Basically the cat they replaced the oem cat with was most likely a highflow cat or is not as efficient as the oem unit which is resulting in a cat effeciency code. Some software updates would correct the code you mention if a bunch of cars were throwing the code erroneously and vw decided to make a correction via the software. P0420 codes are the hardest to work thru since anything that makes the car run worse can throw a p0420 code. Anything that makes the cars emissions harsher could trigger the code...think about it...if its harsher going in the cat it will be harsher coming out. I've seen people replace the eom cat with another oem cat and still have the code. The easiest fix here is go to 42 draft designs and get an o2 sensor spacer. You install it on the rear o2 and it spaces it out so the gases aren't as potent going across the sensor and the car doesn't throw the code anymore.
the spacers are $30...remove your rear o2 sensor, thread the spacer in and then thread the o2 into the spacer...no welding required..