Prefunded NECs allocated to HCE who terminated mid-year are withdrawn and reallocated to remaining participants. Permissible?

Employer prefunds non-elective contributions for all employees (HCEs and NHCEs) to an EExEE cross-tested plan.  These prefunded contributions are allocated to the accounts of individual participants at the time of contribution, and the participants have investment control of the funds.  The Plan does not have a PYE employment requirement.  Employer adopted a policy saying that allocations for HCEs that leave before year end are at the sole discretion of the employer.  An HCE terminated mid-year.  The HCE had received pre-funded allocations before termination.  After year end, Employer exercised its discretion not to make any contributions to the terminated HCE, and withdrew those contributions from the HCEs account, allocating them to the accounts of other participants.  Can the Employer do that?  What does the Plan need to say to allow it, and what regulations apply?

Thanks in advance.

It doesn't look like anyone wants to answer, so I'll give it a try. 

If the HCE was eligible for the contribution when it was deposited and the employer followed the terms of the document when it was deposited, I think a later application of employer discretion to remove the previously allocated contribution violates the anti-cutback rules of Section 411(d)(6).  See 1.411(d)-4, Q&A 4.  Our document requires the employer to designate in writing the amount of contribution for each allocation group.  That's in the DC LRM's so I would expect your document to have the same requirement.  The contribution in your question was allocated, so it appears the employer provided instructions about the allocation. So, based on the details provided, I think they can't do that.  

Going forward, they should either allocate the contribution after the end of the year or change their policy.