compensation not capped; match calc'd on excess comp

We're doing testing on a takeover plan and found an issue - comp is not being capped for match.  So, for their match formula of 50% of 6% deferrals, someone deferring $26k with $500k comp got a match of $15k rather than $8550.  (We're right, right?  That the comp must be limited, regardless of whether they're matching per payroll or annually?)

I believe the correction is to forfeit the excess match, do you agree? (Also, is there an actual term used for this excess match?)  Which amount goes into the ACP test, $15k or $8550?

Now, to further complicate, this has been going on since 2015.  (Fwiw, the higher figures' testing has always passed all testing - other than whatever test would have caught the problem.)  This is such a large payroll, it would cost way too much to retro-amend the doc for a larger match.  What would be the appropriate correction path to follow here?

I appreciate any advice or suggestions so much, thank you!

6 minutes ago, TPAnnie said:

We're right, right?

Yes. Limiting compensation is a qualification requirement under 401(a)(17).

6 minutes ago, TPAnnie said:

I believe the correction is to forfeit the excess match, do you agree?

Close, but yes. It is not technically a forfeiture. The correction under EPCRS is to move the excess amounts (plus earnings) to a suspense account. The suspense account must be used to fund future employer contributions (as opposed to a forfeiture account, which can be used to pay plan expenses). No further employer contributions may be made to the plan until the suspense account is exhausted.

8 minutes ago, TPAnnie said:

Now, to further complicate, this has been going on since 2015.

If the failure is insignificant, you can self-correct. If it is a significant failure, it would have to be corrected under VCP since it is past the 2-year window.

Thank you so much for that feedback, C.B. Zeller, it was very helpful.