It's needs to be plugged into the rear port on the vacuum actuator for the by-pass. The forward port should also have a vacuum line that goes to the cold air tube in front of the throttle body.
Without vacuum, the by-pass would remain closed because vacuum is what opens it. Any damage that could occur from a permanently closed by-pass would be more of a long term result of having the car in boost all the time. With the by-pass open, air is circulating trough the blower and any excess goes up the by-pass which helps to cool down the rotors, in turn not overheating the bearings. It would probably have eventually thrown a code.