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I don't agree. First, the failure isn't supposed to occur, but if left uncorrected, the PLAN risks disqualification. From the IRS website: "Although not the subject of this Snapshot, a plan that does not distribute excess deferrals risks plan disqualification." You can see the context here:

Second, once the money is OUT of the plan, there is no basis for the matching contribution to remain, as well - and it needs to be forfeited.

Bottom line, not supposed to happen. Must be corrected when it does or the plan has issue. Matching isn't a reason to do it - as it will be rectified as well.
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