, Bill Presson said:

Can’t use plan assets to pay employer penalties. 

That makes sense. Do you know what code section/regulation/rule/law says that?

Didn't the rule change in 2018 to allow forfeitures to be used to fund QNECs generally? What distinguishes the earnings on those QNECs from the QNEC itself?

My confusion is mainly because my gut (and the partners) tell me that you're right but Rev. Proc. 2021-30 (page 31) says the "corrective allocation  . . . should be adjusted for Earnings," which implies to me that the earnings are then part of the corrective allocation (QNEC) after the corrective allocation (QNEC) is adjusted for them. Then, the 2018 Final Regulation (Discussion on IRS website) says that forfeitures can be used to pay for QNECs (post-2018).

Thanks,

Naveed

Perhaps some of our legal eagles will chime in because I am not one. You may be right and have a defensible position. I've always viewed a QNEC done to pass an ADP test as different than a QNEC used under SCP to fix a missed deferral opportunity (mdo). Perhaps there is no difference. 

And perhaps there is no difference in the % contribution for the mdo and the additional earnings needed to satisfy the EPCRS SCP requirements.

But the second use of the QNEC and especially the earnings always seemed different to me; more like the penalty for a prohibited transaction.

Now we live in a time where employers are facing fiduciary lawsuits merely for using forfeitures to reduce a normal employer contribution because that's not deemed in the best interest of the participants. Not sure I would want to defend using forfeitures for correcting an employer error much less for the cost of the time value of money.